Electrifying your home & vehicle: how it saves you money and reduces your emissions

Homeowners have a lot riding on their purchase decisions when appliances and vehicles reach the end of their lifespan. If you replace like with like, you’re locked in for the foreseeable future. It pays to do your research and consider the longer-term benefits of investing in electric options when replacing these big-ticket items. Over the lifetime of the product, with average usage, the electric option usually saves you money.

A big buzzword doing the rounds at the moment is “electrification”, which is the process of changing from fossil-fuelled appliances and vehicles to those powered by electricity. Transitioning to an electric home means swapping out fossil fuel-powered machines for more efficient electric alternatives. Owing to Aotearoa’s relatively green grid, electrification is not only a smart economic decision, but a wise environmental one too.

EECA has recently published research that looks at the current electrification situation in New Zealand, and what a future would look like for the average home if people make changes to electrify their place. The reports make interesting reading, and we’ve broken down the key messaging to see where electrifying your space heating, water heating, cooking and vehicle could save you money in the long run.

Where do you use the energy in your home now?

The biggest energy vampires are space and water heating.

Average home energy use* (excluding vehicles)

We don’t often factor our vehicle energy usage as part of the household. When you do, boy does it change the picture! When you think about it, it makes sense. It takes a lot of energy to make a two-tonne hunk of metal hurtle down the road at 100km/h, and that translates to vehicle fuels hoovering up over 70% of the energy usage in your home.

Average home energy use* (including vehicles)

*An average home is calculated as 2.8 people

Who has gas?

Forty-six percent of kiwi homeowners use gas, with a pretty even split between piped and bottled. Interestingly, newer houses built after the year 2000 are more likely to have gas than homes built before then. If you can remember advertising campaigns around endless hot water and fish being cooked in a shower, you can probably understand why. For many people, the thought of having a chilly shower with the dregs of the hot water cylinder was enough to sway them.

When you break it down further, the majority of homes that have a gas connection (bottled or piped) are using it for either water heating, the cooktop, or a combo of both.

Space heating

What’s the current situation?

New Zealanders love a heat pump. We already have a good feel that it’s the cheapest and most efficient way to heat our homes on colder days, and 70% of owned homes already have them.

There’s more benefit to using heat pumps than just cheap running costs, which come from them being super energy efficient. You can install them high on the wall and out of the way to open up more floorspace for living. The fact that they can also cool a room makes them more versatile, particularly nowadays as we stare down the barrel of a changing climate.

In owner-occupied homes where heat pumps aren’t the main source of heat, nearly 40% of heating systems are over 10 years old and getting to a position where their replacement needs to be factored in.

What difference can electrification make?

Only a small proportion of homeowners use gas for heating. Over a 15-year span, on average you stand to save at least eight grand if you swap your gas out for a heat pump. In fact, you will save on your energy bills if you just swap gas or LPG out for plug-in heaters that cost a bomb to run but are offset by their low purchase cost.

However, heat pumps can provide a level of all-round comfort not easily obtained by plug-in electric heaters. They can quickly bring a room up to temperature and then maintain it. Heat pumps work differently than regular heaters or air conditioners. They can both heat and cool your home, and are sometimes called reverse cycle air conditioners. The efficiency of a heat pump depends on how cold it is outside, as well as the type of refrigerant it uses. Even in really cold places, heat pumps are much more efficient than other heaters. In fact, in New Zealand, they’re typically about 350% more efficient, and in warmer places, they can be even more efficient, sometimes over 400%.

Space heating comparison in New Zealand homes

Is your heat pump up for replacement?

Water heating

What’s the current situation?

Water heating ranks as the third most significant energy use in New Zealand homes, trailing behind charging vehicles and closely following space heating and air conditioning. Certain homes may use more energy on water heating compared to space heating, depending on factors such as the home’s location, the extent of heating required, and the number of people in your whānau taking long hot showers.

The majority of New Zealand homes (approximately 65%) have a traditional (resistive) electric hot-water cylinder. About a third use gas. While we trust the technology for space heating and know it’ll be efficient, only 3% of homeowners in Aotearoa have hot-water heat pumps. That’s most likely owing to the relatively high upfront cost to have them installed, levelling out at around $7,000. That might seem a hefty price to pay compared to the trusty gas install that’s about half that.

