Energy hardship is the new norm for an increasing number of stretched Kiwis. But a ground-breaking solar panel trial could be the circuit breaker needed.
Energy hardship is more than not being able to pay a power or gas bill. It often means hunger, sickness, depression and mental illness, going to bed to keep warm, ashamed to have visitors, kids unable to invite friends for sleepovers.
It is directly linked to cold, damp living conditions. In the last Census data published (2018), 102,123 people were identified as severely housing deprived or 2.2% of the total population; half of them were women under 25. A survey by the Ministry of Business, Innovation and Employment (MBIE) says 110,000 households could not afford to keep their homes adequately warm last year.
Researchers have linked energy hardship and poor housing directly to serious human health issues. And it’s not just the tenants in rental homes, but owner-occupiers who can’t afford heating, insulation and proper ventilation, even with the rebates offered under the Healthy Homes scheme.
With the apparently overloaded electricity system causing periodic shutdowns, the, the future of natural gas supplies remaining in doubt and costs creeping ever upward, “energy hardship” has become real.
More than 8000 households were disconnected for non-payment to their power suppliers last year. Prepay electricity is typically used by consumers in energy hardship; it’s more expensive than standard billing, and a third of those who are automatically cut off when their credit runs out are disconnected for more than 12 hours. Power companies can legitimately charge a disconnection fee and then a reconnection fee.
Only 2% of Kiwi households have solar panels and can generate their own low-cost power when the sun is shining. Generally, they use only about a third of what is produced, unless they have storage batteries (which can be double or even triple the cost of solar panels, which average $10,000 on a typical house roof). The surplus can be sold back to the company supplying their mains power, but at about 10c per kilowatt hour, there’s quite a shortfall between that sale and the average consumption tariff of 32.9 cents per kWh.
But what if every house had solar power panels on the roof and the owners or tenants could sell what they didn’t use to whoever they choose, or gift it to whānau, or donate to a charity?
This is technically possible, but there are regulations preventing it in the Electricity Act, which was designed 100 years ago to control who can generate and who can sell power.
However, something is happening. At the end of June, the Electricity Authority (EA), responsible for the governance and regulation of the industry, approved a five-year, ground-breaking energy-sharing trial involving 200 houses in Lower Hutt and Porirua. It’s a joint venture between Ara Ake (the government’s future energy development agency) and public housing agency Kāinga Ora. With Wellington Electricity (a lines company) and Intellihub (a metering specialist), the four are setting up the trial houses with photovoltaic solar panels and innovative metering that allow the diversion and sale of unused power.
Budget boost
The Community Renewable Energy Fund (managed by MBIE) is paying for it. This fund, which builds on the successful Māori and Public Housing Renewable Energy Fund, got an extra $30 million in the most recent Budget for a wide range of initiatives targeted at reducing energy hardship. And Ara Ake has just had its contract renewed for 10 years with $70 million extra capital.
The Kāinga Ora customers with solar generation will get free use of this power and continue to buy their mains electricity from the retailer of their choice, while the exported electricity is managed by a retailer contracted to Kāinga Ora. Contracting with one retailer to buy all the exported electricity will allow Kāinga Ora to seek the best market price, maximising the benefit of its investment in solar.
The agency will use the revenue from aggregated solar buyback for energy hardship reduction initiatives, which it believes may be more appropriate and cost-effective than providing direct credits to household electricity bills. A decision on the best use of the funds will be made once the pilot has been launched and the fund established.
The only other way to achieve such an outcome under regulatory settings would be for Kāinga Ora to convince all its customers with solar to switch to one retailer willing to offset exported generation against the bills of selected customers who do not have solar (they must also switch to this retailer).
But attempting to dictate a customer’s choice of retailer would be contrary to the Kāinga Ora operating principles and ethics related to dignity and independence.
Kāinga Ora is New Zealand’s biggest landlord, with more than 70,000 homes – 40,000 old and cold and in need of upgrading in the next 20 years. It’s also our largest residential property developer, with 700 active construction sites, representing 45% of new residential builds.
Jenny van der Merwe is Kāinga Ora’s renewable energy lead. She says that separate from the Porirua and Lower Hutt initiative, 49 projects are on the go to provide solar power to 780 homes from Whangārei to Christchurch.
