Written by Matt Ward, Chief Executive Officer, SolarZero

1.     A typical Kiwi household pays between 25-30c per kWh for their electricity.

2.     35% of this relates to the cost of generation (i.e. the wholesale cost), 40% to distribution (i.e to Transpower and lines companies) and the remainder is GST and retailer costs.

3.     This implies a wholesale cost of around 8-10c per kWh for what's generated.

4.     Over the past year or so, this wholesale cost has been at elevated levels of 15-20c per kWh and since July, over 40c, and for the last week at 80c (10x the traditional cost); hence the claims from independent retailers (i.e. those who do not generate what they sell) that: 

        a. The big gentailers have been cross-subsidising their retail arm for the last  few years or so and

    b. Consumer prices will have to increase to reflect these higher costs. Some have stopped taking new customers (such as Electric Kiwi).

5.     The reason for the higher costs right now is lake levels - they are at close to historic lows (see chart below) - they are almost at the bottom of the observable range since 1927 for this time of year. The reduction in gas supplies is also contributing to price hikes.

6.     Compounding this, there is further cost pressure coming for the 40% of the household electricity bill that relates to distribution. Recently, the Commerce Commission endorsed the draft changes in transmission and distribution costs for 2026-2030. This equates to a 50% increase over that period, of which 24% will take effect from next year. This itself is a 10% increase (i.e. $15 per month) in a typical household's bill.

7.     This increase in distribution costs will be ongoing as we need to fund the infrastructure ($30bn over the next decade) to electrify New Zealand's economy. Notably the proposed cost increases above, while significant, undershoot the level required to fund the investments Transpower and the lines companies were planning for.

8.     This means there remains a very real residual risk of power cuts and supply and demand imbalances over the next 5 years or so, as arguably NZ is lacking investment in our electricity infrastructure to enable the electrification of the economy.

9.     Accordingly, we are bracing for the perfect storm of increased wholesale prices at a time when distribution prices are increasing by 50% over the next 5 years.

10.  For Kiwi mums and dads, this could conceivably result in their power bills increasing from 25-30c per kWh or say ($200 a month) to 35-40c (or close to $300 per month by 2030) assuming wholesale markets return and stabilise to somewhere around 15-17c per kWh (i.e ¼ of where they are now).

11.  A solution for both households and for Transpower and lines companies, is residential solar with a battery.

12.  Due to cost decreases of 50-60% in panels and batteries over the past year, it is now possible to generate and store electricity in a battery at 16-18c per kWh from your roof and lock that cost in for the life of the panels (~25 years) 

    a.   With SolarZero's subscription model, homeowners do not need to pay any capital upfront and simply swap up to 90% of their current energy bill for a solar subscription and the remainder from SolarZero's grid partner. A typical household will save between $150-$400 in their first year and $15k-$30k over 25 years.

13.  For lines companies, SolarZero's Virtual Power Plant (our fleet of batteries) can support the grid during peak times and reduce the level of investment required. This in turn lowers the energy bills for every New Zealander, even those without solar.

14.  NZ needs to rethink its energy strategy. There is a lot of finger-pointing going on - it's time for action.

15.  The technology exists to electrify the economy, sadly the politicisation of the electricity regulatory environment and markets that are no longer fit for purpose are disincentivising the investment we need. Mums and dads across the country are feeling the consequences of this. 

16.  Renewable electricity can be a competitive advantage or handbrake for our country as we electrify the economy and embrace AI (cue energy-hungry data centres).

17.  We can already see the likes of the UK and Australia embracing solar and battery technology at speed, with the numbers speaking for themselves. Solar and battery technology is no longer simply a solution to ‘greening’ our electricity network, but also to reducing cost and increasing reliability.