One thing that can be off-putting is the space argument. Many newer homes, or those that have been recently renovated, are designed without a hot-water cupboard, with the tiny gas water heater tacked onto an external wall instead. Cylinder manufacturers have wised up to this and offer electric and heat pump options that can be installed outside too.

What difference can electrification make?

Hot-water heat pumps have a higher upfront cost which should be taken into account, though their savings over time will likely make up for it, particularly for households that use a lot of hot water.

Comparing the total costs of water heating shows a clear difference in upfront expenses for each option. Heat pump water heaters have a much higher initial cost, but they’re way cheaper to run, and come up trumps for lifetime costs. Over 15 years you stand to save over $1,800 over piped natural gas, and over $5,000 if you stayed on LPG.

Solar water heaters are another very efficient way of heating your water in your home. They use sunlight to heat and circulate water – they’re those tanks or a row of tubes on a roof you might sometimes see. Heat pump water heating combined with solar, and resistive water heating with solar end up being the two most economical choices.

It’s important to mention that because there’s such a big gap between upfront and ongoing costs, the amount of energy used in your home makes a big difference. Larger families will use more energy and see higher water heating costs, so these homes have the most to gain from going electric.

A regular (resistive) electric cylinder doesn’t need to be overlooked here. The high upfront cost of a heat pump system means that the cheaper running costs will only end up saving you $56 a year over the old faithful electric cylinder. It’s an important decision to really give some thought to. Your standard electric cylinder is a comparatively much simpler piece of technology that, given current pricing, you might opt for instead. However, the equation will change over time as the market competition in hot-water heat pumps warms up somewhat.

Water heating comparison in New Zealand homes

What’s ripple control?

Ripple control is where a line company can send a signal down the lines to turn your electric cylinder on and off. This helps to manage the peaks and troughs in the power and balance out the demands of households, and will save you money on your power bill.

Cooking

What’s the current situation?

Although cooking represents a small portion of your home energy usage, which type of cooktop you decide to go with can have an impact, particularly if your hob is the final hurdle to cross on your path to full electrification in your home.

There are three main types of cooktops in New Zealand: ceramic (resistive) electric, induction electric, and gas/lpg burner hobs. Two thirds of homeowners in the motu already have electric cooktops in their homes – either ceramic (resistive) or induction. Induction cooktops are generally more expensive upfront than gas or ceramic/resistance electric cooktops.

Having a gas cooktop is often the preference of home chefs. People love the precise control that they allow for. Furthermore, if gas cooktop owners don’t have induction-compatible cookware, this will be a further barrier to change. Fair enough too, a full set of pots and pans can be a significant outlay, especially if you’ve gone all-in on an expensive set. However, almost a third of gas cooktops in New Zealand homes are more than 10 years old, and could be due for replacement in the near future. For those in this situation, it’s worth considering making the switch to induction.

What difference can electrification make?

The lifetime costs of replacing an old hob with a ceramic (resistive) electric one makes economic sense over a 15-year span.

Electric resistance cooktops have about 70-80% efficiency and electric induction cooktops 80-90%. Safety-wise, ceramic electric hobs do stay hotter after cooking and can burn hands (or cat paws if they jump on the bench) long after the pot or pan has been removed. When you’re replacing a cooktop, you want performance, especially when it only contributes to 5% of the home’s energy needs.

When it comes to performance, induction is hard to beat. It’s comparable to gas in terms of speed of heat and temperature control, and the safest option overall. And due to the sleek, flat design aesthetic, they’re a doddle to clean. The upfront cost of an induction hob can vary, but on average it will come out at about $2,500 including installation. The pricing can vary significantly with the top-performing induction cooktops, with our recommended models ranging from $1,700 through to $6,000. By contrast, a good ceramic hob can be picked up for less than $500.

What's a recommended cooktop?

Cooktop electrification presents an opportunity to disconnect from gas entirely and save even more by not paying a fixed or subscription gas cost.

Cooktop comparison in New Zealand homes

Vehicles

What’s the current situation?

