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Hydroelectric plants find favour with South African farmers

The power battle for agribusiness in South Africa is moving from coal to water, with more farmers investing in hydroelectric plants to keep their farms running to meet the nation’s food security needs.

In one example, an Eastern Cape farm on the Great Fish River, which relies on irrigation for many of its production needs, uses hydroelectric power to keep operations running during loadshedding.

Standard Bank assisted the agribusiness Lowmar, a commercial farming enterprise, with financing the new hydro project, which cost approximately R24 million.

This is the most significant private hydro project for which the bank has ever provided financial support. [See video below.]

“Feasibility analysis revealed that the project will become cash-positive in its third year and save the business approximately R9.5 million over the 10-year funding period.”

The impact of loadshedding on farming

Japie Marais of Lowmar Farm explains that the agribusiness has relied on water from the river since 1976 and has 450 hectares under irrigation.

Owned by the Collett family since 1975, the Marais family bought into the business in 2011, and Lowmar (Pty) Ltd Company was formed five years later. Lowmar grows crops including maize, lucerne, walnuts and pecan nuts and farms livestock such as sheep, cattle, and ostriches.

Marais explains that river water is mainly used for irrigation, delivered by electrically driven sprayers and centre pivot systems.

“This project has also successfully powered two shearing sheds, a walnut cracking facility, a pelleting factory, two cold rooms, two farm workshops and all the houses on the property. As a result, 26 households have experienced an end to loadshedding, productivity has increased, and our staff are happier,” says Marais.

He adds: “We had been experiencing significant crop losses caused by loadshedding and grid instability, eventually leading to revenue losses of about R3.1 million annually. Increased costs were driven by fuel used for generators and higher maintenance costs on electrical equipment because equipment had to restart up to four times a day.”

According to Marais, the pelletising factory’s inability to irrigate during loadshedding brought it to a halt, and staff and contractors’ inability to complete tasks contributed to the losses experienced.

Hydroelectric financing secures farming production

Faced with an ongoing situation where power outages could last up to three weeks, Lowmar’s owners decided to gain energy independence and build power generation facilities.

Maudene van Rooyen, power and sustainable solutions specialist at Standard Bank Business and Commercial Banking, says the 362kWp hydroelectric plant at Lowmar Farm is expected to produce about 2.9GWh in its first year, which will provide sufficient power for two farms.

“In the early days of its operation, the hydroelectric plant is already delivering positive results. The farm is unaffected by loadshedding, and generators are no longer required.

“Within the first seven weeks of operation, the hydro system generated power to the value of R550,000 at Eskom’s rates. Output is expected to increase as the plant gears up and water flow increases,” says Van Rooyen.

Standard Bank’s financial solution comprises a multi-product structure, with Commercial Asset Finance for R13 million of the project structured on a 10-year debt tenor and an R11 million term loan.

“Our feasibility analysis revealed that the project will become cash-positive in its third year and save the business approximately R9.5 million over the 10-year funding period. Given that the hydro plant’s lifespan is in excess of 30 years, significant benefits lie ahead,” says Van Rooyen.

Clean power pushes the agribusiness border

Lowmar anticipates further benefits should it broaden its export base.

In fact, it could soon add meat products to its current export portfolio of wool and pecan nuts. A major and growing benefit lies in the client’s ability to supply carbon-neutral products to the international market.

“We will build on the fact that our exports are carbon-neutral and believe that our exports will benefit significantly from this niche marketing advantage. Being one of the few active farmers in the market will mean getting premium prices for our products,” says Marais.

Although South Africa is a water-scarce country, rivers across high altitudes are ideal for small hydroelectric plants. These rivers include the Great Fish River, the Orange River, the Sabie River, and the Gariep, which will improve the outlook for building more privately owned plants.

“South Africa has great potential for building more hydroelectric plants. This has been confirmed by increasing interest from farmers, most of whom are located close to rivers with either a high head or a high flow speed,” says Van Rooyen.

“However, our interest in energy is not restricted solely to hydro projects. Our client value proposition spans solar PV, hydro, biomass, biogas, and wind.

“The bank has seen a 68% increase in solar PV investments from farmers from 2022 to 2023. In 2022, the investment was 23% bigger than in 2021.

“Hydrogen solutions also offer vast opportunities, and our investigation into this area for viable projects continues.

Van Rooyen emphasises that Standard Bank intends to play a leading role in helping clients realise their energy projects.

About the author

ESI Africa
Content Team
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