What dairy farmers need to know about their network tariffs

When a business takes a closer look at their energy bill they generally focus on the kWh price they pay for electricity. This is the correct way to compare the offers they are receiving from electricity retailers, however there are other factors that needs to be considered, one being the total energy usage consumed from the grid over a 12 month period. How much you consume will affect the network tariff that your business is on, and for dairy farmers, a tariff change can result in a significantly higher total energy expense.

Most farmers in NSW are located within the Essential Energy or Endeavour Energy network area. Both of these networks have a capacity charge threshold at 160,000kWh per annum. What this means is if you’re total usage on any single meter increases above 160,000kWh in a rolling 12 month period, the network can shift you to a new rate that includes a capacity charge & a significantly higher network access charge. In May & June 2017 Essential wrote to 1,100 customer who were over the 160,000kWh threshold and required them to move to the correct tariff by July 2017.

An easy way to tell which network you are on is if the emergency fault number on your bill is 132 080, your electricity is supplied by Essential Energy, if it’s 131 003 you’re with Endeavor Energy.

 

What’s the issue with capacity charges for dairy farms? 

The issue is that conventional dairy farms have two times each day where they use a significant amount of energy, during dawn and dusk milking. The capacity charge is based upon the highest level of energy consumption within a 30min period. Below shows the period each day that a capacity charge is set.

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In this example if the farm is using 160,000 kWh and they aren’t on a capacity charge they will pay $38,039 a year based on an after discount kWh rate of 23.4c/kWh, and grid access charge of $1.64/day. If the farm has been shifted to a capacity charge tariff by Essential Energy their average cost of power will decrease by 5.29c/kWh saving $8,464/p.a. but the peak, shoulder & off-peak capacity charge, and  new network access charge will increase the bill by $13,044. The net result is the bill increasing by $4,580 or 12% each year moving forward.

So what can be done to prevent this occurring? The most straightforward solution is bringing grid consumption below 160,000 kWh. This can be achieved by implementing energy efficiency technology, or adding on-site generation such a solar system. Both reduce the amount of electricity required from the grid and can bring the farm below the 160,000kWh threshold.

The main barrier for implementing energy efficiency or installing solar power is the initial investment required. In the case of dairy farms, this means using capital that could be dedicated to plant operation or business expansion. However, it is possible to deploy a solar photovoltaic system through a Power Purchase Agreement (PPA): the solar power provider owns and services the system, while the user only pays based on the electricity supplied by the system, based on a kilowatt-hour price below the cost of grid power. This ensures power bill savings from the first month of operation and can eliminate capacity charges in one year or less, at zero upfront cost for dairy farmers. Solar Bay is a company that specialises in providing Power Purchase Agreements to dairy farms, their website is www.solarbay.com.au and phone number is 1300 452 285.