Vehicles take the lion’s share of the overall energy needs of a household, but this is an area with more uncertainty, and more cost than other areas. The introduction of road-user charges (RUCs) has certainly made the waters murkier for potential buyers in thinking about vehicle electrification. But the data is now telling us, even with RUCs, electric vehicles (EVs) and petrol cars come out roughly the same cost when you include all costs over their lifetime including fuel.

Current EVs and plug-in hybrid (PHEV) owners are firm converts to the technology, with 75% lined up to replace a current vehicle with an EV in the future.
Interestingly, non-EV or PHEV owners are proving to be difficult to get over the line. The majority (60%) won’t buy an EV next, and half won’t buy a PHEV. A regular hybrid (like a Toyota Prius) is more palatable, and seemingly more trusted with only a third saying they wouldn’t go near them.

What difference can electrification make?

If you buy an EV, and charge it at home, you’ll no doubt find that your electricity consumption will increase, but you’ll save in the long run over opting for petrol. Based on today’s electricity and petrol prices the average running cost for an EV is $11 per 100km, versus $19 for a petrol vehicle. The same maths that applies to hot water applies here: the more you use your EV, the more you save both in terms of operational costs and payback rates.

However, if you don’t have access to a plug, and instead rely on the network of public fast chargers dotted around the motu, you’ll take a hefty financial hit. It’s important to really take this into account: for apartment dwellers or townies with no off-street charging facilities the pricing situation with only using network chargers is more challenging.

Total cost of ownership and total emissions over 15 years

What's a recommended EV?

Solar

What’s the current situation?

Not many New Zealanders have solar just yet – approximately 7% of owner-occupied homes have it installed, with 2% using home batteries to store solar electricity generated during daylight hours. Purchase and installation costs were the biggest turn off for homeowners.

Of those with solar panels already, over one-third were thinking of installing batteries to complement their system in the next 5 years.

In the right conditions, solar has the potential to pay for itself within about 7-8 years; after that you’ve effectively got free electricity from the panels.

What difference can electrification make?

As more vehicles and homes switch to electricity, we’ll probably need to produce two to three times as much renewable electricity as we do now in Aotearoa. One of the cheapest ways to generate a lot of this extra energy is by putting solar panels on rooftops of homes, businesses, and farms. This not only makes communities in New Zealand more resilient but also saves money for households and businesses by reducing living and operating costs.

Rooftop solar here is still more expensive compared to Australia, where it’s installed for about half the cost. Australia’s adoption of solar power is considered a global success, providing the cheapest home energy ever. The cost of solar in New Zealand is expected to decrease over both the short and long term, making it more affordable in the future.

You stand to save when you add solar panels to your home, should your home be suitable for installation of course. You want a north-facing roof, devoid of shading and you also want to change your behaviour to take advantage of the power during the day. That’ll come in the form of either using the power when it’s being generated while the sun’s out, or buying batteries to store for later use. If you divide the cost of solar panels and upkeep across their 30-year lifespan, it’s like buying your electricity at around 6¢/kWh. Compare this to an average 24¢/kWh for electricity from the grid, and it’s 75% cheaper.  Your hot water is a great example of where solar really makes its presence felt – the cylinder will get fed by the panels during the day after you’ve had your morning shower, and your water stays hot, only needing top ups of electricity to maintain the temperature.

Similarly, if you charge your EV at home during the day with energy generated by home solar panels, you could save approximately $7,000 over the lifetime of your EV. This is a space where workplaces could come to the party as solar can be used to charge cars parked up during the day while you toil inside.

What’s the big picture?

The lifetime costs of a fully electrified home shows an overall benefit for switching to electrification for everything. You get the most benefit from buying outright, which does come into play for most people. Not everyone can drop cash on a vehicle, and solar, and batteries for the system. At present, several banks offer 1% loans for improvements to your home in the electrification space, though be aware that the timelines for the low finance are shorter than the 15-year costs highlighted here.

Total cost of ownership over 15 years

Electric homes use less energy overall

When to think about it

It doesn’t make economic or environmental sense to rip out a perfectly good appliance, nor should you take the depreciation hit on swapping out a vehicle before its time.

The best time to think about electric alternatives is when something stops working and is uneconomical to repair. Not all households are suitable for electrification, so it comes down to your own unique situation. But the data says that the average home does stand to benefit. The households that come out best are those that use the most power and hot water, and use their vehicles more than others.