Unlocking Energy Potential for the Agricultural Industry

Presented by: Agri X, Enpower Trading and Future Cities Africa.

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Panel of Thought Leaders

• Koos Nel, CEO, Agri X
• Simon Le Roux, Trading Manager, Enpower Trading
• Philip van Niekerk, Quantitative Manager, Enpower Trading

Webinar Summary

• 00:00:00 In this section the hosts welcome attendees and thank the organisers and speakers. The agricultural industry's struggle with high electricity tariffs, increasing diesel costs, and consumer pressure to be more sustainable is addressed. Renewable energy, wheeling, and trading are proposed as solutions to reduce costs, enhance competitiveness, and promote sustainability in the South African agricultural sector. Koos Nel, CEO at Agri X explains how they make a difference and unlock value by providing the right advice, expertise, and technology in the energy sector, which is filled with challenges. Recent developments, such as load shedding, the establishment of a new Department of Energy and Electricity, and regulatory changes, are highlighted as opportunities for private sector participation in the energy mix.
• 00:05:00 In this section the speakers discuss the global shift towards renewable energy and innovation, with a focus on South Africa's transition from vertical energy distribution to decentralisation and competition. They mention the impact of technology on reducing energy consumption and using clean energy, as well as the importance of sustainable farming practices in response to consumer demands. The webinar aims to provide farmers, producers, and businessmen with relevant information on energy trading and solutions for the agricultural industry, with Enpower Trading as a partner. Simon Le Roux, Trading Manager for Enpower Trading and a third-generation farmer, moderates the webinar and shares his background in financial markets and farming.
• 00:10:00 In this section the presenters introduce themselves and discuss the challenges facing the agricultural sector in South Africa due to the energy crisis. The energy crisis threatens the food supply chain and agricultural production with frequent power cuts and insufficient access to reliable electricity. Farmers and processors are now able to choose their electricity supply sources and improve their energy strategy through independent solutions, reducing their expenses and risks. South Africa, one of the top 15 largest carbon dioxide emitters, is heavily reliant on coal energy, and the impact of climate change on agriculture could reduce the real GDP by 3%. The power crisis has resulted in an estimated deficit of between 4,000 and 6,000 megawatts of generation capacity, leading to crippling power cuts since early 2008. Despite its small share of GDP, agriculture is an important sector in the South African economy, providing employment, especially in rural areas, and being a major source of foreign exchange. The power crisis has limited the effectiveness of onsite solar, resulting in either low penetration rates or expensive oversized systems.
• 00:15:00 In this section the speaker discusses the significance of solar energy in agriculture and the challenges of absorbing all the generated solar energy during certain seasons. The speaker also mentions the increased input costs in the agricultural sector and how they impact efficiency and productivity. Simon then introduces Enpower Trading, a licensed energy trading company, and explains how they provide low-cost energy pricing and renewable energy certificates to agricultural processors and farmers. He also provides an explanation of wheeling and trading, using an analogy of a dam filled with water to help understand the concept. Wheeling is an accounting transaction for the reconciliation of electricity flowing into and out of the grid, while trading involves multiple sources of electricity flowing into the grid and multiple points of delivery. The agricultural value proposition of traders includes the ability to optimise energy usage, enhance operational efficiency, and reduce costs over time.
• 00:20:00 In this section the speaker discusses opportunities for agricultural businesses to save on electricity costs through time-of-use arbitrage and energy wheeling and trading. Time-of-use arbitrage involves charging batteries during off-peak hours with renewable energy sources like solar PV and discharging the energy during peak hours, reducing electricity expenses. The entire Eskom grid in South Africa is being rolled out for energy wheeling and trading, allowing for risk diversification by blending various sources of power over short, medium, and long terms. This strategy offers more flexible contract terms compared to traditional power purchase agreements and is a complementary addition to on-site solar PV systems. The speaker also mentions working with software providers to manage customer portfolios and optimise savings, as well as offering integrated solutions to minimise the need for multiple power purchase agreements.
