Poorest households 'worst off' if New Zealand shifts en masse to solar
New Zealand's poorest households are likely to be left worse off if many more homes install solar electricity panels with the current pricing structures in place, a new report says.
Concept Consulting has looked at the impact of new power technology on cost-shifting between consumer groups, and how pricing methods could be improved.
When households install solar panels, it lowers the amount they spend on power overall, and the amount they contribute for investment in power stations and other infrastructure required to deliver power.
But they usually still require power from the grid during peak periods, such as on winter evenings, when power is most expensive for retailers to generate.
Under most providers' models, they still pay the normal fixed rate for this power, even though it may not be enough to cover the cost of it at the height of demand peaks.
Concept Consulting said that meant there was a significant element of "cost shifting" when people installed solar panels - as much as $250 a year.
"Solar panels yield little or no savings in network costs because they don't operate at peak demand times in cold winter evenings. And yet they provide a large reduction in bills based on the fall in mains-supplied power."
In a scenario where existing pricing structures are retained and 50 per cent of households installed solar panels, the bills for the poorest 10 per cent of households would increase $60 a year, on average. The wealthiest 10 per cent of households would have their bills drop $150 a year.
The report said the rules needed to be adjusted to allow power companies to charge higher fixed daily charges to low users to recover costs.
Low-user plans are available that charge a lower fixed daily charge, and a higher price per KwH.
"The LFC regulations effectively require electricity suppliers to offer price options that favour consumers with below-average usage. This shifts costs on to consumers with above-average usage," Concept Consulting said.
"The LFC scheme is likely to become increasingly ineffective as a means of helping poorer consumers if existing price structures are maintained. A rising share of those who qualify for LFC benefits will be the middle- and higher-income households who install solar panels - and the costs of maintaining the scheme will fall increasingly on those (mainly) less well-off households that don't install panels."
Chief executive of the Electricity Retailers Association of New Zealand Jenny Cameron said it was an issue that retailers had signalled.
"Without distribution pricing reform, inefficiencies and costs will fall on New Zealand's poorest consumers, which is something we should all be seeking to avoid.
"Lines companies must work with retailers to help communicate and coordinate these changes to our customers," she said.
"It is also essential for lines companies to standardise their terms and conditions and coordinate pricing structures across the country to allow more retailers to enter their regions. Small irregularities and inefficiencies like this can make a big impact for a retailer looking to expand to offer more choice for customers."
The report suggested time-based tariffs could be a solution.
But Electric Kiwi chief executive Luke Blincoe said 25 per cent of the country still did not have smart meters.
"To talk about tariff innovation and time-based tariffs when there a large chunks of mostly regional New Zealand without a smart meter - there are a few chicken and egg issues here."
He said the adoption of solar technologies would require change.
"There is no credible argument to suggest the uptake of new technology is going to be democratic. It will be adopted by the most affluent first and we will see the residual cost being distributed to those that can least afford it. That's the issue we have to address."