Submission tothe Department of Economic Development, Jobs, Transport and Resources

for the

Review of the Victorian Energy Efficiency Targets

Consultation paper

Date: 15thMay 2015

The Victorian Farmers Federation

The Victorian Farmers Federation (VFF), Australia’s largest state farmer organisation and only recognised consistent voice on issues affecting rural Victoria, welcomes the opportunity to comment on small business in Victoria.

Victoria is home to 25 per cent of the nation’s farms. They attract neither government export subsidies nor tariff support. Despite farming on only three per cent of Australia’s available agricultural land, Victorians produce 30 per cent of the nation’s agricultural product. The VFF represents the interests of our State’s dairy, livestock, grains, horticulture, flowers, chicken meat, pigs and egg producers.

The VFF consists of anine person Board of Directors,with seven elected members andtwo appointed directors, a member representative General Council to set policy and eight commodity groups representing dairy, grains, livestock, horticulture, chicken meat, pigs, flowers and egg industries.

Farmers are elected by their peers to direct each of the commodity groups and are supported by Melbourne-based staff.

Each VFF member is represented locally by one of the 230 VFF branches across the state and through their commodity representatives at local, district, state and national levels. The VFF also represents farmers’ views on hundreds of industry and government forums.

Peter Tuohey

President

Victorian Farmers Federation

Farrer House

24 Collins Street

Melbourne 3000

p 1300 882 833 f 03 9207 5500

e w

Contact: Yaelle Caspi

Project and Policy Officer

Question Responses

Questions 1 – 6 have intentionally not been addressed in this submission.

7.In addition to expanding the range of energy efficiency activities available in VEET, should any other action be taken to target participant by certain groups?

The agricultural industry must be prioritised under the VEET scheme. Farm businesses have been paying for the VEET Scheme since January 2009 but they have not been able to access the benefits through appropriate energy efficiency technologies.

Market mechanisms are failing to deliver to the diversity of the Victorian population. As it stands there is an incentive for Accredited Persons to focus solely on densely populated urban centres as this is where the greatest uptake occurs. This however leaves rural people at a disadvantage, paying higher costs for energy and with little opportunity to become more energy efficient. This must be rectified through VEET itself or through other means.

The Victorian Farmers Federation has for years been attempting to have variable speed drives approved under the scheme for agricultural use. Until this point however it seems that the VEET administrators do not understand the significance of the agricultural sector.

Victorian agricultural industries use a total land area of 10.6 million hectares generating $11.6 billion of food and fibre. Agriculture accounts for thousands of jobs and is Victoria’s largest exporter.

Government schemes are often designed for traditional urban businesses and do not take the unique operating environments of farm businesses into account.

Higher network costs in regional Victoria

The network cost per kilowatt of power consumed is rising in country Victoria, causing a blow-out in regional energy costs. In 2012-13 regional business customers were paying over $1000 more in network tariff costs than urban distributors’ customers.

A study commissioned by Dairy Australia found that whilst dairy farm energy consumption over the 2010-13 period remained fairly steady, rising tariffs, additional levies such as the carbon price and renewable energy schemes, and increasing network charges have contributed to daily costs rising 33-100 percent for many dairy farms since 2010.

Not only are farmers disproportionately exposed to higher energy costs than businesses in urban centres, they are paying an extra charge for an energy scheme that they cannot properly access.

High energy users

Many agricultural sectors including dairy, chicken meat, eggs and horticulture are highly energy intensive.

Dairy farmers for example have high power needs for milking machinery and refrigerated milk storage. Analysis commissioned by Dairy Australia indicates that typical dairy farmers are now spending between $20 to over $100 a day on electricity to power their dairies. Many farmers also incur additional energy costs to run irrigation equipment.

Similarly for horticulture refrigeration and irrigation needs results in high energy usage and cost. The housed animal industries such as chicken, eggs, and pig farms have extensive climate control requirements using exhaust fans, heating and lighting.

Barriers to entry

Victorian farmers have been paying higher electricity prices to fund the VEET scheme since 2009. Very few technologies have been registered that are of value to farmers. Farm businesses have been able to take advantage of VEECs in regard to lighting. However farmers still face major barriers to access valuable technologies to reduce energy costs, for example variable speed drives.

Level footing

The VFF believes agriculture, as Victoria’s biggest export sector, needs greater support in boosting on-farm energy efficiency. Such support is crucial if the Victorian Government is to deliver on its commitment to double the state’s food and fibre exports by 2030.

Farmers are price takers, whose only means of remaining viable is to boost productivity, via more efficient use of inputs, innovation and through economies of scale.

Many farmers are already disadvantaged when it comes to cutting energy costs, due to:

  • Lack of access to alternatives, such as reticulated gas.
  • Only having access to single-wire earth return lines.
  • Distance from urban centres that can offer advice.
  • Limits on access to the capital needed to invest in power saving technologies.

The surge in energy prices over the past five years has, along with other rising input costs, eroded farm profitability.

