Green solar power policy

The Herald reports:

Government will loan households up to $15,000 at low interest rates to help them install solar power if the Greens are elected.

Party co-leader Russel Norman launched the new energy initiative this afternoon in Auckland, estimating that it would save a family $100 on electricity bills a year.

“Power prices have risen 22 per cent since National came to power, which means energy companies are making big profits while ordinary New Zealanders struggle to pay their bills,” Dr Norman said.

Under the proposed scheme, New Zealanders would be able to borrow the full cost of installing photovoltaic panels and then pay it back via their council rates over 15 years.

Greens had a target of 30,000 installations in three years, and hoped that the boost for the solar industry would create 1000 jobs and also make the technology cheaper by increasing demand.

The party said that a typical solar-powered system cost $10,000, and households would be able to get loans of up to $15,000.

Interest on the loan would be charged at the Crown’s low sovereign interest rate – currently 4.1 per cent. This rate was not fixed, and could increase over time.

Greens’ policy document said that a 3kW solar-powered system would produce $1000 of electricity a year.

Because households would be paying off the loan at $900 a year, it was expected to save families $100 each year for the first 15 years.

Solar power is a great supplemental power source. However it costs a lot more than other power sources. It can make sense to borrow to install a solar power kit, but you need to be damn sure you’ll be at the place you currently live in for at least the next 15 years.

Also the slightly lower interest rate may not result in much greater take up than at present (and remember the more the Government borrows, the more that rate of borrowing will increase).

A $10,000 loan for 15 years at 4.1% according to Sorted is $74 a month or $888 a year. So yes in theory you can save $2 a week under this policy – but that is not much for a 15 year commitment. But at 6.0% current floating rate, is it only $84 a month so are people going to flock to solar power being it is $10 a month cheaper for a 15 year loan? I’d be amazed.

And what if costs of solar installations increase, if demand does increase? If they cost $15,000 not $10,000 then the cost is $111 a month for 15 years.

This isn’t a terrible policy. There are far far worse policies around. Greater uptake of solar power would be a good thing – but mass uptake will only occur when the costs of solar power becomes comparable to other power types.  I just don’t think a 4.1% interest rate compared to a 6.0% interest rate will make much difference to uptake.