Renewable energy: the key to affordable, reliable power in the agriculture industry

The global population is expected to increase to nine billion by 2050. To meet the demand associated with this amount of people food production will need to increase by 70%. However, given the many challenges faced by the agricultural sector, such as climate change and increasing production costs, it is becoming difficult for farmers to maintain or increase their production year after year.

In South Africa access to reliable and affordable power is becoming increasingly problematic, resulting in farmers switching to alternative power sources from renewable energy. Solar energy, as well as other renewable sources such as wind and hydro, enables farmers and agribusinesses to continue operating when there are interruptions due to load-shedding or cable theft, thus ensuring that productivity is not affected. The impact that load-shedding or power cuts can have on a farming operation – especially those that depend on electricity for their irrigation-, pack house cooling systems and abattoir cold rooms – can be severe for that business as well as the economy.

John Hudson, National Head of Agriculture for Nedbank, says that Nedbank is committed to developing solutions that will ensure the sustainability of the agricultural sector and that its leadership position in renewable-energy finance is helping many farmers and agribusinesses to benefit from more cost-effective and cleaner power generation than the national grid can provide.

‘The global Sustainable Development Goals (SDGs) have been developed as the blueprint for achieving a better and more sustainable future for all. Nedbank has prioritised nine of the 17 global SDGs as these potentially entail banking solutions and so guide its sustainable development activities.’

Nedbank is at the forefront of providing finance for renewable energy to the agricultural sector and, in this role, is helping South Africa to meet three SDGs: SDG 7: affordable and clean energy; SDG 12: responsible consumption and production; and SDG 15: life on land, if the renewable energy allows for continued irrigation.

A recent innovation financed by Nedbank is South Africa’s first commercial floating solar farm, installed by one of Nedbank’s clients and the oldest farming operations in the country, Boplaas, on their farm Marlenique near Franschhoek in the Western Cape.

The owners of the solar farm started investigating renewable-energy projects in 2018 because of the increasing costs of electricity and the carbon emissions associated with it. Nedbank’s Specialised Finance and credit teams came up with a creative solution to use an overdraft facility to fund the development stage of the project, and then move to SDG asset-based finance, with progressive payments over a longer term of 10 years. This solution recognises the need for longer payback periods for solar and other sustainability-related projects.

The pioneering solar park can produce 60 kW of energy and is now used to power almost everything on the farm, from irrigation pumps to the machinery used in the packaging of fruit for export. Infrastructure has been installed to allow for a battery system, which will take the farm completely off the grid in the second phase of the project. Importantly, this innovative solution also does not use productive land to generate power – which can cost up to R3 million per hectare in the Western Cape – and reduces evaporation by up to 80%.

Hudson advises that agribusinesses that wish to apply for renewable-energy finance should shop around for suppliers, equipment and solutions as they would for any acquisition of a large asset. ‘Research different technologies, pricing, guarantees and post-sales maintenance. Obtain quotes and specifications to compare the generation outputs, costs and equipment with your research and the various suppliers’ offerings,’ he says.

‘It’s also a good idea to speak to fellow farmers and agribusiness owners who have embarked on the renewable-energy journey to gain insight into the performance and professionalism of their installers. Remember to determine their level of satisfaction with the actual energy delivery and use against the promised specifications. Nedbank has partnered with the South African Photovoltaic Industry Association to develop the PVGreenCard, which provides assurance that the installer is qualified, follows the latest industry guidelines, uses quality components, specifies the system correctly and installs it properly, and warrants that the system will perform to specification,’ says Hudson.

He adds that when applying for finance, agribusiness owners should ensure that the specifications, invoices, agreements or contracts supplied by the installer accompany the operation’s financial records and electricity bills.

‘We are proud to use our core business to provide access to affordable clean energy and therefore contribute to the sustainable growth of South Africa’s agricultural sector.’

‘At Nedbank, we aim to leverage our banking expertise to make a real difference in the lives, communities and societies of our clients and to help them see their money circumstances differently. While helping them realise their aspirations, we aim to grow the economy sustainably, particularly ensuring that the agricultural sector contributes to affordable clean energy,’ concludes Hudson.