Ready to access

The agricultural industry is already actively working to increase energy and resource efficiency. For example the dairy industry has a sustainability target to reduce greenhouse gas emissions intensity by 30 percent by 2020. Having access to government assistance such as the VEET scheme would allow for greater opportunities to reach this target.

Victoria’s dairy industry is primed to take advantage of energy saving opportunities with 900 on-farm energy audits having been completed, and another 500 due to be completed by June 2015. Horticulture has also recently completed a round of energy audits and is ready to take the next step through installation of energy efficiency technologies.

The VEET scheme has largely been an urban based scheme disadvantaging rural and regional energy consumers. To strengthen the scheme a concerted effort must be made to include country Victoria – some of the highest energy paying customers in Australia. Farm businesses particularly must be prioritised with assistance to have appropriate technologies approved under the scheme.

8. Please suggest up to five activities that should be prioritised for revision or introduction to the VEET scheme.

Agricultural activities should be prioritised under the VEET scheme. These include but are not limited to:

  • Milk harvesting
  • Milk chilling
  • Ventilation
  • Irrigation
  • Water heating

Energy saving technologies

Variable speed drives – for efficient agricultural services.

The Victorian Farmers Federation is calling for agricultural activities to be recognised under the VEET scheme.

Currently swimming pool owners can claim VEECs on their VSD pool pumps, but installing the very same technology on a dairy vacuum pump is not covered under the scheme.

Variable Speed Drives are available to New South Wales farmers under the NSW Energy Savings Scheme however farmers in Victoria do not have this same opportunity. To create a level playing field VSD should be available to farmers in Victoria under VEET.

The VFF has already identified VSD could deliver savings of up to 45 percent when used on:

  • Dairy vacuum pumps used for milk harvesting
  • Dairy milk pumps used for milk cooling
  • Chicken meat, egg and piggery ventilation fans
  • Horticulture cool store fans
  • Irrigation pumps

Vacuum pumps in dairies are used to create a vacuum to attach milk cups to the cows and create pulsation to draw the milk from the animals. The vacuum is also used to wash the milk plant. Vacuum pumps represent approximately 80 per cent of energy used by milking equipment components.

The vacuum pump produces sufficient air flow to operate milk harvesting equipment in addition to a minimum reserve requirement. The reserve is only used when extra vacuum is required to ensure the system maintains functionality, such as when the cups are kicked off the cows’ udder.

Installation of a variable speed drive on a vacuum pump matches the speed of vacuum pump with the demand for air flow at any time. The minimum reserve requirement is only produced when there is demand for additional air flow, thereby lowering energy consumption and emissions.

Variable speed drives can be attached to new or existing vacuum pumps. Two commonly used vacuum pumps are oil vane and blower vacuum pumps. Installing a VSD on a standard 7.5 kW oil vane pump could cut electricity consumption by a massive 47 percent.

The VFF is aware that deeming of VSD is not a simple task, especially when the technology can be used across a variety of applications. Deeming VSDs on dairy vacuum pumps is possible, given they are used during predictable periods each day. However, deeming VSD on irrigation pumps is more complicated, given usage can vary dramatically with seasonal conditions.

In poultry and pig sheds, the installation of VSD in induction fans can deliver energy savings of 40 – 45 percent.

The VFF is calling for VSD to be deemed for agricultural purposes under VEET.

Thermal Heat Recovery Systems for water heating – to capture the heat from milk refrigeration systems and use it to heat water.

There are a number of energy efficiency technologies that are available to assist commercial water heating such as Thermal Heat Recovery Systems and Heat Pumps.

Milk refrigeration technologies – to cool milk more efficiently.

Milk cooling and storage is the single largest energy usage in a dairy shed, typically accounting for 42 percent of total energy used. There are many technologies that can be implemented to cool milk more efficiently. Technology such as cooling towers and electronic control valves are able to assist in keeping costs down.

Cooling towers are an option for farmers who do not have access to three phase power and farmers are often forced to look to alternative measures to manage energy loads.

9. Please suggest up to three changes which should be made to improve the VEET scheme.

It is essential that agricultural businesses have access to the VEET scheme through deemed products rather than project-based methodologies. The project-based scheme is not suited to farm businesses that are largely small to medium-sized enterprises. The high level transaction costs – consultant fees and metering costs would be too great a barrier for farmers to be able to access VEET.

Farm businesses operate under extremely tight margins and do not have the resources to undertake an onerous application and monitoring process. Farm businesses are highly suited to a smaller, upfront payment to assist in reducing the payback periods for efficiency technology installation.

A report by Dairy Australia found that the upfront cost is the biggest barrier to farmers installing energy efficient technologies. Project based funds are not paid until energy savings are proven, this would not help farmers overcome the major barrier to accessing technologies.

Project based assessments are appropriate for large businesses but should not be imposed on smaller operations who do not have the resources necessary to access such programs.

Victorian Farmers Federation is calling to maintain the deemed product methodology, whilst extending it to the agricultural sector.

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