Podcast: Two Cents’ Worth
The combination of solar panels, electricity storage batteries, smart household gadgets, and a boring looking black box is set to change forever how our electricity system works. But do we need subsidies?
If Thomas Edison, inventor of the commercial light bulb (1879) and the electricity distribution system (1880s), was in New Zealand today, he would probably recognise much of whatâs going on in our power network. A system of lines delivers electricity from power stations to homes and businesses.
Pretty much one-way traffic.
Over the next 20-30 years, thatâs going to change, experts say. In the same way that the unidirectional media networks turned into the multi-directional internetÂ so power could flow constantly in and out of our homes, our cars and even our appliances. And household rooftop solar systems, combined with home battery storage, will be a catalyst for the change.
Eric Pyle picks up a small, boring black box. Small enough to fit in the palm of his hand. Pyle is director of public affairs and policy for solarcity, New Zealandâs biggest solar company. In the past heâs worked for Forest &Â Bird, the Ministry of Research, Science and Technology, and the Wind Energy Association.Â
And the box is an electricity computer – part of the solar panel-battery storage system that the company installs into peopleâs homes.Â
âWhat this black box does is connect the house into the management of the whole power system,â Pyle says.Â
In theory, it will make someoneâs home solar electricity set-up system âan integral part of the power system of the futureâ.Â
âSo during the day for instance, the battery will absorb electricity and store it. At nighttime, when people come home, the battery releases the electricity so people can cook dinner using their electricity etc.â
So far, so 2020. This is just the beginning, Pyle says.
âBut in the future, the black box might say âYou’ve got an EV [electric vehicle] and it would be much better if you charge that EV at 10 o’clock at night, because there’s not so much congestion on the power networkâ. So the black box will say to the EV, âItâs 10 o’clock, start charging please.âÂ
âBut then maybe at 10.37, [national grid operator] Transpower might tell the box âActually, we’ve got a bit of a glitch on the power system. Can you just stop all your charging and in fact can you inject a bunch of power into the system? Can you do that in the next second and can you do it for six seconds?âÂ
âAnd the black box goes âFine. I’ve got that instructionâ. And off it goes and does it.â
Add several thousand homes with solar systems, and a handful of different smart electric gadgets in each home – heat pumps, hot water systems, pools, fridge-freezers, as well as EVs and home batteries – and youâve got a powerful tool to control energy spikes, mitigate outages or even supply enough power into the grid to reduce future generation and transmission investment needs, Pyle says.
âWhat that means is as we electrify the economy, we don’t have to invest nearly so much in new power system infrastructure, and that’s the poles, the wires and the transformers because these devices help flatten out supply and demand, and make the power system work much more efficiently than it does at the moment.â
Some industry rules need to change before our solar systems, EV batteries and fridges can be used as an active part of the electricity management system.
But most importantly we need way more of it.Â
Electrification’s role in Carbon Zero
A handful of recent reports (from the interim Climate Change Committee, the Productivity Commission and Transpower) have suggested New Zealand needs to electrify significantly more of its economy if it wants to have a chance of meeting its commitment to being net carbon zero by 2050.Â
Transpower’s estimate is we’ll need 60 percent more electricity.
Even with the Tiwai Point aluminium smelter out of the picture, weâre going to need a lot more renewable energy, including household solar.
Solar is still pretty small in New Zealand. As of June this year, there were just 26,000 homes with solar panels.
In the sunny south-west of Western Australia, by contrast, almost 40 percent of homes – thatâs more than a million houses – now have rooftop solar systems, and about 2000 households a month are connecting up.Â
Part of the reason for that is Australia has a much more solar-friendly climate.
In New Zealand, maximum domestic power use happens on winter evenings, when we get home from work, turn the heaters on, make a cup of tea, have a hot shower and cook a warming meal. But thatâs a time when itâs dark and our solar panels arenât producing any power.
But hot parts of Australia use lots of electricity for air-conditioning at times when solar panels are at their most productive – in the middle of the day in summer.
Home battery storage helps mitigate the problem, but until relatively recently, batteries have been so expensive they haveÂ been hard to justify financially at a household level.
The other thing Australia and other countries have done to push solar use up, is provide a range of government subsidies. We didÂ that a little bit here too, in the early days.
But Australiaâs got much more of a problem with fossil fuel-generated electricity than we do. And so itâs got more incentive to encourage people to install panels to get more renewable power into the system.Â Â
Five years ago, 86 percent of Australiaâs electricity was from coal, oil or gas. Now it’s 76 percent. In New Zealand, 84 percent is renewable.
Subsidies – not necessarily the answer
Still, if we want to reap maximum future benefits from our boring black boxes, get rid of remaining fossil fuel power stations like Huntly and boost electrification, it would be good to have more home solar systems.Â
In July the Green Party announced that as part of its Clean Energy Plan it would âintroduce grants to halve the price of installing solar in privately-owned homes, and offer grants and low-interest loans for businesses to transitionâ.
Sounds like good solution, but subsidies are … problematic.
Business commentator Rod Oram says subsidies have been âmassively distortingâ and âabsolutely cripplingâ for electricity companies in Europe.Â
“Solar subsidies were a dog’s breakfast in Australia”
Electricity Networks Association chief executive Graeme Peters talks about subsidies being a âdogâs breakfastâ in Australia, contributing to a bunch of problems, including power cuts.
Thereâs also the problem that subsidising household solar meansÂ basically giving money to people who own their own home, meaning they end up getting cheaper power than people who canât afford to buy a house. Which isnât equitable.
In fact, because of the way electricity pricing works, people without solar can end up subsidising distribution costs for people that have panels.
Meanwhile, Wind Energy Association chief executive Grenville Gaskell says subsidising generation, which is what funding installing home solar panels is, doesnât make sense because thereâs no shortage of people out there wanting to build renewable generation.Â
“New generation is built when economically viable without the need for incentives.”
âProviding subsidies for renewable development to favour a generation type, while increasing supply, distorts the market and leads to suboptimal investment outcomes.Â Â
âThe history of the NZ electricity industry is that new generation is built when economically viable without the need for incentives.âÂ
Instead, if you want to put subsidies into the industry, he says, use them to fund electric vehicles and energy efficiency.
Consumer NZ technical writer James le Page agrees. He says energy efficiency initiatives provide a better return on investment in terms of greening the economy than solar panels.Â
A Green Party spokesman says the subsidy policy would provide a kickstart to get lots more solar panels on roofs quickly, and also that post-Covid, panel installation could provide a bunch of much-needed jobs.Â
âInstalling rooftop solar creates more jobs per megawatt than other clean energy.â