How going electric halved my electricity bill

But although electricity is an essential enabler of modern life, we generally we don’t give it a second thought. Yet, if it wasn’t for electricity, we would all be watching television by candlelight.

My name is Paul Fuge and as you can probably tell, I love electricity! I’ve worked in the power industry for 30 years and I’m now lucky enough to help run Powerswitch, Consumer NZ’s free and independent electricity and gas price comparison service, which in just the past 12 months alone, has saved savvy New Zealand households over $10 million.

Electricity really is wonderful stuff – but even more so in Aotearoa. That’s because in New Zealand we are 100% self-sufficient in our electricity production, and also because our electricity mainly comes from renewable generation sources. According to the Ministry of Business, Innovation and Employment, in 2023 roughly 88% of New Zealand’s electricity was renewable.

In New Zealand, shifting to using more electricity, rather than continuing to consume imported fossil fuels, is easier on the environment and bolsters our nation's energy independence by reducing our reliance on fuel imports. But often what gets lost in the debate is the fact that opting for electricity over fossil fuels isn't just an environmentally sound choice; it's also a financially savvy one.

In fact, New Zealand is fortunate to be one of the first countries in the world to reach the magic electrification tipping point – that’s the point at which using electricity to power our homes and vehicles will reduce both costs and emissions. A win-win! Despite what mum always said, we actually can have our cake and eat it too!

A recent study conducted by Rewiring Aotearoa showed that homes that currently use gas appliances and petrol vehicles would be more than $1,000 a year better off by switching to electric alternatives, and powering these through a mix of rooftop solar panels, home batteries and the traditional electricity grid.

And this trend is only set to continue. Studies undertaken for Electricity Networks Association show that by 2040, Kiwi households that electrify will be paying thousands of dollars less per year than those that stick with fossil fuels.

Save the planet and save money? This sounds too good to be true! The question is, do fancy reports by fancy economists and scientists translate to savings in the real world?

Well, several years ago, I decided to walk the talk and have been progressively electrifying my household ever since. Sure, I’ve had to invest money in stuff like solar panels, but when I’ve reviewed my power bills over the past 4 years, even I’ve been really surprised just how much I’m saving.

Adding up my power bills, I’m now spending around half of what I was 4 years ago, even though I’m using more electricity now because I’m charging an electric vehicle.

But I didn’t do it all at once. Looking back, here are the steps I took.

1. Change power company

Estimated saving: $435 a year

Cost: Free!

Even though I have worked in the power industry for many years, prior to working at Consumer, like 35% of Kiwis, I thought it didn’t really matter much which power company I was with. As far as I was concerned, electricity retailers were a bunch of ratbags who all charged about the same anyway. I also knew that, regardless of who you buy it from, it’s the same electricity that comes from exactly the same place. It just didn’t make sense to me that prices would materially differ.

Boy was I wrong! Working on Powerswitch really opened my eyes to the differences in electricity prices and just how many households are paying much more than they should be. In fact, 90% of people who come to Powerswitch find savings of at least $100, with the average saving from changing provider now around $400 per annum .

In my case, changing providers resulted in an annual saving of $435 .

2. Install solar panels

Estimated saving: $1,150 a year

Cost: Around $13,500

In the past, solar power was considered a luxury rather than the practical and cost-effective choice it has become today. With each passing year, the cost of installing solar panels in Kiwi homes has decreased, making solar power more accessible to a wider range of people. For example, the cost of a 3kW system in 2008 was around $40k. Today that same system would be around $10k.

Greater affordability means there has been something of a quiet revolution, with rapid uptake of residential solar in New Zealand in recent years. In the past 10 years, there has been a 2,400% increase in domestic solar systems! Although that sounds like a lot, it started from a low base: only 3% of New Zealand households now have a solar system installed. S o there is plenty of room for further growth.

Being an electricity nerd, I’ve always been interested in generating more of my own electricity. And watching the increases in electricity prices against the reduction in the price of solar, a couple of years ago I decided to take the plunge.

I ended up paying around $13,500 for my system, as I went for a larger 4kW system with flasher higher-spec panels. I also went for a higher-capacity inverter, to futureproof the system in case I wanted to add more panels and a battery later .

Was it worth it? Over the past two-and-a-bit years my system has produced around 13,000 kWh of electricity. I consumed around half that amount, which has offset my power bill to the tune of $1,200 . The excess solar (the amount we didn’t consume) got sold back to the system, for which I have been credited $1,125 to date. So, all up, over the past couple of years, my system has generated around $2,300 in value. That gives the system a rough payback period of around 12 years .

The “buy-back rate” – what you get paid for your excess solar generation – varies significantly between retailers, and can make a big difference to the economic viability of a system. My current retailer’s buy-back rate is around double what my previous retailer offered (I’m currently getting 17 cents for every unit of electricity I sell back). So, it pays to shop around. On Powerswitch, we have a solar-rates page, which shows the different buy-back rates on offer.

