Power prices crippling intensive agriculture

Electricity prices walking intensive agriculture off the cliff


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QFF President Stuart Armitage says the Queensland Government must set power prices at efficient levels, remove the hidden taxes, and fast-track suitable tariffs.

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Nowhere else in the world has there been such a focus on energy, or more specifically, energy price as there has been in Australia. High energy prices are now the number one issue Australia’s company directors want state and federal governments to resolve.

Unfortunately, the cries from Queensland farmers and irrigators have become all too familiar. Sustained agitating and calls for intervention by the intensive agriculture sector were recently described by a leading consumer group executive as the ‘canary in the coal mine’ situation when it came to understanding the impacts of Australia’s current energy crisis on the wider business community.

Irrigation electricity tariffs in Queensland have risen a minimum of 136pc over the past decade, and for some more than 200pc, while CPI has increased by just 24pc over the same period. A cliff looms post 2020, when these specific ‘non-cost reflective’ irrigation tariffs will be withdrawn. This will result in farming businesses already struggling to cope with unsustainable electricity price increases being forced over the edge.

Irrigation electricity tariffs in Queensland have risen a minimum of 136pc over the past decade, and for some more than 200pc.

The cost of electricity in this state is having real world implications. According to the Australian Energy Regulator, 698 small business were disconnected by Ergon Retail (regional Queensland) in 2016-17; a substantial increase from the 384 disconnections recorded in 2015-16. In our sector, a growing number of primary producers are switching to dryland farming practices as the price of electricity has already become unsustainable. Alarmingly, the number of irrigating farm businesses in Queensland has fallen by more than 42pc since 2009-10 to just 5,416 in 2015-16.

In response to price increases, farming businesses have installed energy efficiency measures and renewable energy and, in many cases, simply reduced demand. Gains made from energy efficiency measures have been cancelled out by the increasing electricity costs; while simply reducing demand has also come at a cost either through reduced productivity or farmers simply choosing not to plant a crop.

Many farmers are now weighing-up options to ‘switch-off’ efficient irrigation technologies, or leave the grid and take up opportunities in advancing energy technologies. Due to irrigation demands which may include channel or harvest conditions such as time of use, through to the need for continuous power to refrigerate produce, some farmers have already installed hybrids of renewables and new diesel generation as they transition key infrastructure off grid.

Last year the Queensland Government proved that direct action could be taken to deliver immediate price relief. In June 2017, the government directed the state-owned Stanwell Corporation to alter its bidding strategies, delivering an average 23pc reduction in wholesale prices. Crucially, the move disproved previous claims by government that it could not influence electricity prices.

Everyone can see the opportunities ahead for agriculture. Farmers understand that this means adapting to changing markets, better utilising digital technology, innovating and intensifying their operations; but these actions will be severely undermined if Australia continues to fail to leverage the comparative energy advantage we have.

Australia has an electricity affordability problem that must be fixed. The Queensland Government must set prices for Queensland networks at efficient levels, remove the hidden taxes, and fast-track suitable tariffs before the ‘canary’ drops off the perch.

- QFF President Stuart Armitage

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