“We have a pipeline of trials across the country, covering most of our housing types,” says van der Merwe.
“About half of our projects are on retrofitted and newer homes. The other half are integrated into new construction. Most of our housing consists of stand-alone homes, and most of our solar installations are individual systems on these homes.”
Rules, rules, rules
Meanwhile, in Porirua, the solar-sharing trial is technically known as a multiple trading relationship (MTR). It is not currently permitted under the Electricity Industry Participation Code 2010, as each customer connection (an ICP, or installation control point) must be registered to just one retailer and metering equipment provider; it cannot be split between two or more retailers. So, regulatory exemptions from the Electricity Code had to be applied for and granted specifically for Wellington Electricity and Intellihub to go ahead with the pilot. Ara Ake says such exemptions don’t go far enough.
In a submission to the EA’s consultation on “Updating Regulatory Settings for Distribution Networks”, it stated: “Since Ara Ake took a leadership role in developing MTR trials, we have seen a significantly large number of consumers wishing to trial MTR. For them, the concept and benefits … are clear, but they have been unable to access that service from their mainstream retailers. We are aware of a draft cost-benefit analysis of MTR conducted internally by the authority in 2018 and we would recommend that the authority publicly releases it so that we can build on that substantial piece of work and further quantify the benefits of MTR through our trials.”
The submission continued, noting that “MTR is an opportunity to enable innovation and realise significant consumer benefits. MTR can help to provide consumers (households, businesses, community groups) with more choice regarding electricity services; to make investment [in energy distribution] more economic; encourage innovative new flexibility business models to emerge; increase competition … and alleviate energy hardship when deployed effectively.”
Porirua is not the only MTR project Ara Ake is involved with. Its project spreadsheets include a solar facility to power seasonal irrigation pumps at a Hawke’s Bay farm – irrigation is a significant source of daytime power demand in summer. The farmer will share the excess solar generation with others in the community via project retail partners Our Energy and Flick Electric. Another project enables off-peak charging for electric vehicles: supplier Thundergrid offers a discounted smart charger and manages that separately from the participant’s grid-fed household electricity consumption.
In Canterbury, SolarCorp, Cortexto and Our Energy are trialling flexible services across 12 different customer connections, allowing households to access EV charging, solar power and battery storage with different providers.
For these projects, business-to-business collaboration is required to make them happen – regulatory approval has not yet been sought – and Ara Ake noted in its submission to the EA that the Electricity Code works against any spirit of collaboration, let alone innovation.
“The one-to-one relationship between customer and retailer is deeply embedded throughout the Electricity Code, and also in operating systems, hedging strategies and market participants’ offerings.”
Sparking hope
There is some light shining. In Australia, the Energy Market Commission is considering changes to its regulatory structure, which is akin to New Zealand’s.
Here in New Zealand, the Electricity Industry Amendment Act, passed in August last year, provides new regulatory powers to grant code exemptions and enable innovation trials.
Briony Bennett is Ara Ake energy innovation manager. She says that in addition to the exempted Kāinga Ora trial, “a good intermediary step for the EA to also consider is a trial that is not full of multiple trading relationships but at least where solar or household batteries are involved, you can split generation and consumption, and that allows you to donate or to sell excess generation.”
“So, it’s like a light version of full MTR. We are collaborating to gather evidence for a cost-benefit analysis that the Electricity Authority and Treasury demand before they will consider policy changes.”
Authority chief executive Sarah Gillies says new technology and the pace of change in the industry “are testing market rules that were designed for different circumstances years ago”.
“The rules will need to change to enable innovation and alternatives to traditional single buyer and seller electricity models.
“The [Kāinga Ora] trial is an opportunity for the authority to assess and learn more about this model of energy sharing using multiple trading relationships, alongside industry.”
Bennett says the impact of deregulation would be felt nationwide. “It would encourage a lot more Kiwis to invest in solar power and EVs and household batteries– regardless of location, urban areas included – taking pressure off the grid. It’s not a silver bullet, it won’t solve climate change, but it won’t go anywhere without the EA deciding to make the regulatory changes.”
Ara Ake is one circuit to change in the EA’s regulatory structure, and it has many more projects it could be pushing forward.