Given my solar panels have an expected lifespan of 25 years, I’m happy with my investment. Especially over the longer term. It’s predicted the price of electricity will continue to rise, which will only make them more economic.

3. Install hot-water heat pump

Estimated saving: up to $600 a year

Cost: Around $5,000.

One day a small puddle of water ominously appeared next to our hot-water cylinder. Each day the puddle got larger and larger. I finally called a plumber who confirmed my cylinder was rooted and would have to be replaced pronto.

I knew that hot-water heating was a large part of my power bill. According, to the Energy Efficiency and Conservation Agency (EECA), hot water represents about 30% of the average Kiwi household’s energy costs. So, when facing a replacement, I was keen to find both an energy-efficient and cost-effective solution.

Hot-water heat pumps are an energy-efficient and low-emissions technology that can significantly reduce household water-heating costs. They are similar to the heat pumps commonly used to heat homes, working on the same principle of extracting heat from the surrounding air and transferring that heat – in this case to water rather than a room. Again, according to EECA, hot-water heat pumps typically use around 60% to 75% less electricity than conventional electric hot-water systems . They are most cost effective for households that have high hot-water usage.

With three teenagers in our house, a hot-water heat pump seemed to fit the bill. The only issue was the cost. Adding a hot-water heat pump to the replacement cylinder added an eye-watering $5,000 to the cost. But I estimated that the annual cost savings for my household would be around $600. Which equates to a payback period of around 9 years .

In theory! When crunching the numbers for this article, although pleased with the levels of savings revealed, I was perplexed because, on paper, I should have been saving even more. After several days of head scratching, I figured out why.

You see, when I replaced my hot-water cylinder, I opted to put in a much larger one. My thinking there was that, with the said teenagers, we often ran out of hot water, and a larger cylinder would stop the resulting family bruhahas . I also figured the new cylinder could act as kind of a battery – capturing more of my solar production by heating water during sunny days to use at night.

The penny dropped when I went to have a shower one evening and the water was cold. The bigger tank meant we were now using more hot water. The kids were just having longer and more frequent baths.

Hot-water heats pumps are still relatively new as a residential application in New Zealand. Only around 3% of households have one. But as 65% of households use an electric hot-water cylinder and 46% of these are more than 10 years old , you can expect to hear a lot more about hot-water heat pumps in the future. Especially, as their cost should get progressively cheaper, and the price of electricity is likely to continue to increase.

4. Change power companies … again, and getting shifty

Estimated saving: $600

Cost: Free!

Just over a year ago, I changed electricity retailer again, this time to one that offered a time-conditional power plan. Time-conditional plans reward you for using power outside of expensive peak demand times – those times of day when everyone usually gets up and gets going, and when they come home and get on with their evening. These plans make power either cheaper or free for periods outside those peak times.

For people who can move a large part of their power load out of the peak demand times, there are big savings to be had through taking advantage of lower-cost periods.

Comparing my more recent power bills to those from my previous provider, I see I have managed to save about $600 over the year by moving as much electricity use as possible to the cheaper times of the day or week. Turns out this was fairly painless. The biggest contributors to my power bills are hot-water heating and charging my car. I set my hot water up so it only comes on during cheap periods and generally only charge my EV either during the weekend or overnight, taking advantage of cheaper rates. Another energy shifting habit is to load the dishwasher and dryer, but not hit the go button until later in the evening.

Next steps

My electrification journey is not over yet. In future, I plan to add a house-sized battery to extract further value from my solar system – especially if I add more panels. This would allow me to generate even more of my own electricity and store the excess for use during peak times.

I have done the numbers, and the costs don’t quite stack up for me, yet! But as happened with solar systems, the cost of domestic-scale batteries is rapidly reducing, so it won’t be too long before this becomes economic. I also hope to take advantage of emerging trends of retailers offering even greater incentives to reduce demand at peak times or paying handsomely to access the energy stored in my (future) battery.

Looking back, was electrification worth it?

Definitely! My analysis of my household power bills shows I have increased my electricity consumption yet reduced my bill by almost half over the past 4 years .

Sure, I spent around $20,000 on a solar system and a hot-water heat pump, but the numbers show these were cost-effective investments with a payback period less than the life of the equipment. And that doesn’t include the value they’ve added to my property.

Also, not included is the saving I’ve made through not buying petrol. Moving to an electric vehicle means I consume more electricity, but have saved around $950 a year in petrol costs. If you have an EV, you could think of installing solar: it’s like building your own petrol station on your roof.

Which brings us back to the point I made at the beginning. Even if climate change was not a thing, it still makes sense to electrify, simply because it is cheaper to do so. Electrification is increasingly economically prudent (although – bonus! – it helps the environment too).

We may not yet realise it, but we are on the cusp of another electricity revolution. For electricity nerds like me, it’s an exciting time to be alive!