Investing in Tomorrow: the electrification opportunity

The idea that we cannot afford to address climate change doesn’t stack up. Rewiring Aotearoa’s new paper shows that household electrification can massively reduce emissions while saving money for the average New Zealander and improving the country’s balance of payments.

The Big Finding:

The cost of buying and financing electric machines is cheaper over the long run than using fossil fuels because they use energy much more efficiently. That leads to significant savings for individual households, and even more savings for those with rooftop solar and batteries.

This could lead to combined savings of $29 million per day or $10.7 billion per year by 2040 and also avoid millions of tonnes of carbon emissions per year by removing the need for expensive and mostly imported fossil fuels in exchange for more electricity generated in New Zealand.

Authors: Dr Saul Griffith, Josh Ellison, Michelle Pawson, Paul Conway*. Peer reviewed by Geoff Simmons*

*The contributions of Paul Conway, the chief economist at the Reserve Bank of New Zealand, and Geoff Simmons, the chief economist at the Parliamentary Commissioner for the Environment, do not constitute an official endorsement from either organisation.

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Investing in Tomorrow

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Report Highlights

Electrification is efficiency

Electrifying your household appliances and vehicles offers significant efficiency gains that far exceed conventional efficiency efforts.

Switching from fossil fuels to electric vehicles, hot water heating, space heating and cooking can reduce total household energy use by 70%.

Rooftop solar is the cheapest & most stable fuel

The cost of grid electricity and fossil fuels has historically risen faster than inflation, while the cost of rooftop solar and batteries has fallen rapidly.

Rooftop solar is the cheapest delivered electricity for New Zealand homes and unlocks additional savings. This presents an opportunity to help lower rising energy bills for homes and flatten energy costs over time by buying decades of electricity upfront, while batteries help create a more affordable and resilient energy system for all New Zealanders.

Better energy productivity leads to big savings

The ‘Electric Homes’ report showed the average household could save about $1,500 per year through electrification and investment in solar and batteries.

The largest savings are on petrol and diesel at the pump because electric vehicles are around four times better at using energy than petrol vehicles.

Households can save on every unit of energy they use to heat their water or their home because heat pumps are around four times more efficient than gas systems.

Big household savings = big national savings

While the upfront costs of electrification are higher than their fossil fuel counterparts today, this higher cost is more than offset by lower running costs through time by reducing the use of relatively expensive fossil fuels.

As economies of scale continue to drive down the costs of electric vehicles, solar and batteries, the combined savings for New Zealand potentially increase as more households electrify.New Zealand homes and businesses are currently spending around $55 million per day or $20 billion per year on fossil fuels, most of which are imported.

Approximately two-thirds of New Zealand’s total energy needs are met by burning these expensive fossil fuels and the price of these fuels is expected to increase. With electrification, New Zealanders could be saving $9 million per day or $3.2 billion per year by 2030.

By 2040, those savings will rise to $29 million per day or $10.7 billion per year (this is around half the current education budget) and will greatly improve our balance of trade.

It’s not just money we’ll be saving

By 2040, electrification would help us avoid 10 million tonnes of unnecessary carbon emissions annually from burning fossil fuels, or 105 million tonnes cumulatively between 2024 and 2040.

The emissions savings would also help to minimise the amount of offshore carbon credits New Zealand purchased, keeping more money in the local economy.

We need to swap fuels for finance

Electric machines are more expensive up front than fossil fuel equivalents but have lower and more consistent ongoing bills. Every new fossil machine basically puts us in more fossil fuel debt for the lifetime of that machine and the price of the fuel is likely to keep going up.

In most cases, financing electric machines is now cheaper than the fuel and much better for the environment. This means the opportunity to electrify can be better realised by facilitating electrification finance access to every home.

Data spotlight

70%

The reduction in total energy use when a home switches from fossil fuelled machines to electric vehicles, hot water heating, space heating and cooking. This takes the average home’s total from 85kWh per day to 25kWh per day, with other efficiency measures reducing that by a further 1kWh.

$0.31/Litre

Using a petrol price equivalent to show the greater energy productivity of electric machines, you can power your electric car for $0.31/Litre with rooftop solar and $0.64/Litre with electricity delivered from the grid.

300-400%

A heat pump for space heating outputs about 3 or 4 units (300-400%) of heat for every unit of electricity it uses. Heat pump water heaters have similar efficiency gains, whereas gas space heaters operate at about 80% efficiency and gas hot water systems at about 95%.

$1,500

On average, our Electric Homes report showed New Zealand homes can save $1,500 by switching their fossil fuelled machines to electric alternatives and running them with a combination of electricity from the grid, rooftop solar and batteries. This includes upfront costs and 5.5% interest. The biggest savings come from vehicles, followed by hot water heating.