“I would not call the waiting list a logjam, but I think if they [really opened up the consumer market] they would be overwhelmed by the amount of code changes requested and struggle to grapple with the size of the task of rewriting the code,” Bennett says. “They don’t really know where to start. They keep a tight control on things, it’s their job.
“Large retailers don’t like MTRs. They don’t want new, sparky businesses stealing their customers and offering better services. They prefer bundling your internet, gas and electricity. What we are proposing is further unbundling, so it’s a threat to the established order,” she says.
Our Energy is one of the retail power providers that is actively developing community energy schemes. The company has 18 solar-based marae community energy schemes in operation or in progress in different parts of the country, all primarily government-funded.
The revenue from energy sales goes into a pool managed by the community from where it’s available for later redistribution to the whānau participants. On the drawing board are community storage batteries and water-heating management technology.
Our Energy founder and chief executive John Campbell says the significance of what is being achieved by Kāinga Ora and Ara Ake can’t be overstated.
“It represents potentially the single biggest change to the electricity market from a customer perspective since the reforms of the late 1990s that brought about competition,” he says. “Let’s be clear – this would not be happening without the role that Ara Ake now plays in the ecosystem.
“Our Energy has been advocating for such trials since our founding in 2015 and we participated in the first year of the MTR pilot co-ordinated by Ara Ake, which was a precursor to Kāinga Ora’s trial.
“An organisation like that leading the charge here is massively important – incumbents really can’t argue against it with a straight face because they all wax lyrical in public and in front of regulators and ministers about the importance of social equity [or] addressing energy hardship and all the innovative things they’re apparently doing to help.
“This trial is far from game over, though, and gen-tailers in particular will fight hard behind the scenes to prevent (or at least delay as long as possible) actual regulatory change that allows wider application.”
Campbell started thinking laterally about community energy possibilities while out running in 2015. Seeing a roadside box of butternut pumpkins, and later, on the same road, a lifestyle block kitted out with solar panels and a small wind turbine led him to ask: if a farmer’s pumpkins can be sold to the local community, why can’t energy?
Winding up
Could multiple trading relationships under deregulation open up opportunities for small-scale community wind generation?
Yes, says Dunedin wind energy advocate Scott Willis, but only if resource consenting rules are modified.
In partnership with the University of Otago, he formed a community resilience trust that, with crowd funding help, did a feasibility study, built a wind testing mast at Blueskin Bay and proposed up to three 800kW turbines on a leased 24ha site, to supply 1000 houses and sell the surplus to the grid.
The consent application (supported by 73 parties and opposed by 68) was declined by a commissioner in 2016.
Willis says, “It was a bruising experience as the setting seems to bring out the raw in people. We realised that some people just don’t like the look of wind turbines and some people have a fear of change.
“We needed a national environmental standard for community wind projects then and it is no different today. It could be done within six months if the government decided to act.”
Charged ideas
Solar Sense, an energy research and development startup business based in Te Awamutu, has built two small solar generating arrays on Ngāti Maniapoto farms in the King Country, which are completed and will now be scaled up.
“Ngāti Maniapoto approached us and said they had whānau throughout the country in energy hardship,” says Solar Sense founder Manu Barrett (Tainui, Ngāti Maniapoto, Kāi Tahu). “They wanted to partner with us to figure out a solution to address this problem.
“We put pilot solar arrays of 20kW and 30kW on their farms, to prove whether it would work. A lot of the hardware involved was our IP [intellectual property], so when scaled up, it will be cheaper. We were able to connect into the local grid without a substation.”
Called the Maniapoto Energy Sovereignty Project, Solar Sense brought in Our Energy to sell the power on the wholesale market. Distribution is via the Lines Company of Te Kuiti. MBIE’s Māori Housing Renewable Energy Fund provided $386,000 to cover the physical build and software development and supply, and project management.
“The cost to implement the generation assets was about $1.86 per watt generated,” says Barrett. “A 1ha 400kW solar farm in Waitomo would earn an average of $75,000-$85,000 in gross revenue per annum. A 400kW farm in Whakatāne would earn $100,000-$120,000 per annum, and the difference is due to location and sunlight hours. The profit depends on how much debt is funded.” The starter project looped in 15 households, mostly in the King Country but also in Northland and Manawatū. “We were proving we could generate power in one location and credit the sale profits to people anywhere via their customer connection numbers, regardless of the lines companies used or their power retailers.”
