The case for energy loans: read our latest explainer
New research from Rewiring Aotearoa shows electrification could save New Zealand households around $29 million per day by 2040 and massively reduce the country’s emissions.
27th August, 2024: A new paper from Rewiring Aotearoa shows that swapping fossil fuel hot water heating, space heating, cooking and vehicles for electric equivalents and powering them with renewable electricity from the grid, rooftop solar and batteries could save billions in unnecessary imported fossil fuel costs and avoid millions of tons of unnecessary carbon emissions.
Dr Saul Griffith, Rewiring Aotearoa’s chief scientist and founder of Rewiring America and Rewiring Australia, says ‘Investing in Tomorrow’, which was co-written with Paul Conway, the Reserve Bank of New Zealand’s chief economist, and peer reviewed by Parliamentary Commissioner for the Environment’s chief economist Geoff Simmons, clearly shows that climate action does not have to be considered a cost. Instead, it is an opportunity to save money on cost of living for New Zealanders and bring with it serious energy productivity gains.
“Combined, New Zealand homes and businesses are currently spending around $55 million every day or $20 billion per year on fossil fuels, most of which are imported. Approximately two-thirds of New Zealand’s total energy needs are met by burning these expensive fossil fuels. But this country is one of the first in the world to cross an ‘electrification tipping point’, where the cost of buying and financing electric machines is cheaper over the long run than using fossil fuels. That leads to savings for individual households and it could lead to huge savings for the country as a whole.”
Previous analysis in Rewiring Aotearoa’s ‘Electric Homes’ report suggests the average New Zealand household could save around $1,500 per year by investing in much more efficient electric machines and solar and batteries.
‘Investing in Tomorrow’ shows that these benefits at the household level add up to a significant national opportunity and estimates that by 2030, New Zealanders could be saving $9 million per day or $3.2 billion per year.
By 2040, if the necessary adoption rates are met for technologies like electric vehicles and electric hot water heating, those savings will rise to $29 million per day or $10.7 billion per year (this is around half the current education budget). Cumulatively, this would equate to savings of around $95 billion by 2040.
“This is an opportunity to help New Zealanders access the savings that electrification can provide primarily because of increased efficiency, swap some of the world’s most expensive imported fossil fuels for renewable electricity generated in New Zealand, and meet the climate crisis head on with strategic investment in the future of energy use in New Zealand.”
The price of grid electricity and fossil fuels has increased at above the rate of inflation, and recent news has highlighted the increasing price of wholesale electricity during a dry year, but the paper shows how the prices of rooftop solar and batteries have gone in the opposite direction and could help to bring down the cost of electricity for all New Zealanders.
“Because the costs have declined so quickly, rooftop solar is now the cheapest form of delivered electricity available to New Zealand homes and it augments a lot of the savings electrification offers through efficiency. Buying solar panels also locks in a stable price of energy for the lifetime of those panels, while batteries can help reduce strain on the network during peaks. These technologies will also improve New Zealand’s energy security and resilience.”
Electric machines are more expensive up front than fossil fuel equivalents but have lower ongoing bills. And this means the opportunity to electrify can only be realised by enabling finance that allows all households to access the immediate savings.
“Historically, energy infrastructure has been thought of as large power plants and lots of poles and wires. Because this was seen as critical it received favourable finance. New technology has allowed households, small businesses and farms to generate and store electricity, so we would argue that customers also need to be seen as a critical part of the energy infrastructure and should also receive favourable finance.”
The idea that we cannot afford to address climate change is clearly wrong, Griffith says. As this paper shows, we can reduce emissions while saving money for the average New Zealander.
“Every new fossil machine basically puts us in more fossil fuel debt for the lifetime of that machine and the price of the fuel is likely to keep going up. In most cases, financing electric machines is now cheaper than the fuel and much better for the environment. It’s a real win-win.”
Griffith believes New Zealand has an opportunity to lead the world.
“New Zealand has a long history of electrical innovation - from the southern hemisphere’s first public electric street lights in Reefton to the first all-electric house near Tauranga - and excellent centralised renewable energy resources. That puts the nation in a great position to facilitate an energy transition that will be beneficial to every Kiwi. Now we need action.”
ENDS
Download the paper here.
NOTES TO EDITORS:
Rewiring Aotearoa is an independent charity working on energy, climate, and electrification research, advocacy, and supporting communities through the energy transition. The New Zealand-based team consists of energy, policy, and community outreach experts and it is funded by New Zealand-based philanthropists including Sir Stephen Tindall, Urs Hölzle and the Whakatupu Aotearoa Foundation.
Paul Conway’s contribution to this paper does not constitute an official endorsement from the Reserve Bank of New Zealand, nor does the contribution of Geoff Simmons constitute an official endorsement from the Parliamentary Commissioner for the Environment.
In the last Electric Avenue of 2025, we look at the two biggest trends in the world of energy; the Government goes electric for its fancy fleet upgrade; Nick Offerman offers his services to a US campaign extolling the virtues of EVs; Australia shows what's possible in new homes when you add solar, batteries and smart tech; a start-up selling portable solar and battery systems that wants it to be as easy and common as wi-fi; and The Lines Company looks to put some solar on the roof of the Ōtorohanga Kiwi House.
Read moreDownloadWhen it comes to electric farming, "the numbers are becoming undeniable," says Nicholson Poultry's Jeff Collings. With 60kW of solar, a Nissan Leaf as a 'farm quad', electric mowers, an electric ute that can run a water blaster, and even a chicken manure scraper made out of a wrecked Tesla that, as Rewiring's Matt Newman says, looks a bit like something out of Mad Max, "almost everything is electric". There aren't many others in New Zealand who have gone this far down the electric road. And, with his electric Stark Varg, the fastest off-road motorbike in the world, he's obviously having plenty of fun on that road, too.
Read moreDownloadRNZ's Kate Newton reports on the "madness" of thousands of new piped gas connections being installed into houses every year, despite dwindling supplies and higher lifetime costs.
Casey said it was positive that the numbers showed people starting to leave the gas network of their own accord, but not all households were in a position to make that choice.
"If we don't plan for a decommissioning of the gas network, then it's going to be a chaotic transition, where vulnerable New Zealanders really suffer."
As the research of Rewiring and others has shown, gas is expensive, it's getting more expensive, it's terrible for your health when burned inside and there are substitutes available right now that, on average, do the same job for less money over the long run for households, would save the country billions on health costs and lost productivity, and don't pump out unnecessary emissions.
Around 300,000 homes and businesses have connections to the gas network (it’s estimated another 300,000 use more expensive bottled gas, mostly in the South Island). The number of active connections has started to decline recently and the country’s largest gas network, Vector, is forecasting no new residential or commercial connections after 2029.
Upfront capital costs are the main barrier for many homes, which is why we're working hard on a low-interest, long-term loan scheme that can be used to pay for electric upgrades, including hot water heat pumps. This would mean paying for a new thing with a loan would be cheaper than paying to run the old thing.
Read more about the scheme here.
Disconnection costs are also a major barrier. We have seen examples where households permanently disconnecting from the network have been charged between $1,000 and $2,000 to have a meter permanently removed (i.e. digging up the pipes to the road), even though it should only cost customers $200 to have the connection capped at the house.
RNZ even reported a case where a business customer was quoted $7,500 but took the case to Utilities Disputes, where complaints about disconnection costs have been rising.
The Australian Energy Regulator and the state of Victoria have now capped the disconnection fees to a few hundred dollars to stop this kind of behaviour and protect households.