NZ has reached the 'electrification tipping point' — where to now?

Tuesday, 09 April, 2024

NZ has reached the 'electrification tipping point' — where to now?

Research from the energy transition charity Rewiring Aotearoa has found that New Zealand is one the of the first countries in the world to reach the ‘electrification tipping point’. This is the point at which electric appliances and vehicles are more affordable than their fossil fuel equivalents over the lifetime of the machine — even with upfront costs and finance built in.

The ‘Electric Homes’ report showed homes currently using gas appliances and petrol vehicles could save about $4500 per year with a low-interest loan and approximately $1500 per year at average home loan rates.

The report also found that household electrification can play a substantial role in reducing the country’s carbon emissions.

“Electrification is a real win-win for New Zealand and reaching this tipping point is a big deal,” said Rewiring Aotearoa CEO and cherry grower Mike Casey.

“While our lights, dishwashers and ovens are mostly electric, there are still a lot of households that burn fossil fuels for water heating, space heating, driving and cooking, and because our fossil fuel prices are so high, electrification of households and businesses is now a smart economic decision, not just a smart environmental decision. Electric appliances and vehicles are much more efficient, and that’s where a lot of the savings come from.”

The New Zealand-specific modelling used to inform the report was commissioned by EECA (The Energy Efficiency & Conservation Authority). The technical data — that Rewiring Aotearoa built on with further analysis — examined cost-of-living impacts of electrifying New Zealand homes, compared individual appliance and vehicle economics, and counted the emissions that can be attributed to decisions made by households.

According to the research, decisions made by households account for a much larger share of emissions in NZ’s domestic economy than conventionally thought.

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

“Electrifying appliances and vehicles gives individuals the power to make a difference on climate and is likely to have a bigger impact on emissions reduction than any other decision you make.”

Casey and his wife Rebecca have firsthand experience of electrification. They bought land near Cromwell and planted a cherry orchard in 2019, electrified their home and purchased more than 20 electric machines instead of fossil fuel-powered machines, even importing the country’s first electric tractor. They are saving over $60,000 per year on diesel and have reduced their carbon emissions by around 60 tonnes per year.

“I’m an orchardist, so I love low-hanging fruit. And electrification is low-hanging fruit that can lead to more profit for businesses, lower bills for homes and reduced emissions for the country,” Casey said.

While Casey is using almost nine times more electricity than the previous farmer, he has not increased electricity use at peak times, which means no public infrastructure upgrades were required. He also generates significant amounts of energy from his rooftop solar.

“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,” he said.

The question remains as to where New Zealand will get the extra electricity to power its citizens’ increasingly electric lives. Historically, there has been a focus on building large-scale power plants and the poles and wires to support them, both in NZ and globally.

“We will certainly need more renewable generation and some grid upgrades, but customer-generated energy from rooftop solar and battery storage is likely to play an important role and needs to work alongside the grid,” Casey said.

“Rooftop solar is the lowest-cost delivered energy available to homes in New Zealand today and it is vital to take this into account when planning for and building out our energy system.”

Globally, the cost of heat pumps, electric vehicles, solar panels and batteries continues to fall, while the price of fossil fuels and grid electricity has increased and is expected to continue rising. Casey said this means the economics of electrification will continue to improve, both for households and for the country as a whole, given the decreased need to import as many expensive fossil fuels.

Analysis of the report by New Zealand academics has largely affirmed its findings.

Ralph Sims, Emeritus Professor of Sustainable Energy, Massey University, said, “Cost comparisons made for space heating, water heating, cooking and vehicles show that electrically powered appliances and systems are usually the cheapest options (though the increase in electric line charges anticipated for many consumers in the near future and future variations in the carbon price under the ETS were not included).

“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,” Sims said.

“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 per kWh when purchased from the grid are thought-provoking. Anyone replacing an old gas cooker or LPG heater should first read the report.”

Sims added that it will be interesting to see how the electricity industry views the report, because using more electrical appliances to replace gas and LPG, as well as changing to EVs, will increase the household demand for electricity. Conversely, installing a domestic solar system will reduce demand from the grid — which is why the industry has not embraced the concept to date, according to Sims.

Professor Shaun Hendy, Chief Science Officer, Toha Science, said the report was important and timely, and deserved considerable attention.

“The report finds that electrification is financially favourable for a typical New Zealand household today, taking into account the current cost of capital. Electrification also generates considerable savings in domestic emissions for these households. Using the report, I estimate that household electrification could eliminate approximately 10% of the current national greenhouse gas inventory. This is significant, but barely accounted for in New Zealand’s Emissions Reduction Plan,” he said.

Hendy believes the report also has implications for New Zealand’s future energy system. “The impact of local supply via rooftop solar has been greatly underestimated, and rooftop solar plus batteries could and should play a significant role in expanding electricity generation in the grid.”

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