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AgEcon’s gross margin analysis found that in the energy-
intensive irrigation systems, energy not only accounts for a higher
proportion of variable costs and reduces gross margins, but it also
results in the enterprise being more exposed to the price risk of
traditional energy inputs.
‘An energy investment that includes renewables is a hedging
strategy to protect the business against future energy price rises,’
The AgEcon study into the feasibility of incorporating renewable
energy on cotton farms found that current carbon and energy
policy, specifically the Renewable Energy Target (RET) schemes,
has a positive impact on determining whether or not switching to
grid- or diesel-connected solar is cost-effective.
The RET operates as two schemes: the Large-scale Renewable
Energy Target (LRET), and the Small-scale Renewable Energy
The LRET is designed to encourage new major renewable power
generation, while the SRES is designed to encourage small-
scale renewable energy systems. In the case of solar, a system
is considered small scale when capacity is no more than 100
The Renewable Energy Certificates (RECs), issued under the RET
schemes, create a financial incentive for growers to install solar
panel systems. Under the SRES, RECs are called small-scale
technology certificates (STCs), which are issued and paid up-front,
effectively subsidising the installation costs.
In the LRET, RECs are large-scale generation certificates (LGCs),
which are issued on creation and can be sold on the open market.
Participation in this more complex scheme involves uncertainty
around the future income stream it will provide.
‘In our cotton case studies, STCs subsidised up to 49 per cent of
the installation costs of the solar panel systems, which is obviously
a huge incentive for farmers interested in making the switch to
renewables,’ Powell says.
The current RECs will only be paid up to 2030, meaning that each
year approaching 2030, the scheme becomes less attractive as a
means of offsetting installation costs.
The RET is due for review in 2020, so those wanting to take
advantage of the incentive have less than two years to do so
before a potential policy change occurs.
‘The gap is also widening between the “feed-in tariff”; an energy
retailer will pay a farmer and the per-kilowatt cost of production,
making the investment even more attractive,’ Powell adds.
‘These factors, combined with remote monitoring of pumps and
improvements in the efficiency of new energy technologies, are
having a real impact on the viability of renewables in the irrigation
The new energy technologies most applicable to irrigators will
likely be pump-site ‘micro-grids’, according to AgEcon research
economist Jon Welsh.
‘Micro-grids are clusters of generators that are operated by single
controllable entities,’ Welsh explains.
‘For example, a pump-site micro-grid might include a renewable
energy source, such as solar panels, combined with a lithium-ion
battery for storage, as well as being connected to power from the
‘The power sources are controlled by drive systems to ensure
[that] voltages are stabilised at the load source,’ he adds.
Welsh says that with the prices of flow and lithium-ion batteries
set to be reduced by almost 60 per cent in the next 13 years,
the potential for irrigation farms to adopt these technologies is
becoming more feasible.
‘While more complex than a single diesel or grid pumping system,
these kinds of solutions can be controlled and monitored remotely,
saving labour and boosting farm productivity,’ he says.
Welsh adds that advanced battery storage systems could facilitate
the integration of renewable power generation into existing
irrigation systems through their ability to manage frequency
variations and handle peak loads.
‘Another new energy technology that could be considered is [one
that] converts solar to store hydrogen for use in fuel cells in off-
grid scenarios. This exciting concept is applicable in areas with
high irradiance and seasonal energy demand,’ he says.
Welsh explains that the technology of micro-grid componentry
has been developing and improving at a rapid pace, and as more
competitors enter the market, prices are decreasing.
‘A benefit of a micro-grid is that componentry may be swapped
out or added in at a later date. So, now may be the time to take
advantage of government incentives and invest in the first stage of
a micro-grid,’ Welsh says.
For further information, go to www.agecon.com.au.
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