How reaching Net Zero can help the Agriculture Industry

Ask any schoolkid to name one of the primary causes of greenhouse gas emissions, and they will tell you – with a smile on their face – that its methane gas from cows. While not strictly true – sheep also make a significant contribution – it’s no laughing matter.

An article in The Conversation pointed out: “Australian agricultural activities emitted about 76 million tonnes of carbon dioxide-equivalent emissions in 2019. Of this, about 48 million tonnes were methane belched by cattle and sheep, and 11 million came from their excrement.”

Overall, agriculture in Australia accounts for around 14% of Australia’s greenhouse gas emissions each year and, with the addition of land clearing, “contributes about 20-22% of national greenhouse gas emissions, nearly equal to the transport sector’s contribution”, according to Professor Richard Eckhard of Melbourne University.

Three reasons to work towards lower emissions

There’s no doubt that Australia’s agriculture sector makes a significant contribution to our economy. The $67 billion-a-year sector employs over 320,000 people and contributes 1.9% of GDP. Yet, of all the industries looking to reduce emissions to meet national and international climate change goals, agriculture arguably has the most reason to change, as it stands to be affected the most.

1. The agriculture sector is uniquely vulnerable to climate change

Being intimately connected to the natural environment means farmers and their products are more susceptible to the effects of climate change, including drought, heatwaves, bushfires, floods and storms

2. Exposure to international market tariffs

As an export-heavy industry in some sectors – particularly red meat, which exports nearly 75% of production - it could be open to border taxes. For example, The European Union’s Carbon Border Adjustment Mechanism (CBAM) will, from 2023, impose additional costs on industries with a high carbon footprint.

3. An opportunity to secure additional revenue streams

As The Conversation points out: “Trees provide shade for animals, while good soil management can preserve the land’s fertility. Both activities can store carbon and may generate carbon credits, which can be used to can be used to offset farm emissions, or sold to other emitters.”

What is the opportunity?

According to the Ernst and Young report, there are four critical areas of opportunity for farmers in a low-emissions agricultural environment.

These are:

Transitioning to renewables.

Australia’s vast natural resources and biodiverse land provides many opportunities for farmers to become more sustainable and, at the same time, increase the potential to diversify incomes.
For example, by using land assets to generate renewable energy through wind, solar and even hydroelectricity, where that’s not possible, by increasing uptake of solar or wind energy to replace grid consumption.

This has many benefits, including: Less susceptibility to energy price rises – which can have a considerable impact on profitability. Less reliance on a single source of energy – which can cause issues around business continuity.

Compliance with existing and future regulations – which is pushing all areas of the economy to account for and reduce emissions. Meeting consumer needs – which is increasingly looking to engage only with ‘sustainable’ businesses. Australian farmers also have the opportunity to diversify their incomes through the generation of Australian Carbon Credit Units (ACCUs) and similar assets.

EcoAvo is a small avocado producer in southwest WA. Moving to carbon neutrality by offsetting their emissions is designed to build resilience in the business by focusing investments into renewable energy and altering its reliance on fossil fuels. They have also opted for all ‘Natural Power’ from their grid energy supplier, which supports renewable energy generation.

EcoAvo, is located in West Australia. “We recognise that we are not just farmers and play a critical role in sustainable development.”.

Act now to make an impact tomorrow

Energy Action has helped thousands of businesses across multiple industries make the transition to sustainability and Net Zero. (We achieved Net Zero ourselves this year.)

Energy Action’s services include:

Step 1: Measure your usage and emissions

Step 2: Lower your costs.

Step 3: Consider your emission reduction options

Step 4: Procure at least-cost

Step 5: Fulfilment of certification management

Through our solar auction platform, you can quickly and easily get the right solar solution, at the best possible price, and select the right purchasing method for you. Installing solar will save your business considerable sums while lowering your emissions and reducing dependency on the grid.

To find out more about how we can help you reach your Net Zero goals, contact us.

Sources:

  1. The Conversation: The clock is ticking on net-zero, farmers most not get a free pass 26 September, 2021
  2. Melbourne University website: Agriculture can be climate neutral by 2030
  3. Ernst and Young Report: How can Australia’s agriculture realise opportunity in a low emissions future? Figures from -Department of Agriculture, Water and the Environment (2021) Snapshot of Australian Agriculture 2021. Figures include Fisheries and Forestry, which constitute approximately 8% of overall value.

