Energy Efficiency – Why bother?

January 8, 2010

In the big news in the Tibby household stakes is our impending move to suburbia. We’re very excited, and mostly because of the requirement to make a lot of plans.

Now some would call this nesting. And they would likely be right. But! In our defence a large part of the planning concerns ways to, firstly, save money compared to living in a city apartment (our first choice…), and secondly to add value to our property (like all good New Zealand home owners).

Other than servicing the mortgage and feeding/clothing ourselves, the big cost to any household is energy – including petrol for the automobile, another post altogether. It’s important then to make sure that your place is as energy-efficient as possible. It’s a mantra the green movement has been speaking for years, and I’m well-sold on it. Not only does it assure us that we’re not being wasteful, it also ensures that we save a little money. After all, $10 a week saved on the power bill, if transferred to the right account, amounts to about $30k off the cost of a mortgage.

So in looking at this issue I started considering alternative power sources as a means to drop costs. The outcome is another post entirely, but in doing so I uncovered one big long-term reason for looking at energy efficiency – the ongoing rising cost of purchasing electricity.

Snooping around the net I discovered this handy page on the Ministry of Economic Development (MED) site. What you have there is a quarterly survey of power costs for a household using 8000 kilowatt hour’s (kWh) of power a year, around about the average for a New Zealand home. And there was some pretty interesting stuff provided in this excel spreadsheet.

The spreadsheet provides costs of electricity purchasing across the entire country since August 1999, and that’s a reasonably good time series. With a little very simple manipulation this turned up some very interesting information about power prices across the country, and how much they have changed over the decade. The first graph, below, gives us raw costs in cents per kWh averaged nationally (and yes, they include the 10% prompt payment discount).

Power Prices, National average

What’s more than clear from this graph is that prices have been increasing steadily since 2001. What this made me wonder is, how much will they increase in future? The thing about alternative energy is that once the initial outlay has been made you’re (hopefully) no longer subject to increasing in pricing – again the subject of another post.

If you consider the minimum tariff line the average household will be paying about $1800 per annum for electricity alone, a fair amount. This is especially the case if you earn close to the average weekly income of $830 (which is around $43k per annum, before tax, meaning the income in the hand is actually only $34k). In effect, the average house earning the average weekly income spends around 5% of it’s total budget on electricity. Higher earners usually have bigger houses, so they’ll also likely spend around that percentage (or more).

Now consider what prices are actually doing. As you can see in the above graph, prices trend up, as is normal. What I did then was find out the how much these prices have increased, and how much they are likely to increase in future. And I was mildly surprised.

The graph below shows both the percentage in quarterly increase in prices relative to an August 1999 benchmark. As you can see, the quarterly price difference (i.e. the amount prices change every three months) kind of bubbles along, but the cumulative cost places current prices 80% higher than in 1999 (the blue line, measured on the left axis). And that’s a fair bit. The green line (measured on right axis), shows that kWh are today costing around 23c each (whereas they cost around 12c in 1999).

Price Increases, Wellington Region only

The next thing to do was to attempt to project prices out to 2019, to see what we could be paying here in Wellington by then. To do so, I averaged the total quarterly price increases since 1999, and applied them to cost of kWh’s. When applied to the graph above I got the graph below. Of course, this assumes a constant rate of price increases close to my average – but considering the time series of data I had to work with thus far, it’s likely not far from the truth.

Future Retail Cost of Electricity, Wellington only.

As you can see, assuming a constant increase of 1.47% per quarter (the current average quarterly increase), electricity prices should rise to around 44c per kWh. This is almost 90% higher than now, and if we go back to our Joe Average family consuming 8000 kWh per annum, their bill will increase to around $3.5k!

Why I found this all interesting is that if you’re making energy efficiency savings in your house now, the ongoing saving in real terms actually increases every year. This means that as the price of energy increases – which it must – then you’re actually saving more over time, because that kWh you don’t use today hopefully won’t be used in 10 years when it will cost you almost double.

Furthermore if you’re installing some kind of energy generating device or system (the real reason I set out on this analysis), then the offset of your initial cost is actually higher as the years pass, because you’re generating the same amount of kWh you were when you installed, but saving more on money not spent. If you get my meaning.

Now the only question is how to generate that electricity… The subject of another post.



  1. Lets just say you’ve got a pelton wheel and a bit of space in the garden – if one was to install a 12 or 18 volt system then that would at least be a few lights looked after by using one’s garden hose to power a waterwheel
    As long as one wasn’t water metered one could refer to oneself as the smartest guy in the room..

    • you know… i actually considered something like that?

      pesky social conscience.

      • I hear you can also get energy by burning kittens. (Seriously, dudes, using a hose to power a Pelton wheel is insane.)

        This is the year when I look into installing solar panels. The added bonus of getting rid of the gas supply and its atrocious line charges alone is very appealing.

        Since you’re heading to suburbia, have you considered improving on the house’s existing insulation before you move in?

      • dude. post to follow.

        am thinking i can cover all these bases: wind, solar, insulation, being smart with power.

      • I’m not sure that the current trend will continue as steadily as it has. I do however expect energy used in the home to be more expensive in 10 years than it is now. If it works out on current prices then it will be more than worth it.

        I’d also consider passive solar heating for hot water. They very frequently work out as among energy saving/generating devices with the best payback.

        The price for photovoltaics seems to be decreasing fairly quickly, particularly as China enters manufacture, so it might make sense to wait a short while. And unless your house is particularly exposed to the wind I hope you aren’t considering wind power.

  2. Do you get to add anything to the house? Perhaps a conservatory?


    Sourcing glass is usually the most expensive bit so sourcing 2nd hand and framing accordingly is cheap.
    Avoid toughened glass as it can’t be cut once toughened ( and it explodes if you hit it on the edge)

    Wind is your best bet in this town – have you driven out towards Eastbourne lately? there’s a local turbine co at the LHS of the straight through Seaview from Hutt River towards Eastbourne – their unit isn’t feathered as often as the Brookln one because it trails the wind rather than faces it.*

    In winter never forget the bigtime efficiency gain – a woodburner hooked up to a thermosiphon-effect HWC or wetback – easy to plumb, existing building standards and just plain damn sexy – It’s cold, you need heat, you need hot water too – duh.
    With the added bonus that if the power is out then, provided you can raise a fire in the grate, you’ve got hot water aplenty. For some reason this has a tendency to keep women happy more than men but I’m still gathering data on that one.
    The old DSIR spun off a company that made the “Pyroclassic” which could heat water and one could cook on – there are some around 2nd hand and you can spot them by their circular burnspace – they tend to look so tacky that they might be cool again?

    So where did you guys end up? Newlands? If so, the mist can be amusing.

    *Poster may be pulling figures out of his arse – must not post when drunk..

  3. Never burn kittens in the fireplace, they smell bad and annoy Italians.

  4. Hi have you guys heard of this? Local initiative…



  5. am looking carefully at photovoltaics, but the benefit of solar hot water is largely lost on us. solar water requires behaviour change, and that would be too much of a drag.

    however, solar power to offset use of the grid could work – given the decreasing prices. perhaps 500w or a kW now, and increase the amount in future.

    but this is another post!!

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