$55 million

New Zealand homes and businesses are currently spending around $55 million per day or $20 billion per year on fossil fuels, most of which are imported, and New Zealand’s fossil fuel prices are among the most expensive in the world.

Two-thirds

In 2023, 88% of New Zealand’s electricity production was renewable, but electricity only makes up around 30% of our final energy consumption. Approximately two-thirds of New Zealand’s total energy needs are met by burning fossil fuels, despite the fact that the majority of our economy could run on electricity that we could generate in New Zealand using existing technology.

$29 million

An aggressive programme of household electrification could result in all New Zealand households saving a total of $29 million per day or $10.7 billion per year by 2040.

105 million

An aggressive programme of household electrification could remove 105 million tonnes of carbon emissions by 2040, and 212 million tonnes by 2050.

Charts

Efficiency and energy productivity

Cost comparisons

Cumulative savings

Quotes

Dr Saul Griffith, Rewiring Aotearoa’s chief scientist and founder of Rewiring America & Rewiring Australia.

Quotes from Saul

“New Zealand is one of the first in the world to cross an ‘electrification tipping point’, where the cost of buying and financing electric machines is cheaper over the long run than using fossil fuels. That leads to savings for individual households and it could lead to huge savings for the country as a whole. “

“This is an opportunity to help New Zealanders access the savings that electrification can provide primarily because of increased efficiency and swap some of the world’s most expensive imported fossil fuels for renewable electricity generated in New Zealand. Every new fossil machine basically puts us in more fossil fuel debt for the lifetime of that machine and the price of the fuel is likely to keep going up.”

"Household electrification represents a significant short term emissions reduction opportunity that will simultaneously save New Zealanders money, build energy resilience, and reduce dependence on imported fossil fuels. By accelerating investment, we reduce the burden of climate change mitigation on future generations."

“Historically, energy infrastructure has been thought of as large power plants and lots of poles and wires. Because this was seen as critical it received favourable finance. New technology has allowed households, small businesses and farms to generate and store electricity, so we would argue that customers also need to be seen as a critical part of the energy infrastructure and should also receive favourable finance.”

“New Zealand has a long history of electrical innovation - from the southern hemisphere’s first public electric street lights in Reefton to the first all-electric house near Tauranga to Mike Casey’s all-electric orchard near Cromwell. It also has excellent centralised renewable energy resources and that puts the nation in a great position to facilitate an energy transition that will be beneficial to every Kiwi.”

Paper Comments

"I suggest everyone interested in a more sustainable and prosperous New Zealand take 15 mins to read this. It’s worth it. It makes a pretty compelling argument for rapid electrification of most things. And the economic rationale - at a consumer and national level - is well argued. There is no need to invent anything here. We just need to get on with it."

‍Sam Stubbs - Simplicity Co-Founder

How's your energy?

We are working to build an electrified future where every New Zealander saves money on their energy bills and every community has the resilience to keep its lights on and homes warm.

We are carrying out research into all the fossil fuel machines in New Zealand and by filling in our Home Energy Survey you will be helping us create a realistic pathway to an electric economy, hit our emissions targets, and save households and the country significant money.

Take the Survey

So you want an electric home?

Electrifying your home is not just a smart environmental decision, it’s now the smart economic decision for most. But it can sometimes be easier said than done. So how much can you save? What do you need to consider? And how do you make it happen?

We’ve gone through each of the main machines in the home, crunched some numbers on the costs and potential savings and provided a bit of process to follow for each of them.

Check out our electrification guides

New Zealand could lead the world - again

New Zealand has a long history of renewable electricity innovation. The world’s first all electric home (right) with the world’s first practical electric home water heater was designed by engineer Lloyd Mandeno and powered by renewable hydro electricity in the early days of New Zealand’s hydro electricity boom.

Around 1888, New Zealand had the southern hemisphere’s first electric public lighting in Reefton, and the world’s first electric gold dredge around 1890. In 1958, New Zealand built the world’s first wet steam geothermal electricity power station.

There are sparks of this world-leading Kiwi ingenuity again, from community energy projects to what is believed to be the world’s first electrified zero fossil fuel fruit orchard, including New Zealand’s first electric tractor imported from the USA. With this rich electrical heritage, a longstanding love of self-sufficiency and a highly renewable electricity grid, New Zealand has a unique opportunity to become one of the world’s most electric economies.

Find out more about Rewiring Aotearoa CEO Mike Casey’s electrification journey here.

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Your donations help our team keep the momentum of rapidly electrifying Aotearoa New Zealand within our key focus areas of community, government and industry.

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