Investment in sustainable water management is proving a saving grace for hundreds of Canterbury farmers amid soaring electricity prices.
With spot energy prices skyrocketing more than 50% this month in the South Island as hydro lakes and alpine rivers run low, irrigation companies are weighing up the value of future-proofing investment.
“It really has been a case of taking away the risk of the ups and downs and insulating from the increase in energy prices for most of our farmers,” Ashburton Lyndhurst Irrigation Ltd (ALIL) scheme chair Colin Glass said.
Based out of Mid Canterbury, ALIL is a farmer-owned co-operative that delivers water through a network of pressurised pipes to 240 shareholders irrigating more than 30,000 hectares of farmland.
“As we collectively pave our way toward a sustainable, locally grown future, our scheme has adopted modern telemetry that aids us in achieving efficient water use and delivery via pressurised pipelines.
“There’s no disputing electricity is a big issue but we have moved to above-surface metering, operating with smaller pumps, on non-half hourly hubs under different pricing contracts, many of which roll out two- to three-year cycles taking away the pricing ups and downs.”
Glass is also chief executive of Dairy Holdings, Fonterra’s largest milk supplier, with 70 farms across the South Island, a large number of which come into Canterbury irrigation schemes.
“It has become important for Dairy Holdings and ALIL as because of the pressurised pipelines and gravity we are mostly insulated from increases in energy charges.”
Several other large schemes across Canterbury are also gravity pressurised, including Central Plains Water, lessening the exposure to increasing electricity prices.
“There’s been quite an investment by irrigation companies to future-proof for anticipated rising electricity prices.
“With these big projects complete we are looking more closely at interest rates, being more exposed now to changes in interest rates rather than electricity prices.”
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Glass said the same goes for Dairy Holdings.
“We moved away from deep ground water to surface water takes, which considerably lowers electricity costs and leaves us less vulnerable to energy increases.
“I’d like to think it is all less of a risk over time.
“Electricity has been rising greater than the rate of inflation over the past two decades and the reality is New Zealand’s economy and population have continued to grow and we have been slower investing in electricity generation.
“We [irrigation companies] know our electricity prices will increase but we hope with our future-proofing investment it will not have a major impact on our businesses.”
Ashburton-based Ruralco Energy, which lines up power contracts for farmers looking to fix irrigation electricity farm costs, encourages farmers exposed to spot pricing or renewing contracts into the future to look at options.
“While spot pricing is the highest it’s been for some time it will not really impact anyone locked in fixed price variable volume contracts,” Ruralco Energy key account manager Glenn McWhinnie said.
“When market prices are this high, we would not be looking at locking in longer term contracts. Wait for the downward; while the forecast is for prices to remain high, it will drop at some point, I just don’t have a crystal ball to say when.”
McWhinnie said farmers renewing contracts over the past two weeks are paying 50-60% increases in what they are coming off, but retailers are flexible and can do shorter term to ride out the high.
Glass believes the greater risk facing irrigators right now is water availability with very little water in the hydro lakes and alpine rivers.
Environment Canterbury surface water science manager Elaine Moriarty said lakes and rivers throughout Canterbury are at record low levels and there’s no saying when this will improve.
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