Government 2012). A total of 1538 subprojects have been funded by the Australian
Government to improve the efficiency of on-farm irrigation system and nonfarm
water use through measures (Australian Government 2018d) such as (a) installing
new or upgrading irrigation infrastructure or technology through automated water
management systems and sensing equipment; (b) improving irrigated area layout or
design for the purpose of improving on-farm irrigation efficiency; (c) upgrading
of/conversion to surface and sub-surface drip systems and overhead spray systems
such as lateral move or centre pivots; and (d) ancillary equipment necessary for new
or upgraded irrigation system to function. All projects that have been approved
under OEFIEP (Rounds 1–5) have provided the Australian Government with
152.6 GL (calculated as long-term average annual yield) of water savings to ‘bridge
the gap’ towards the sustainable diversion limit under the Basin Plan 2012 (Cth).
Although the achieved water savings have been significant, many on-farm infrastructure upgrades under SRWUIP have come at the cost of higher energy use
(e.g. via new pumped or pressurised irrigation systems). Coinciding with the
increasing electrification in agriculture came a large increase in electricity costs,
mainly driven by large-scale infrastructure investment for electricity distribution
network businesses. According to the AER, NEM-wide network investment over the
2009–2014 regulatory cycle was over AUD$7 billion for transmission networks and
AUD$36 billion for distribution networks (AER 2013), with the largest investment
occurring in QLD and NSW. The large-scale infrastructure investment translated
into significant cost increases for agricultural producers in NSW who are serviced by
the Essential Energy. An internal industry analysis in 2014 revealed that electricity
bills for irrigators had increased by up to 300% over the period, 2009–2014 (NSWIC
2014). This additional cost pressure was also confirmed by the Australian Competition and Consumer Commission in a 2017 inquiry into retail electricity pricing
which concluded that ‘network costs were proportionally more significant in QLD
and NSW than other States’ and ‘network revenue increased the most in QLD and
NSW, peaking respectively at 200 percent (in 2015) and 190 percent (in 2013)
relative to 2006 revenue’ (ACCC 2017). Furthermore, the Energy Security Board’s
first Health of the National Electricity Market report (December 2017) declared that
the ‘National Electricity Market (NEM) is not in the best of health’ and the three
immediate symptoms are (1) electricity bills are not affordable; (2) reliability risks in
the system are increasing; and (3) future carbon emission policy is uncertain (COAG
Energy Council 2017). The Energy Security Board noted that the retail electricity
prices have increased by about 80–90% (AUD$, real) over the last decade, making
affordability (of electricity) a major concern (COAG Energy Council 2017). Whilst
both electricity and water infrastructure upgrades were driven by State and Federal
policy directives, the lack of coordination between the two meant that Australian
food and fibre producers were caught between the two competing policies of ‘energy
security’ and ‘water security’ which were difficult to reconcile. Whilst water efficiency measures were driving energy intensity in agriculture, energy security measures were driving up prices of electricity which undermined previous water
efficiency upgrades in agriculture. To address these competing policy initiatives,
agriculture sought the assistance of the State Government (NSW Office of
104
S. Schulte et al.
Government to improve the efficiency of on-farm irrigation system and nonfarm
water use through measures (Australian Government 2018d) such as (a) installing
new or upgrading irrigation infrastructure or technology through automated water
management systems and sensing equipment; (b) improving irrigated area layout or
design for the purpose of improving on-farm irrigation efficiency; (c) upgrading
of/conversion to surface and sub-surface drip systems and overhead spray systems
such as lateral move or centre pivots; and (d) ancillary equipment necessary for new
or upgraded irrigation system to function. All projects that have been approved
under OEFIEP (Rounds 1–5) have provided the Australian Government with
152.6 GL (calculated as long-term average annual yield) of water savings to ‘bridge
the gap’ towards the sustainable diversion limit under the Basin Plan 2012 (Cth).
Although the achieved water savings have been significant, many on-farm infrastructure upgrades under SRWUIP have come at the cost of higher energy use
(e.g. via new pumped or pressurised irrigation systems). Coinciding with the
increasing electrification in agriculture came a large increase in electricity costs,
mainly driven by large-scale infrastructure investment for electricity distribution
network businesses. According to the AER, NEM-wide network investment over the
2009–2014 regulatory cycle was over AUD$7 billion for transmission networks and
AUD$36 billion for distribution networks (AER 2013), with the largest investment
occurring in QLD and NSW. The large-scale infrastructure investment translated
into significant cost increases for agricultural producers in NSW who are serviced by
the Essential Energy. An internal industry analysis in 2014 revealed that electricity
bills for irrigators had increased by up to 300% over the period, 2009–2014 (NSWIC
2014). This additional cost pressure was also confirmed by the Australian Competition and Consumer Commission in a 2017 inquiry into retail electricity pricing
which concluded that ‘network costs were proportionally more significant in QLD
and NSW than other States’ and ‘network revenue increased the most in QLD and
NSW, peaking respectively at 200 percent (in 2015) and 190 percent (in 2013)
relative to 2006 revenue’ (ACCC 2017). Furthermore, the Energy Security Board’s
first Health of the National Electricity Market report (December 2017) declared that
the ‘National Electricity Market (NEM) is not in the best of health’ and the three
immediate symptoms are (1) electricity bills are not affordable; (2) reliability risks in
the system are increasing; and (3) future carbon emission policy is uncertain (COAG
Energy Council 2017). The Energy Security Board noted that the retail electricity
prices have increased by about 80–90% (AUD$, real) over the last decade, making
affordability (of electricity) a major concern (COAG Energy Council 2017). Whilst
both electricity and water infrastructure upgrades were driven by State and Federal
policy directives, the lack of coordination between the two meant that Australian
food and fibre producers were caught between the two competing policies of ‘energy
security’ and ‘water security’ which were difficult to reconcile. Whilst water efficiency measures were driving energy intensity in agriculture, energy security measures were driving up prices of electricity which undermined previous water
efficiency upgrades in agriculture. To address these competing policy initiatives,
agriculture sought the assistance of the State Government (NSW Office of
104
S. Schulte et al.