Buying an EV and switching to all electric appliances at home may cost more upfront, but the cost equation will flip in electric’s favour by 2026, according to a report for the electricity industry.
From 2026, households fully powered by electricity will save money compared with sticking with a petrol car and/or gas appliances, the study says – with the savings growing to hundreds and eventually thousands of dollars a year.
The report (by consultancy Sapere) was paid for by Electricity Networks Association, which represents the lines companies transporting electricity to houses. It uses modelling from the Climate Change Commission.
“Regardless of variables like energy prices, there is going to be a crossover point this decade where going all-electric will begin to generate savings,” said the association’s chief executive Graeme Peters. “For a lot of Kiwis, in time these savings will amount to thousands of dollars.”
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The report found people who installed solar panels and batteries would save even more money than those using only the national grid, but it didn’t factor solar in when calculating the tipping point when electric became cheaper.
Using electricity to power things that are currently fossil-fuelled, like cars, would see electric power bills rise, but the drop in spending on petrol and gas would more than make up for it, Peters said.
The report assumes people mainly charge their vehicles at home.
“There is however an equity issue in play,” Peters said. “As it stands, wealthier households will be the first to benefit from energy savings as they can afford to buy EVs, which is where the major cost savings are going to be found. The upfront costs will be a barrier for a lot of New Zealanders, particularly until EVs drop in price and a second-hand market emerges.”
The report doesn’t look at cost savings from switching to mini electric vehicles – like ebikes and e-scooters – instead of cars. Nor does it look at savings from increasing walking and public transport. The Climate Change Commission says all those modes need to grow to maximise the cost-, -health- and planetary- benefits of going greener.
By 2040 the spending difference between a household using maximum fossil fuels and a house going all-electric would be about $2,400 a year, the report says.
The calculations assume electricity prices will rise steadily from 2024. But fossil fuels are projected to rise by more, meaning going electric still ends up cheaper starting in about four years, Sapere concluded. Manufacturers are also expected to make small energy-efficiency gains.
If EV prices fall less than expected, or energy costs change at a different pace than forecast, it could take longer than four years for going electric to come out on top, but it will still happen, Sapere’s report says.
A new EV would be the same price as a petrol car by 2030, under the report’s assumptions, but lower maintenance and running costs would make EVs cheaper to own overall well before that even accounting for the sticker price. Upfront costs for second-hand EVs are expected to take longer to reach price parity with second-hand petrol cars.
To reach its findings, two Sapere researchers estimated the average New Zealand household’s total energy expenditure under a range of different scenarios through to 2040, based on data used by the Climate Change Commission.
The sums are based on averaging out the upfront purchase cost and running costs over the life of vehicles and appliances into a yearly figure.
The report looks at the impacts of fuel, gas and electricity price rises on a range of average households including those with petrol or diesel cars, electric cars, electric appliances, and a mix of gas and electric fittings (including for heating, hot water and cooking).
The electricity industry says massive investment is needed to increase renewable generation as New Zealand goes electric. These costs could flow on to households in the form of higher fixed charges.
However, a recent report by trade unions and a climate group accused the industry of over-paying dividends and under-investing in infrastructure – at the cost of household energy bills rising more than they needed to. The way the power market is structured means electricity generation companies can benefit from overall higher prices when more expensive coal-fired generation is operating, even when most of the nation’s electricity is coming from cheaper sources: wind, hydro and solar.
Energy Minister Megan Woods said at the time that the union-backed report “lacked context” but she took the allegations “seriously”. The industry said New Zealand’s power sector scored well on both price and reliability.
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