Market warming to cheaper solar panels

Country's renewable energy sector could be approaching a tipping point as solar panel become affordable for homes and offices.
The involvement of large power companies is shaking up the sector and bringing down prices.
This week Elemental Energy, half- owned by giant power company Meridian Energy, will start leasing solar panels and micro wind turbines to its customers, allowing businesses to treat the cost as a tax deductible expense and considerably improving the technology's economic viability.
The total cost of installing solar panels, the most viable renewable energy system for urban environments, is in the range of $9 to $13 per watt of power they produce, according to the Energy Efficiency and Conservation Authority.
That means a system producing 2kW of electricity, enough to power an electric heater, would cost $18,000 to $26,000. And the bigger the system is, the more it costs.
But a similar system would have cost about $40,000 four years ago, so prices are falling rapidly.
Those high prices meant renewable energy systems, which include micro hydro plants as well as wind and solar systems, were largely confined to remote locations where the cost of running power lines to connect a property to the electricity network was prohibitively high.
The small number of systems being installed also made the business infrastructure which supported the industry comparatively inefficient.
"The supply chain in New Zealand has been very long, from manufacturer to importer/distributor to reseller and then you need someone to install," said Brendan Winitana, chairman of the Sustainable Energy Association of NZ.
"It's been too long and everyone wants to clip the ticket on the way through. So the final cost to the consumer is high. That makes it harder to recoup that money [through power savings] over time."
That is changing as bigger players enter the market and start to cut out the middlemen, building vertically-integrated companies which do everything from importing the equipment to installing it. The volume of work they do also gives them better economies of scale, allowing them to reduce prices.
The largest of these so far is Elemental which was formed as a joint venture between its senior managers and Meridian last year.
The company has taken an aggressive stance on price right from the start, according to its managing director, Toby Littin.
"When we started retailing in September last year we were about 40% below the current price of most installed systems and we put a lot of price pressure on our competitors. And a lot of them have been responding, so prices have declined," he said.
Other large players, such as Vector, which is currently conducting trials of micro turbine systems, are also looking closely at how they could become involved in the renewable energy market, so competition is likely to increase.
Littin said Elemental customers who leased solar panels or wind turbines would pay for its installation and non- removable equipment such as wiring, but Elemental would own the equipment and any associated kit such as an inverter.
Most leases would run for between five and 10 years, he said.
The viability of the systems is also being helped by a change of attitude among power companies over how much they will pay for surplus electricity produced by renewable systems.
Solar panels produce electricity only when the sun is shining, but that may not be when the customer needs it. The solution is to either store the surplus electricity in batteries, which are expensive to install, or sell it into the electricity network.
Until recently many power companies would pay far less for the power they received from a customer's solar panels than they would charge for any power the customer drew from the network.
Now some power companies are equalising their rates, which dramatically reduces the time it takes for a renewable system to pay for itself through savings on the power bill.
But this can vary dramatically depending on where the customer was located.
Littin said that in major centres such as Auckland, Wellington and Christchurch, where the cost of grid electricity (including line charges) was quite low, it could take 20 or 30 years for a renewable system to pay for itself.
But in areas such as Northland, East Cape and Southland, which had high line charges, systems could pay for themselves in 10 to 15 years.
Business customers could usually expect solar panel price to pay for themselves in 10-15 years, and if they were in a windy location where they could install a turbine, that could come down to five years.