Financial implications of electricity tariff increases, loadshedding, and photovoltaics on irrigated potato-maize and soybean crop rotation farming

Thesis (MAgric) --Stellenbosch University, 2024.

ENGLISH SUMMARY: The state of the South African electricity provider Eskom has caused an electricity crisis in the country. Hence, loadshedding is implemented, decreasing the surety of the electricity supply in the country. For Eskom to meet the demand for electricity in South Africa, drastic changes in governance as well as repairs need to take place meaning the country will experience increasing electricity tariffs. This thesis describes the financial implications of loadshedding and increased electricity tariffs on irrigated potato-maize and soybean crop rotations in South Africa. It also tests the financial viability of migrations towards photovoltaic technology to address these constraints. The theoretical foundation of the study is based on the theory of constraints as well as components of the farm problem theory. The study uses a base whole farm budget model to develop and create an inflated model to test the set-out scenarios. Potatoes are produced in 16 different geographical regions in South Africa. Given that contextual differences such as climate affect design solutions, it is not desirable to design a single generic solution for all the potato production areas of South Africa. A farm in the North West province of South Africa producing mainly processing (Innovator®) potatoes planted under contract with crop rotation of maize and soybeans has been chosen as a case study. The study tests a loadshedding and tariff increase scenario in which the assumption is made that loadshedding will be present for the next ten years, and a tariff increase forecast is also developed. The study identified that stage 4 loadshedding is the threshold at which farmers can manage their irrigation systems depending on the design of their irrigation infrastructure. The study continues to test scenarios on yield decreases due to loadshedding stages 5 and 6 and what financial implications this holds on production and profitability. The study also tests two photovoltaic design scenarios, one grid-tied and one off-grid system. The results of this study based on the set assumptions indicate that the implications of increased electricity tariffs will significantly affect producers' profitability in the specified area and that insolvency would be a possibility. The tested scenarios indicated that if either sustained stage 5 or 6 loadshedding is implemented, this would mean that these farmers will either divert into different crops or practices or will be insolvent before Eskom has resolved the electricity problem. The study indicated that, in the effect of using photovoltaic technology to possibly address these constraints, a grid-tied PV system would be the most viable and would, in effect, be the solution for the situation these farmers are in. Loadshedding in effect will not be fully addressed. However, electricity input costs will be lower and make irrigation schedules more manageable, allowing these farmers to keep producing and managing possible losses.

AFRIKAANSE OPSOMMING: Die toestand van die Suid-Afrikaanse elektrisiteitsverskaffer Eskom het 'n elektrisiteitskrisis in die land veroorsaak. Gevolglik word beurtkrag geimplementeer, wat die sekerheid van die elektrisiteitsvoorsiening in die land verminder. Vir Eskom om aan die aanvraag na elektrisiteit in Suid-Afrika te voldoen, moet drastiese veranderings in bestuur sowel as herstelwerk plaasvind, wat beteken dat die land toenemende elektrisiteitstariewe sal ervaar. Hierdie tesis beskryf die finansiele implikasies van beurtkrag en verhoogde elektrisiteitstariewe op besproeide aartappel-mielie en sojaboon gewasrotasies in Suid-Afrika. Dit toets ook die finansiele lewensvatbaarheid van migrasies na fotovoltaiese tegnologie om hierdie beperkings aan te spreek. Die teoretiese basis van die studie is gebaseer op die teorie van beperkinge sowel as komponente van die plaasprobleem-teorie. Die studie gebruik 'n basiese heleplaasbegrotingsmodel om 'n geinfleerde model te ontwikkel en te skep om die gestelde scenarios te toets. Aartappels word in 16 verskillende geografiese streke in Suid-Afrika geproduseer. Omdat kontekstuele verskille soos klimaat ontwerpoplossings beinvloed, is dit nie wenslik om 'n enkele generiese oplossing vir al die aartappelproduksieareas van Suid-Afrika te ontwerp nie. 'n Plaas in die Noordwes-provinsie van Suid-Afrika wat hoofsaaklik (Innovator®) aartappels onder kontrak met 'n gewasrotasie van mielies en sojabone produseer, is as 'n gevallestudie gekies. Die studie toets 'n beurtkrag- en tariefverhoging-scenario waarin die aanname gemaak word dat beurtkrag vir die volgende tien jaar teenwoordig sal wees, en 'n tariefverhogingsvoorspelling is ook ontwikkel. Die studie het geidentifiseer dat fase 4-beurtkrag die drempel is waarop boere hul besproeiingstelsels kan bestuur, afhangende van die ontwerp van hul besproeiingsinfrastruktuur. Die studie gaan voort om scenarios te toets vir opbrengsvermindering as gevolg van beurtkrag in fases 5 en 6, en watter finansiele implikasies dit vir produksie en winsgewendheid inhou. Die studie toets ook twee fotovoltaiese ontwerpscenarios, een wat aan die net gekoppel is en een wat afgekoppel is. Die resultate van hierdie studie, gebaseer op die gestelde aannames, dui daarop dat die implikasies van verhoogde elektrisiteitstariewe aansienlik die winsgewendheid van produsente in die gespesifiseerde area sal affekteer en dat insolvensie 'n moontlikheid sou wees. Die getoetste scenarios dui daarop dat indien volgehoue fase 5 of 6 beurtkrag geimplementeer word, dit sou beteken dat hierdie boere of na ander gewasse of praktyke sou oorskakel, of insolvent sou wees voordat Eskom die elektrisiteitsprobleem oplos. Die studie dui aan dat, in die geval van die gebruik van fotovoltaiese tegnologie om hierdie beperkings moontlik aan te spreek, 'n hibridiese PV-sisteem die mees lewensvatbare sou wees en sou, inderdaad, die oplossing vir die situasie kan wees waarin hierdie boere hulself bevind. Beurtkrag sal nie heeltemal aangespreek word nie. Elektrisiteitskostes sal egter laer wees en besproeiingsskedules meer bestuurbaar maak, sodat hierdie boere kan aanhou produseer en moontlike verliese kan mitigeer.

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