NZ solar power takeup still low but economics are changing, says installer

New Zealand’s take up of solar power is low compared to other countries, but that may soon change as the economics of it improve, says a solar power company.

A lack of government grants and a high upfront cost of installation has helped keep a lid on demand. At the end of February there were just 31,000 solar power installations in New Zealand, the majority of them residential. That is a 15 per cent increase on a year ago, and up 1 per cent on January.

Auckland-based solar power company Lightforce raised millions of dollars last year to grow and get ready for a boom it believed was coming in the next 12 months, said chief executive Luke Nutting.

“The barrier to entry was pretty high, the average system being $10,000 to $20,000 and a payback of 15 years, there was no real driver for anyone to go and do it,” he said.

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Inquiries began last year when Covid-19 hit and people could not travel, so began spending money on their houses.

“It’s already starting to take off now in New Zealand, we’re behind just about every other Western [country], because we’ve never had a grant, but the economics have now hit the point where it’s pretty attractive return on investment,” he said.

New Zealand's take up of solar power is low compared to other countries, but that may soon change, says Lightforce chief executive Luke Nutting.

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New Zealand’s take up of solar power is low compared to other countries, but that may soon change, says Lightforce chief executive Luke Nutting.

The price of power from energy companies was also rising.

About 20 per cent of houses were not suitable for solar power, due to factors such as the type of roof, or lack of sun. But for 80 per cent of homes it was viable and offered pretty good payback, between five to eight years, said Nutting.

“The price has plummeted over the last two years.

“If the roof wasn’t perfect before because the system was so expensive, you wouldn’t even look at it, but now we’ll look at systems you probably wouldn’t have looked at three years ago because the pricing has halved from what it was three or four years ago.

“I would say the last 12 months has been the big tipping point for it, and I think next year is where we hit that grid parity point where essentially it’s a crossover between what the cost to generate on your roof versus what the cost to pay your power bill is.”

The Climate Change Commission expected to see continued low uptake of solar power until about 2035, when it is forecast to start rising quickly.

Energy Efficiency and Conservation Authority head of strategy and regulations, Marcos Pelenur, said solar costs had fallen over the last five years, but more slowly than in many other countries.

“There is frequently an upfront capital cost which can act as a barrier, so good reliable information is important.”

The authority provided a solar calculator tool to help people understand the potential costs and benefits of solar for an individual situation.

Nutting expected banks to become more open to lending on solar power systems.

“Given the cost of capital’s come down so much, you’re basically there if you can get the cost of capital right. We’re not quite there if you’re paying plus-10 per cent for your money, but if you can get your money at 5, 6 per cent then we’re there.

“If you’re topping your mortgage up at 2 per cent, you’re definitely there.”

Solar power was a little less economical than wind at utility-scale generation, but it was close, he said.

Price was the ultimate driver for most residential customers, but it was not so important for commercial customers.

“When you’re talking blue chip clients, internationals, they don’t even care about payback any more. It’s in their mandate that they need to be using 100 per cent renewable energy by whatever the year is, and they just have to put it on.”

Lighthouse had a sole distribution agreement for New Zealand with battery company Energizer, and most of the systems the company installed had battery storage. The systems had a 25-year warranty.

Last year’s capital raising meant Lightforce experienced three to five years’ growth in 12 months, Nutting said. The company currently had about 20 per cent of the market, and expected to grow that to 50 per cent by the end of the year.