The Green Party has some great transport policies, and have recently announced their support for the Congestion Free Network as one of those policies. However, I haven’t been as impressed with the Greens’ energy policies (or any of the other parties’ ones, for that matter).
Earlier this year, the Greens announced their Solar Homes policy, aimed at encouraging the uptake of solar electricity. There aren’t any (direct) subsidies involved, but instead the government would offer low-interest loans for solar panels, and the homeowner would then pay the loan off over time as an extra item on their rates bill. As National correctly point out, this is still a subsidy, to the extent that the interest rate is below market levels.
Incidentally, I see Dr Susan Krumdieck is not a fan of the policy either, based on the comments on the Youtube video…
There are a number of flaws in this policy, as I see it. Firstly, the desired outcomes don’t seem to be well defined. What is the goal of this policy? Is it about encouraging renewable energy generally, or reducing greenhouse gas emissions? If so, there are more direct ways of tackling the problem. Or is it about solving a perceived market inefficiency, i.e. households are underinvesting in solar because they don’t value the future benefits enough? If so, the policy might be a good idea, but there are market inefficiencies everywhere, and no government can solve them all. Solar may not be the best one to tackle: perhaps we’d get more bang for our buck by focusing on another area, e.g. encouraging active transport for its health benefits, or something different altogether.
I talked to quite a few people about this at the NERI Energy Conference this year, and views were quite mixed. Some people thought the policy was a good idea, and others thought it wasn’t the right time or place. Mike Underhill, chief executive at EECA, is in the second camp, and he spoke on this at the conference, as well as writing a column which was published in the Herald.
The Wider Issues
There are some general issues with solar power in New Zealand. It provides power during the daytime, and with more generation in summer. That’s not a good fit with our electricity demand profile: demand is highest in the evenings, and in the winters. This isn’t the case for some countries, incidentally – in hotter climates like Australia, the Middle East, or California, air conditioning use means that demand is higher in summer, making solar a great fit.
The other thing is that solar is relatively high-cost compared to other sources of generation, and isn’t likely to be cost-competitive for NZ. Prices continue to fall, and it probably will be competitive in the medium term, but are we better off waiting a few years until prices are lower? Besides, solar will become more attractive as we develop better ways of storing energy – e.g. electric vehicle batteries (I expect this to be a long-term factor) or pumped hydro storage – and those will also be more viable in the future.
Another important factor is that New Zealand already generates most of its electricity from renewable sources. If we’re switching out other electricity for solar, we’ll get the most benefits from making sure we displace non-renewable sources, not renewable ones.
This doesn’t mean that solar won’t have its uses in New Zealand. Ideally, we could use it in a targeted fashion, to avoid having to make expensive upgrades to the grid. For example, Auckland is growing rapidly, and is a long way away from our hydro resources in the South Island. Solar here could take the edge off that demand growth, and perhaps also reduce reliance on thermal plants like those at Huntly.
Turning to the rural areas, solar may look like an attractive option for remote rural communities, where electricity is expensive. However, it may not actually save that much money. Firstly, unless households can go “off grid” entirely, they’ll still need to pay for the fixed costs of maintaining the grid – but spread over a smaller amount of purchased electricity. And if they do go off grid, they’re shifting those costs onto other people in their communities, who are still connected – that’s a bit unfair on the people left behind. Not to mention that most of these communities have a shrinking population to begin with, and therefore are likely to have a declining demand anyway.
As Mike Underhill wrote in the Herald column, “the price of solar panels has dropped but it still costs about $10,000 to install a grid-tied 3kW system without storage batteries”. The Greens would lend the money for this at the Crown’s sovereign interest rate, and at 4.1%, the interest would work out to $410 a year. Would households even be able to save more than this on their power bill? I’m sure some could, but I’m sceptical that the average household could, and certainly not if the interest rate was much higher.
As Cliff Turner, an electrical engineer, pointed out on the NERI Hub:
Rather than households investing $12K or so in a PV system, in many cases they would be better investing in a more efficient vehicle, especially for city use. As an example, a Toyota Corolla GX Hatch is priced at $34K (from Toyota’s website) with efficiency 6.6L/100k and if the household was prepared to go to a Prius C at a similar or cheaper price depending on the model they could increase efficiency to 3.9L/100km. Assuming 10,000km pa this would save about $500 pa which is getting close to what the PV system might save in electricity cost. If the premium for a pluggable option was small, then even further fuel savings are possible. This is a better strategy than PV from the perspective of carbon emissions, given that NZ has low emission electricity generation options with good EROI.
I’d agree with those points.
As policies go, the Solar Homes one isn’t a shocker. But it’s not particularly helpful either. Overall, I don’t think now is the best time for a blanket, nationwide policy like the one proposed. I’d be more interested in a cohesive strategy to wean us off thermal generation, to get us to 100% renewables, which I’ve written about previously. With the Greens’ policy, I’d be inclined to wonder how much solar would simply be displacing other renewables, rather than non-renewables.
The Greens are also advertising a policy called Solar Schools, which, from a quick look, seems like a good idea (and is a better match with solar’s generation profile). However, if it gives substantial cost savings as implied, I can’t see why the Ministry or schools wouldn’t do it themselves, and why it would need a political party to come up with a specific policy to make it happen.