July Market View

Market Insights

With over 20 years’ experience of using smart technology and data-led insights to make clients’ energy cheaper, easier and cleaner, Energy Action is the trusted, independent energy partner for over 7,000 Australian businesses. This market view is part of our regular energy market commentary.  

More of the same for energy prices

In the energy market for both electricity and gas, we can see that there's nothing mitigating pricing and the our outlook continues to be pessimistic. Our view is that it’s not possible to say when the market will break, and there will need to be significant changes that influence long-term supply to overcome the short-term factors holding prices at current levels. Our expectation is for current price levels to continue and be here for the short to medium term.

In commodity markets, the price of oil continues to increase and is having an impact on coal prices. What we’re seeing generally is a high inflationary energy environment, driven by world markets’ response to the war in Ukraine, coal generation outages, and weather impacting renewable generation.

Victorian gas under pressure

At home, the Victorian gas market is coming under pressure because of shortages due primarily to the rundown in the Iona Gas Storage Facility in southwest Victoria, which holds approximately 26 petajoules of gas. The market operator, AEMO is concerned that there will be physical constraints in the Victorian gas market, with most locally produced gas being shipped north to Queensland for export.

In Victoria, the gas market is fairly concentrated, with three big exporters of Santos, Shell and Origin. Gas shortfalls are expected to continue through to September, with Victoria impacted the most.

Another reason that we're seeing gas shortages now is because gas demand is up as a result of the need for gas-fired generation. We're seeing higher outages for coal-fired power stations and also an increase in heating demand expected at this time of the year, particularly in the southern states of Tasmania and Victoria, and to a lesser extent NSW.

State government policies impacting supply

While heating demand naturally has a short term impact on gas prices, in the longer term, the greatest impact on the gas market is state government policy – in particular, the restrictions for gas exploration currently in place. What will break or alleviate pricing is new gas and we can't see that from any state other than Queensland which still has exploration licensing in place. Both the Victorian and NSW state governments have a moratorium or ban on the granting of exploration, licensing or the expansion of existing production, and that's restricting new supply. So the only augmented increase in gas supply is going to come from Queensland exploration. To date there has been little appetite for the Federal government to impose a East Coast gas reservation policy or to impose taxes on exports.

Surging electricity prices led to capping

In the electricity market, upward pressure in terms of prices and of business costs, led the market operator, AEMO to step in June and cap the wholesale electricity market at $300 a MW hour.  As a consequence, electricity generators are claiming compensation, stating that their costs were higher than revenues during the $300 cap period.  

The government has said that taking this action saved the market $800 million, and that the intervention was favourable. That is, it would have been $800 million more had they not capped the market, or $2.4 billion in total. The government’s point of view is that they have limited costs to $1.6 billion; costs that would have been borne by consumers. The market’s response to that is that it was ineffective or that it really hasn’t produced the outcomes needed in the current market.

Electricity prices: New South Wales /Queensland

In New South Wales, we're seeing electricity pricing retrace back to previous highs. Our view is that the uptrend has not been reversed and technically it continues to be an uptrend. For Queensland, on the other hand, we're seeing a downtrend. Time will tell whether that reverses back and follows a similar path to NSW.

The overall result is that we're still in very high price territory, with $200 plus wholesale prices, which, feeds into retail prices.

Electricity prices: Victoria / South Australia

In Victoria, a very strong uptrend remains, currently around $150 /MWh. While this is slightly below New South Wales and Queensland, it’s still in a strong uptrend. In South Australia, there’s a similarly mixed result to Queensland.

Overall, we can see that the next movement is generally upwards. There are no short term influences that indicate that there would be price weakness coming through the market. Our view is that prices can't be sustained at these levels in the long term.

Policy position influencing prices

Prices are also being affected by policy position. In our view, we see the need for a gas reservation policy on the east coast – as they have on the west coast – rather than just the trigger. And we need to see some direction around coal-fired generation, in terms of increased base load capacity. Right now, there’s no real change to the availability of base load coal-fired generation and no change to gas availability. These potential solutions of gas reservation and capacity have little or slow political traction, and so current high prices will, we believe, be here for the short to medium term. 

