Farmers who supplement their electricity supply from Eskom with solar power should prepare for much greater increases in their electricity costs than the average 12.75% tariff hike granted to the power utility by energy regulator Nersa in January.
The hike was the result of a comprehensive restructuring of Eskom’s tariffs, which it had sought for years. The new tariff structure and rate increase came into effect on April 1.
The new tariffs’ impact is hard to predict as energy costs differ, depending on when it is used — the so-called time-of-use tariffs. So the total cost can vary depending on each farm’s usage pattern.
Ig du Plessis, director of Sonfin, which supplies solar power systems primarily to farmers, said the company had analysed the bills of specific clients to determine the impact of the new Eskom tariffs. The comparison was done over 12 months to accommodate the difference between the summer and winter tariffs.
The first client, on Eskom’s Ruraflex Gen tariff, was a medium-sized irrigation farm with a maximum demand of 250kVA and a maximum export capacity of 187kVA.
The farm purchased 394,000kWh over a 12-month period and fed 338,000kWh of its own solar power into the Eskom network for which it received credit at the same tariff it would have paid had it bought the electricity in the same time slot.
According to Sonfin’s calculations, the farm’s annual electricity cost will increase by R119,096 to R761,624, a rise of 18.54%.
The same comparison for a large irrigation farm that bought about 3-million kWh from Eskom and fed 1.7-million kWh of solar power back into the Eskom network shows a total cost increase of 26%. This farm has a maximum notified demand of 1,000kVA and a maximum export capacity of 999kVA and is also on the Ruraflex Gen tariff where the use of electricity during low demand and off-peak periods is rewarded with lower charges.
“I suspect that the costs for all our clients will increase by significantly more than the average 12.74% hike,” said Du Plessis. He believed farmers with solar who still rely on the Eskom network should prepare for increases of 20% or more.
Several administrative fees have been significantly reduced, but that did not cancel out the impact of Eskom’s new fixed cost, he said.
Furthermore, the increases in unit costs during the summer months are much higher than those in winter. Since summer tariffs apply for nine months of the year, farmers will have to pay Eskom much more for most of the year.
A farmer solely reliant on Eskom, like on a cattle farm with a single Eskom connection of 50kVA and annual usage of about 104,000kWh, can expect costs to rise about 14.4% under the Landrate 2 tariff (prepaid).
However, fixed costs will increase notably by nearly 26%, while energy costs, which vary according to consumption, will rise 7.7%. Farmers’ ability to save costs by reducing electricity usage is therefore limited.
Johann Kotzé, CEO of AgriSA, said the agricultural sector is extremely concerned about the rise in electricity costs. “About 50% of our products are exported. The international market is extremely competitive.”
To compete internationally, farmers must be cost-efficient and deliver quality products, he said.
If a farmer can no longer absorb the extra electricity costs, they must pass it on to the consumer. This hampers their competitiveness abroad and locally, and the product becomes unaffordable for consumers already under severe financial pressure.
“Inflation on agricultural products is going to rise,” he said.
The continuous availability of electricity is also extremely important to ensure the quality of the product. “It’s no good if the farmer has electricity, but not at the right time.”
Kotzé encouraged farmers to increasingly invest in alternative energy sources even if they had to endure hardship now to make it happen. It was the right thing to do to ensure continuous power for farming operations, and to position producers for sales in foreign markets, where more was being demanded of environmentally friendly processes.
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