After six months of power generation, Solar Sense returned a $433 credit to each household. A preliminary report into the project noted a marked improvement in the mental health and stress levels of the clients.
“We have proved a solution to energy hardship that works,” says Barrett. “We’re now concluding this project and have done another distribution of credits.”
Solar Sense now has other, larger projects ready to go and more are at the scoping stage. “They range between 200kW and 400kW solar arrays, about 300-400 panels minimum, cost about $1.86 per watt, about $360,000-$400,000. These are solar with batteries, but we are also looking at super capacitor storage technology, and doing research on that.
“We have a model that can be used anywhere by any qualifying entity, be it marae, iwi, hapū, or trust, and the beneficiaries can be anywhere in New Zealand. We are primarily focused on the central North Island, but we want to be able to offer this solution to everyone anywhere. There’s literally no limit to what we can do given adequate capital.”
Local warning
In May, 200 people attended Aotearoa’s first national energy hardship conference, convened in New Plymouth by the Community Energy Network, Ara Ake and Wise Charitable Trust.
The two-day event featured 42 speakers and put the spotlight on some innovative, grassroots developments that can best be described as the beginning of a new wave of small-scale community power projects. Ara Ake presented its official community energy guide, researched and written over the past two years by a team headed by policy lead Jonathan Young.
“A community energy project is a major undertaking,” Young told the conference. “Everybody will say yes to cheaper power, but putting it in place for a community group requires a commitment, and that comes through conversations, agreement around values and to understanding and trusting their leaders.
“Having a leader who will champion the vision and the ideas is essential, someone who has the mana for this role,” Young said.
“Community engagement, celebrating milestones, these things are important for a project that will take significant time and cost to build. The idea of energy project navigators is a role worth seriously considering.”
Gareth Cartwright, executive officer of the Community Energy Network described the conference as “an attempt to broaden our networks and make sure the government and all potential funders are lined up with what communities are trying to achieve. We don’t think there’s a very good alignment yet.”
Cartwright was pleased the big power players such as Meridian and Mercury were there, but irked they hadn’t sent senior managers. He wants chief executives at the table, as well as the industry’s key lobby group, Electricity Networks Aotearoa, which represents all 27 lines companies.
“Some networks, like Orion and Powerco, are leading the race, but there are other network owners who don’t understand us yet,” he says.
“It’s much bigger than the Healthy Homes and Warmer Kiwi Homes initiatives. We already have energy hardship hubs and now we need to develop community energy hubs, which could be moved into climate change impact hubs. This would provide the social infrastructure in the right places.”
Cartwright’s home hub is Community Energy Whāingaroa Raglan. “We have made mistakes. We kicked off with a hiss and a roar, wanting to put large solar panels on every big roof we could find. It turned out there are not many good roofs on this west coast and even the good ones won’t last 25 years. We’re pivoting away from that.”
Project sponsorship has come from “a totally anonymous major donor who has been critical to our success. What we have started will continue to grow.”
Also at the conference was Cliff Colquhoun (Ngāpuhi), chief executive of Kaitaia-based Community Business and Environment Centre (CBEC), and managing director of Healthy Homes Tai Tokerau, a $5 million-a-year business (funded by government agencies and philanthropic sources) insulating and upgrading Northland homes from Kaipara to Cape Reinga, prioritising isolated communities, often off the power grid.
“It may not be financially viable for the private sector, but if we can break even, we just get on and make it happen,” he says. “Some of these homes are so bad they are beyond repair and maintenance. It requires trained people to get involved to do insulation, ventilation, heating, drainage and draught-stopping. They go into places that others fear to tread. They get the job done and they call themselves health providers.
“We cannot get away from the problems of energy hardship. In 2010, the poorest households, measured by government decile statistics, were spending on average 12% of their income on fuel. Now it’s around 25%.
“In the Far North, we don’t just use more energy, we pay more than most New Zealanders pay. An average family spends $100-$125 a week on power.”