Act now to make an impact tomorrow

Energy Action has helped thousands of businesses across multiple industries make the transition to sustainability and Net Zero. (We achieved Net Zero ourselves this year.) Energy Action’s services include: 

Moving to Net Zero: How wineries can win the war against climate change.

From France to South Africa, the US to Australia, grape growers and winemakers are preoccupied with the impact of climate change.
The concern is understandable, given winemaking communities' dependence on the unique terroir and micro climates which allows vines to flourish in their particular region.

One recent example shows why. In September 2021, the French winemakers’ harvest produced a whopping 29% less wine
in 2021 than in 2020, according to a report in the Financial Times.
This was primarily due to climate change induced spring frosts and summer rains and followed by floods in Germany, a heatwave in southern Europe and drought in California.


Recognising that wine is a centuries-old natural treasure, Australia’s wineries are already taking positive steps towards rethinking practices to help preserve the environment for future generations, as the recent Sustainable Winemaking 2021 Impact Report makes clear. The report shows how its 568 member vineyards (now up to 767) have been dealing with six key areas of sustainability: water, energy, biodiversity, land & soil, waste and people & business.

Cool changes ahead?

In Australia, of course, we’re used to drought, fire and flood challenges. Now we can add climate change to that list of natural disasters. “Climate change is already impacting the grape and wine community,” says Wine Australia. “It’s evidenced by changes in grape phenology and harvest dates, which has led to compressed harvests and greater pressure on vineyard and winery infrastructure.”

Adapting to those challenges could include changing growing and harvesting methods, planting different grape varietals and perhaps even relocating to ‘cooler’ regions.

Winemaker Kate Hill has done precisely this by moving to Tasmania. She says, “People talk about harvest dates already being a couple of weeks ahead of where they were 10 to 15 years ago, and we’re seeing a lot of young winemakers moving to Tasmania for that reason.”

Driving energy efficiency

“For many wineries, energy is their single largest operating cost,” says the report. Being such a climate-dependent industry, moving to a more sustainable energy model makes sense in so many ways. In fact, it shows that members who generate on-site renewable energy offset their grid electricity by an average of 4X.

The report shows the encouraging stats that 72% of member vineyards and 82% of member wineries have acted to reduce energy consumption and are prioritising energy-efficient practices.

Duxton winery – a certified winery and vineyard – is another benefitting from energy efficiency practices, running its Wentworth two vineyard’s operations entirely off-grid using a solar and battery system.

While at the famed Wynns Coonawarra Estate, viticulturist Dr Catherine Kidman says the company has embraced sustainable practices, adding that “From 2024 we are going to have 100% renewable energy and then from 2030 we will have net zero emissions.”

As well as reducing energy costs, the drive towards sustainability also makes sense from another business perspective – customer demands. As Tony Battaglene, Sustainable Winegrowing Australia CEO, points out. “More than half of Australian wine consumers are driven by sustainability and this number continues to increase alongside the growing global demands for products that demonstrate sustainable practices.”

According to a study, Leask Agri(certified vineyard) is located in South Australia. They were able to reduce their reliance on the grid by 57% and overall operating costs by 93% after installing a solar system to offset the power needs of the well.

Act now to make an impact tomorrow

Energy Action has helped thousands of businesses across multiple industries make the transition to sustainability and Net Zero. (We achieved Net Zero ourselves this year.)

Energy Action’s services include:

Step 1: Measure your usage and emissions

Step 2: Lower your costs.

Step 3: Consider your emission reduction options

Step 4: Procure at least-cost

Step 5: Fulfilment of certification management

Through our solar auction platform, you can quickly and easily get the right solar solution, at the best possible price, and select the right purchasing method for you. Installing solar will save your business considerable sums while lowering your emissions and reducing dependency on the grid.

To find out more about how we can help you reach your Net Zero goals, contact us.

Sources:

  1. Financial Times: ‘Climate change tastes bitter to winemakers’ John Gapper, 10 September, 2021
  2. Wine Australia website: https://www.wineaustralia.com/growing-making/environmentand-climate
  3. ABC Rural online: Australian wines changes as industry adapts to warming climate. 28 October, 2021
  4. Sustainable Winegrowing Australia 2021 Impact Report.
  5. ABC Rural online: Australian wine industry pushes for sustainable future. 13 October, 2021