NAB’s Chief Economist, Alan Oster provides his thoughts on the Australian and Global economy.
The Clean Energy Finance Corporation is working with NAB to make energy-efficient equipment more affordable. NAB’s Robert White discusses the benefits of investing in new technology.
The latest technology can help farmers and other business owners and operators to cut their energy and operating costs and boost their long-term performance. NAB’s Robert White explains how the Clean Energy Finance Corporation and NAB are working together to make energy-efficient equipment more affordable.
Diesel is a major expense for a broadacre and irrigation farmer such as Dave Smith of BD Farming. He uses it to fuel his farm vehicles and also to drive the irrigation pump that moves water around his 3500-hectare property in Croppa Creek, New South Wales, where he grows cotton, wheat, barley, linseed, chickpeas and canola.
Recently he replaced his old pump with the latest energy-efficient technology.
“The new pump has a high-efficiency engine and variable speed drive that matches the engine speed to the load,” says Smith. “As a result, it uses four litres less fuel every hour – and that’s a big saving when it’s running for about 2500 hours every year.”
He also replaced his old caterpillar loader with a four-wheel drive vehicle with continuous variation transmission, which can save up to 20 per cent on fuel.
“Smaller energy bills and lower operating costs are helping us to make the business more profitable,” he says.
With the support of the Australian government owned Clean Energy Finance Corporation (CEFC), NAB is offering approved Equipment Finance customers a 0.7 per cent per annum discount on standard equipment finance rates for approved energy-efficient equipment.
“The CEFC is focused on accelerating the adoption of renewable energy, energy efficiency and low emissions technology”, says Robert White,Associate Director, Balance Sheet Solutions and Environmental Finance at NAB. “As part of this mission, the CEFC is participating in an investment program of up to $120 million to encourage NAB customers to reduce their energy use, and costs, by switching to more efficient technology. The benefits of the CEFC supported finance are flowing straight through to our customers, enabling us to help farmers and agribusinesses become more competitive while also reducing their emissions.”
The offer is valid until the $120 million is deployed. While offered across a broad commercial base, it’s expected to appeal most to customers in agribusiness and regional Australia.
According to CEFC’s Chief Executive Officer, Oliver Yates, cutting energy costs has never been more important. “Energy use is a major cost for Australia’s agricultural sector and, if addressed, can have a positive impact on Australia’s economic competitiveness,” says Yates.“With the right equipment, businesses can lower energy and operating costs, cut heating, cooling and lighting bills and even create energy from waste. Together with NAB, we want to provide an incentive for businesses in rural and regional Australia so they can act now on their energy costs by investing in high-performance, energy-efficient technologies and equipment.”
The challenge for many farmers is that, while energy-efficient equipment is more cost-effective over the long term, the initial outlay can be high.
NAB structured the program to be as broad and flexible as possible.
“Farmers know their own business better than we do,” says White. “Funding is available for eligible light and heavy vehicles, solar energy and irrigation systems, as well as energy efficiency upgrades to buildings and cold storage facilities that will significantly reduce energy use. We also consider processing equipment that will save 10 per cent or more in energy, which means we can include a broad range of equipment, from eligible combine harvesters to canning and bottling lines.”
In August 2015, NAB Research surveyed a sample of its agribusiness clients to identify their biggest business concerns. Energy costs, water scarcity and soil health were the top three.
“It’s clear that farmers want to build resilience in the face of rising energy prices,” says White.
The cost of energy is also a challenge for Australian manufacturers.
“If we’re going to compete with low-cost imports we need to sharpen our game,” says Ron Barrington, Managing Director of Cullen Steel, an Australian-owned private company with a long history of supplying quality fabricated steelwork to the building and mining industries.
The company recently took up NAB’s energy-efficient offer on a multimillion-dollar loan.
“Our energy bills were extremely high so we knew that reducing consumption could have a big impact on our bottom line,” says Barrington. “The loan from NAB enabled us to invest in more energy-efficient equipment than we had budgeted for so it’s helping us to fight back against overseas competitors.”
Until recently, the manufacturing process involved marking out and cutting massive sticks of steel by hand. These then had to be moved from workstation to workstation to be drilled and for various attachments to be welded on. A new beam line now cuts, drills and welds the steel robotically.
“The actual process uses far less energy, and is also much faster,” says Barrington. “As our plant consumes a certain amount of energy every hour that represents another important saving.”
Rising energy costs pose an ongoing challenge for growth and profitability, and with all the pressure on businesses there can be a temptation to think it’s all too hard to address, according to White.
“This new financing program offers an opportunity for farmers and businesses to take action now to help alleviate the pressures of higher energy costs in the future,” he says. “The reality is that there are a lot of options available that can have an immediate and positive impact on energy costs, right across a whole range of activities.”
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