Opinion Piece By John Hudson, National Head of Agriculture at Nedbank
South Africa has been plagued by power supply issues for many years. Mostly because of the significant reliance on Eskom, which is struggling to meet electricity demands. Every year the electricity tariffs increase by 15% and continue to squeeze profits of businesses, including farmers. According to the World Economic Forum (WEF) Energy Transition Index 2021, the rising electricity price is one of the major contributing factors placing South Africa near the bottom of the list, at 110 out of 115 countries.
Energy efficiency is increasingly becoming a way of life for many people around the world. Even in South Africa, the government has started with the decommissioning of coal-fired power stations, while creating a favourable environment for ‘green energy’. The government is also supporting municipalities that aim to generate their own power through renewable energy, and this has resulted in a number of Western Cape municipalities adopting renewable energy in a bid to move off Eskom’s grid.
‘The idea of relying entirely on natural resources for electricity supply across sectors can have high-cost implications if is not done right, no matter how visionary it may be for farms, businesses and homeowners. Managing the energy demand and being more energy efficient is just as crucial as doing thorough research before installing systems that generate alternative energy,’ says Duncan Abel, Energy Finance Principal at Nedbank Corporate and Investment Banking.
‘It is not just about generating your own power. There are certain steps that you need to take first to ensure that you generate enough power. If you go off the grid completely, then you don’t need Eskom’s permission. You have free will to do what you want when it comes to energy supply. It is only when you are still partially connected to Eskom’s grid that there are certain licencing and registration requirements to think about.’
Abel adds that not all agriculture businesses or farmers can afford to go off the grid. Installation costs for renewable-energy systems are expensive, although they can become cost effective in the long term. Depending on the property size and energy need, going off the grid can cost north of R 500000 for a farm. ‘Solar photovoltaic (PV) panels, for instance, are considered cheaper than Eskom’s tariffs. And it is important to note that energy demand does not always follow the sunshine cycle. This means that solar panels should be supplemented by batteries, which require dedicated solar panels and extra energy to charge them. You will also need a generator for backup. So, typically batteries double the cost of a system, while the generators that back up the batteries come with fuel costs.’
Farming off the grid
‘The best time to consider moving your business off the grid is when you see there is a significant energy security issue. That is if lost production and operations far outweigh the cost of going off grid or installing a hybrid solution,’ says Abel.
‘Ultimately, farming businesses need to manage their electricity demand, be more energy efficient and generate only as much electricity as they can use every day. daily.’
In Eastern Cape’s Komga region a handful of farmers have become used to farming off the grid and installing integrated power systems. One of them is a Nedbank Business Banking client, Dr Les Trollope. He is a general medical practitioner and cattle farmer, and has been completely off the grid for over a year and a half.
Dr Trollope shared his experience with us about moving off the grid ’The reasons for moving off the grid can be personal- or business-related, like wanting secure energy and sustainable business growth.’
For him, moving off Eskom’s grid suited his lifestyle and business needs. He installed an integrated off-grid energy system for his home, the boreholes, irrigation systems, and pumps from the water source. The solar panels provide energy for the pumps during the day and the batteries support the rest of the system in the evening.
According to Dr Trollope, installers often serve as a compass on the end installed system. The type of farm one is running, as well as its needs are considered before deciding on solar PV panels or wind turbines. There is quite a lot of work to be done before money is invested.
This includes making sure you have the right tariffs, variable speeds drives, and incorporation of water supply. Dr Trollope also mentioned that good suppliers should be able to guarantee what happens with the wear and tear of the technology over the years.
The benefits of being off the grid
Dr Trollope explains that he was able to lower operational costs that ultimately affect the end user costs. ’I am no longer concerned about unreliable power supply, electricity price hikes and load-shedding. In fact, when there’s load-shedding, I am not aware of it – It is business as usual,’ he says.
‘The economic benefits for my business and operations are relieving, as I’m currently saving 30% of what I used to pay for electricity. Plus, thanks to the sufficient energy supply, the security system always works, so we always feel safe.’
Another benefit is sustainable farming, be it managing food waste, soil health, or energy and water efficiency. But technically there is a lot to consider around farming off the grid. It is also worth noting that a suitable financial partner with expert knowledge and experience is important. They are able to guide you through the process while ensuring that sufficient financial resources are available when necessary.