Time is now to head off unfair power costs
Life is pretty expensive at the moment. The cost of almost everything - rates, insurance, food, travel, building, subscriptions, fuel, electricity - has shot up over the past few years and we’ve been warned that most of those costs are likely to keep rising. But there are a couple of costs that have decreased quite rapidly recently: solar panels and home batteries.
The prices have dropped so quickly due to a couple of fundamental laws of economics: supply and demand, and economies of scale. They are more popular than ever with customers and, like many things that are produced in bulk in big factories, they are able to be produced much more efficiently, to the point where solar panels are so cheap they are being used for garden fencing and one of the world’s biggest battery makers expects to halve the price of its new battery this year.
Rewiring Aotearoa’s “Electric Homes” report offered proof that New Zealand is one of the first countries to reach what’s called the “electrification tipping point”. Because our fossil fuel prices are among the world’s most expensive, the average household is now better off financially if they buy electric appliances and vehicles and power them with a combination of rooftop solar, batteries and our renewable grid than a household using LPG/gas and petrol vehicles - even with the upfront costs and finance built in.
That means electrification has now become a smart economic decision, not just a smart environmental decision, and that’s a big deal because price is more powerful than good intentions when it comes to behaviour change.
As a farmer, it’s a pretty simple equation: when we reduce our costs, our business becomes more profitable and we’re saving around $60,000 per year on energy in our house and on our cherry orchard near Cromwell.
We have also reduced our on-farm carbon emissions by 60 tonnes per year by using electric machines instead of fossil fuel machines. That’s the story I have told tens of thousands of farmers who have visited Forest Lodge but the economic argument tends to win out over the emissions.
It’s hard to get people to care about electricity. It’s what marketers call “a lowinterest category”. But it’s easier to get them to care about excessive and unfair costs and that’s what we believe the New Zealand public may soon face.
Regulators and power companies are claiming the price of delivered electricity will rise in the coming years - at a time when rooftop solar is able to provide the cheapest electricity in New Zealand (and also in human history).
The price of electricity should not be going up and the main reason Rewiring Aotearoa exists is because we don’t believe there’s enough focus on the people who actually use the energy system, or the role they could play in it.
The electrification of my farm means I use about 900% more electricity than the previous farmer, but I generate around half of that myself through rooftop solar. Because I can store a lot of that energy in batteries I don’t use any more electricity from the grid at peak times and this means no new expensive poles and wires were required.
This context is crucial when we’re deciding how much customer money (either through taxes or public debt) to spend on infrastructure, and it’s important that the Government and regulators acknowledge that the cheapest way to get a lot of the electricity we will need in the future will come via communities. For that to happen, we need to fix the finance so that every New Zealander, no matter their income level, can manage the upfront costs and access the cost-saving benefits of electric technology.
The Government should be in the business of creating level playing fields, but the electricity system is pretty uneven at the moment. It was designed to be one way, but growing numbers of rooftop solar and battery systems (and, increasingly, vehicle to grid systems in newer EVs) means it needs to become more of a twoway system.
The wholesale price of electricity has gone up consistently in recent years, but the rates being paid to those who export electricity to the grid remain very low and in some cases are being reduced further, even as prices for consumption increase.
It is not a fair system. Australia has 35% residential rooftop solar penetration and as much as 50% in some areas, and has implemented much fairer two-way tariffs that appropriately reward customers for playing a role in the energy system.
New Zealand needs to follow suit and Minister Seymour might also like to look at cutting some red tape in the sector because New Zealanders currently pay around twice as much as Australians do for solar installation and a lot of that additional cost is due to unnecessary compliance.
This Government promised relief from the rising cost of living. If it looked at the electricity sector, it might see some solutions staring it right in the face.