It is now cheaper to run a fully electric home and EV in NZ than to use fossil fuels

NZ is one of the first countries to reach an electrification tipping point, as high petrol and high gas costs make electric homes and EVs more affordable than fossil fuel alternatives.

New Zealand is one of the first countries in the world to reach an electrification tipping point, as prices of $3a litre for petrol and high gas costs makes electric homes more affordable than fossil fuelled alternatives.

The Electric Homes report, from the charity Rewiring Aotearoa, shows that a combination of EVs and electric appliances are cheaper over the lifetime of the machines, even with higher upfront costs or a 5.5 per cent interest rate for finance.

The report found that homes currently using gas or LPG appliances and petrol vehicles could save more than $1,000 per year if they electrify and get their power from a combination of rooftop solar, home battery, and the existing electricity grid.

“A comparison of whether the electricity demand comes solely from the grid or around half comes from installed solar panels (rather than a household going totally off-grid) also confirms recent analyses that investing in solar systems continues to become more economic,” says Ralph Sims, Emeritus Professor of Sustainable Energy at Massey University.

“For example, investing say $10,000 in a solar system usually gives a better return than investing the same amount in Kiwisaver [superannuation funds].

“The main conclusions that fully electrifying a home and vehicles could save $1500 to $5000 a year with annual GHG emissions being significantly lower, and that electricity prices from solar can be around one third the cost /kWh when purchased from the grid, are thought provoking.”

Gas/LPG and petrol home versus electrified home, annualised (Source: Sources: Rewiring Aotearoa Analysis. Residential Baseline Study 2021. EECA Energy End Use Database. MBIE Energy Prices 2023. 15 year lifetime and finance term. Average home is 2.8 people and 1.8 vehicles)

Average home energy comparison. On the left are the annualised costs of homes with gas/LPG appliances and petrol vehicles (gas is more prevalent on the North Island, LPG on the South Island). In the middle is a home with electric appliances, electric vehicles, and a solar and battery install. This chart shows that while the upfront cost of electric appliances and vehicles is higher, when energy bills are taken into account the all electric zero energy emission home is lower cost. The average New Zealand home could save over $1000 a year electrifying, and over $4,000 a year if they can do so with low interest finance. Every home is different and many factors will affect the amount of savings individual households realise, yet the benefits of widespread household electrification in New Zealand are clear.

The report found that overall energy use would fall with electrification to less than half of what an average household uses today as petrol, diesel, gas and wood are avoided. But electricity use would be two to three times as high.

New Zealanders are already concerned about where the extra generation will come from, but the report suggests that rooftop solar and batteries, and consumption management, will fill the gaps.

“Models did not foresee that in New Zealand today, rooftop solar is already lower cost than grid-based electricity in terms of delivered energy. This price difference is only likely to increase in the future as economies of scale continue to drive solar costs down,” the report says.

Professor Shaun Hendy, chief science officer at independent research agency Toha, says the impact of rooftop solar has to date been greatly underestimated, and rooftop solar plus batteries are likely to play a significant role in expanding electricity generation in the grid.

Rewiring Aotearoa CEO Mike Casey believes New Zealand could become one of the world’s most electric economies.

He says in order to get there the country must offer finance for electric appliances, no matter the income level, fairly reward energy exports, make electrification a primary pillar of emissions reductions, and recognise that lowest cost energy will come from communities.

The report compared current costs of running fossil fuel vehicles and appliances with consumer-generated and grid power, as sources such as rooftop solar are beginning to emerge in New Zealand.

Three phase but little rooftop solar

The New Zealand energy use situation is very different to that of Australia.

Three phase power connections, which facilitate more efficient options such as highly-powered induction stoves, are common. Household gas use is tiny, with just 6.79 petajoules logged for residential use in 2022 compared to an estimated 140 petajoules in Australia, and New Zealanders are much more familiar with heat pumps for household and industrial use.

But rooftop solar is still new and, without government subsidies, costs at least three times what a similar system does in Australia. Yet these systems are becoming more popular now electric and hybrid vehicles make up 27 per cent registered vehicles in New Zealand, and with feed-in tariffs between $NZ0.07 and $NZ0.17 ($A0.065 to $A0.16).

New electric vehicle sales crashed from 50 per cent of all sales in December to 5 per cent in January after the new National government removed the subsidy on EVs while promising a big investment in charging infrastructure.

Yet anyone buying a fossil fuel-powered vehicle over an EV is looking at petrol prices that at their cheapest are well above $2 a litre across the country, and at foreign-owned stations are close to or above $3.  

Electricity use up, diesel down

Casey says his Cromwell, South Island, cherry farm is saving about $60,000 in diesel costs a year by using 20 new electric vehicles, including a tractor.

Casey’s electricity use is nine-times higher than the previous farmer of his land, but use at peak times has not increased so network upgrades weren’t needed, and rooftop solar provides “significant” amounts of energy.

“We’ve proven the economics of electrification stack up at our orchard. And this report shows that it stacks up for almost everyone else too. We just need to look at it from the customer’s point of view,” he says.

“While our electricity grid is around 80 per cent renewable, only around 30 per cent of the country’s total energy use is renewable because we are so reliant on fossil fuels for transport, heating and industry.”

This article was first published on RenewEconomy. You can read it here.

Rachel Williamson
April 19, 2024
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