Do the sums on solar power

Photo of Mike Underhill, EECA's Chief Executive
Mike Underhill, Chief Executive, EECA

By: Mike Underhill, Chief Executive, EECA

Many parts of the country enjoy high sunshine hours, making solar power seem like a no brainer for New Zealand home owners. Solar power is popular overseas and appeals to many Kiwis wanting to save money and generate their own electricity. EECA's experience is there are four different drivers for the interest in solar power - saving money, independence from the grid, helping the environment and experimenting with new technology.

However homeowners thinking about investing in solar power need to carefully analyse their own situation and to do their sums before making a decision. The price of solar panels has dropped but it still costs about $10,000 to install a grid-tied 3kW system without storage batteries. This price excludes costs such as building consents and metering, and prices are usually higher outside the main centres.

Saving money with solar power is harder than people realise. Energy generated by solar power is at its peak around midday in summer, while residential demand is at its highest about 6pm on winter evenings. This means generation and demand are not aligned and electricity retailers generally pay a lot less for buying your surplus solar power than you pay them for electricity.

If people do the maths, including the cost of installation, I suspect they will find solar power won't save their household money overall on their power bills.

There are some relatively simple and more effective ways to reduce electricity bills if households need to save money. For example replacing six incandescent bulbs in high-use areas with efficient bulbs can save $120 a year, even after you factor in the cost of the bulbs.

For some consumers saving money isn't their main motive - they are concerned about carbon dioxide emissions and want to act to help the environment. However solar power mainly replaces one lot of renewable electricity from the national grid with another renewable electricity, so there is generally no reduction in overall emissions.

There are better ways for a householder to reduce greenhouse gas emissions. Forty percent of New Zealand's energy related greenhouse gas emissions come from transport, and our vehicle fleet is very inefficient, so that is the best place to start. Drivers can save fuel, and therefore reduce greenhouse gas emissions by changing their driving behaviour, switching to fuel efficient tyres, and checking once a month to make sure their tyres are correctly inflated. Every dollar of fuel saved by a motorist avoids about a kilo of carbon dioxide going into the atmosphere.

Other consumers are attracted to solar power from a desire to be self-sufficient and free of the grid. Off-grid solar power can make good economic sense in situations where connecting to the grid is very expensive - it can cost property owners as much $25,000 per kilometre of power line to connect to the grid. A battery bank that's needed for off-grid solar power can cost anywhere from $10,000 to $30,000, depending on how much energy you need to store.

The reality is most solar power is grid-tied and people need to be aware a grid-tied system will stop generating if there is a grid blackout. Grid-tied solar power is wholly reliant on the grid to operate and users are also reliant on the grid for backup in winter when sunshine hours are less and their system isn't producing as much as they need.

From a national perspective the economics of solar power are questionable. New Zealand would be investing in solar generation at a cost of about 30c/kWh, which will displace cheaper renewable generation like geothermal and wind, costing about 8-9c/kWh. The country still needs to pay for the national grid.

New Zealand is also uniquely different from most other countries, which depend on coal to generate electricity, and where each new solar power will avoid burning some coal, and will reduce greenhouse gas emissions. By world standards, New Zealand is in an enviable position where we already generate more than 70 percent of our electricity from renewables like hydro and wind. We have a target of achieving 90% renewable electricity by 2025.

I welcome the fact that energy, greenhouse gas emissions and innovative technologies are generating so much public discussion and debate. Solar power is an exciting technology. I believe it will play an important role in the future but we need to have the debate about whether its time has come for New Zealand. Let's continue the research and discussion so we are well informed to make the best decisions for our own households and for New Zealand's future.


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