Emissions Reduction Fund (ERF): Carbon credits for solar-powered irrigation?


Irrigation communities have cautiously welcomed the federal government's approval of an Emissions Reduction Fund (ERF) methodology that makes projects generating renewable industrial electricity eligible for carbon credits. Additional incentives for renewable energy are urgently needed in the irrigation sector where there is massive interest in switching to solar power for pumping. At this point, however, it is not clear if ERF credits are intended to be additional to, or replacement for, existing Renewable Energy Target (RET) incentives.     

The cost of pumping water using mains electricity or diesel is a major burden on Australian agricultural productivity, with irrigators typically having to cover six-figure energy bills. While electricity is more energy efficient for bulk water pumping than is diesel, high network charges and connection costs in rural areas have inhibited growth in the electrification of irrigation pumping. While most irrigation farmers are interested in solar technology,  either to replace diesel or mains electricity, the capital expense can be difficult to justify for properties that have only seasonal high energy demand. 

The government has not yet published details of how the new ERF methodology will work in practice, but it will entail farmers or collectives bidding to provide CO2 reductions for relatively large-scale projects and at a competitive abatement price which is likely to be in the order of $5/tCO2e. 

At this price, the ERF incentive would be a step backwards if it is intended to replace the Renewable Energy Target (RET) legislation. Currently, installers of small PV systems (systems less than 100kWp) can create and trade Small Technology Certificates (STCs) at close to $40 each. This allows them to discount the final pricing of a PV system by around 300 to 550 dollars per kW installed. In contrast, at an abatement price at $5/tCO2e, the ERF would provide an incentive of sixty dollars per kW.  

If combined with the RET and with incentives to export unused energy to networks off season, the new methodology could make a valuable contribution to the economics of farm scale and community scale renewable projects.  

The Carbon Credits (Carbon Farming Initiative—Industrial Electricity and Fuel Efficiency) Methodology Determination 2015 can be obtained as a download from the official government web page.

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