• 00:25:00 In this section the speaker discusses how renewable energy certificates are becoming increasingly important for companies, even those in the agricultural sector, as they are expected to show their scope to emissions and reduce them. The biggest drivers for renewable energy adoption in agriculture are sustainability, reduction in emissions, and cost savings. The speaker mentions substantial savings of up to 30% on customers' existing electricity tariffs through wheeling and trading. These savings can then be reinvested in on-site solutions such as diesel generators, solar PV batteries, and offsetting diesel costs. The speaker also warns that the agricultural industry may face a significant shock with the potential implementation of the European Carbon Border tax Adjustment mechanism (CBAM) for agricultural exports or imports by 2030. The speaker emphasises the importance of being proactive about reducing emissions to remain competitive in the international market and meet the growing demand for low-carbon products from customers and supermarkets. Renewable energy penetration is discussed, with on-site solar providing around 20% of a site's consumption, and wheeling in solar, wind, and hydro adding another 30%, potentially offsetting up to 50% of a customer's electricity costs over time.
• 00:30:00 In this section Simon discusses how a large agricultural producer in the Western Cape region, focusing on deciduous fruit and wine with agro-processing on site, was able to save up to 55% on their electricity costs by using renewable energy. The client's load profile, which is quite seasonal with most consumption in summer months, fits well with solar PV and wheeling. A solution was offered that offset about 55% of the client's Eskom energy with renewable wheeled energy, resulting in significant savings of R700,000 in the first year with a five-year contract and R900,000 in the first year with a 10-year contract. The cumulative savings for the client were estimated to be R4.3 million over five years and R13.7 million over 10 years. The client's criteria for using this solution include being MV connected or higher, with talks of expanding to low voltage customers in the future, and a minimum consumption of around 250,000 kilowatt hours a month.
• 00:35:00 In this section Philip van Niekerk, Quantitative Manager at Enpower Trading discusses the process of buying wind energy from the company for agricultural customers connected to Eskom or Municipal electricity grids. The process involves signing a non-disclosure agreement, providing 12 months' worth of energy data, receiving a proposal and high-level commercial terms, and optimising the solution for the customer's needs. Once a solution is agreed upon, the customer must amend their electricity Supply Agreement with Eskom to receive the wind energy.
• 00:40:00 In this section the speakers discuss the challenges agricultural players face when buying clean energy via Wheeling. The main roadblocks include the customer's connection and size of connection, as well as the long-term commitment required. Traditional IPPs have burdensome security requirements and are not interested in smaller customers. As an energy trader, they aim to fill this gap by providing the necessary securities and more favourable terms to customers. The type and amount of securities required depend on the customer's quality of offer and size.
• 00:45:00 In this section the speakers discuss the possibility of offering the energy trading and wheeling service to clients on municipality accounts. The Constitution of South Africa grants municipalities the right to articulate Power and Water Services within their jurisdiction, and the decision to implement wheeling is made on a municipal basis. Eskom has taken steps to enable wheeling within its network, and some municipalities, such as City of Cape Town and the Western Cape, have already adopted their own wheeling frameworks. Eskom is also developing a virtual wheeling platform, which will allow direct procurement of energy for municipalities and reduce their reliance on municipal initiatives to enable wheeling. The speakers also address a question about protection for customers during prolonged low charging grid failures. Currently, reconciliations for power usage are done on a monthly basis, and Eskom allocates energy based on monthly consumption. Customers who are not using power during a low charging grid failure will not be impacted until they are down for an extensive period of time. The speakers mention that having multiple take sites that are not on the same low charging schedule can help mitigate the risk for customers.
• 00:50:00 In this section the speaker discusses how a power trading company can help agricultural businesses during grid failures by reallocating power to their customers. An attendee asked about signing a multiparty Power Purchase Agreement (PPA) for multiple farms in the same area to buy electricity in bulk for lower tariffs. The speaker suggests creating a cooperative-like company structure, where farmers are shareholders, and the Contracting Company handles bill settlements. The speaker also addresses the question about Eskom's strategy to move from monthly 30-day reconciliations to monthly 30-minute reconciliations, stating that this has already been implemented in Cape Town, and farmers can sell excess energy to the city at a reduced tariff if they don't consume it.
• 00:55:00 In this section speakers Simon and Philip discuss the challenges of energy constraints in South Africa and the potential for growth through excess generation and privatisation. They compare South Africa's current situation to that of Turkey, which took 15 years to liberalise its power industry. They believe that South Africa still has a long way to go in terms of privatisation and distribution of electricity, and that the economy's development will ultimately lead to increased demand and a more liberalised power market. They emphasise the importance of wheeling trading in the agricultural industry and encourage attendees to visit Enpower Trading and Agri X websites for more information.

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