Here’s a prediction we think we can bet on – 2025 will go down as a historic year for both solar power and household electricity expenses. Why? While there is a long list of many big and small factors, two factors are the most important – the rate at which grid power prices are shooting up, and the rate at which solar prices are falling.
Let’s go ahead and take a look at what’s happening (and why it should matter to you).
The Rise in the Cost of Grid Power (Yes, Again!)
A couple of months ago, the Commerce Commission decided to allow a ‘revenue increase’ for Transpower (an electric monopoly) and local lines companies. It did this to accommodate the ‘significant investment required to maintain and upgrade New Zealand’s electricity network over coming years.’
What’s new, you may ask. Well, for starters, this time it is a 5-year increase plan, allowing Transpower and local lines to earn up to $5.9 billion and $11.5 billion more respectively. In terms of household pricing, ComCom said that it expects the average household’s bill to rise by $10 per month in the first year and $5 per month over the next four years.
We pulled out our calculator and found that this means an estimated extra of about $360 over five years. But don’t forget that the cumulative increase is $30/month ($12 + $5 x 4) at the end of five years, which means you’d be spending $360 more every year after that.
But the catch is, the Commission itself says that the increase will be different based on where you live, and some households can see average increases of about $25 per month. And we were further stunned to learn that by the end of five years, some households may see an increase of up to $85 per month. That translates to over $1,000 per year, until another price hike follows and bumps it further up.
Why are Power Prices Rising Again?
To be fair, no matter how much we dislike the climbing electricity costs, we do understand that some price hikes are inevitable. In the words of ComCom’s current Commissioner, Vhari McVha, ‘Deferring investment would mean even higher future prices and a network that does not meet consumers’ needs.’ And the reason for this is our country’s power grid.
New Zealand’s first power lines were built in the late 1800s, with much of today’s network built in the early 1900s. Frankly, it is impressive that something that has stood in the sun, rain, wind, and storms for over a century still functions reasonably well. However, older components of the grid are now starting to crumble, needing frequent repairs and upgrades. Think of the nation’s electric grid as buying an old house. You fix the insulation, then the hot water cylinder breaks down. You fix that, and the piping breaks down, then a mouse bites open cables and there’s new electrical work.
That’s not all, there are other factors straining our power grid. As Commissioner McWha puts it, ‘A growing population, an increase in extreme weather events, and greater reliance on electricity as a fuel, for uses like transport and industrial process heat, continue to test the capacity and resilience of the country’s electricity network.’
According to the Migration Policy Institute, New Zealand has seen an average of ten new arrivals per 1,000 population from 2015 to 2024, which is notably higher than many major immigration destinations such as Australia, Canada, Germany, Ireland, the United Kingdom, and the United States. This is why the Ministry of Business, Innovation, and Employment (MBIE) predicts that the country’s total electricity demand will grow between 35.3% and 82.0% by 2050.
Speaking of extreme weather events, a study by Auckland University shows that New Zealand will see about 17 one-in-a-century extreme weather events in just a decade, seriously threatening the health of our power grid.
Will There Be More Price Hikes?
You may think everything we discussed in the previous section was to justify the current rise in power prices. Instead, we are trying to establish the obviousness of how electricity prices are going to keep rising.
Don’t trust us? Here’s what the Commissioner says about it – ‘Predicting how growth will unfold across the regions remains a challenge. That’s why businesses have the option to come back to us to ask for additional revenue when there is more certainty about the investment, or if an unexpected new demand were to occur – for example if significant new infrastructure was needed to accommodate ferries, buses, or trains converting to electricity.’
In the words of Consumer NZ, ‘While the increases are spread over five years, further price hikes are anticipated, particularly in the wholesale electricity market.’
If that doesn’t convince you, it helps to look at historical data. The MBIE says that power costs in NZ have risen by an average of 3% every year since 2006. More interestingly, there was only one instance (2016) when the price dropped instead of rising.
And then there’s more recent data. An analysis by Octopus Energy shows that between September 2024 and January 2025, standard prices from three of the country’s largest power providers ‒ Contact, Meridian, and Mercury ‒ had increased by 5% to 15% in Auckland, Wellington, and Christchurch. Prices for short-term discounted plans had increased by as much as 40%.
The Big Moment of Solar Power
In 2008, a small, 3 kW solar power system cost around $40,000. At the same time, the average electricity price was just over 20 cents/kWh. Today, a 3 kW system costs approximately $8,000, which is a fifth of its 2008 pricing. The average electricity price, on the other hand, has gone up to 35.36 cents/kWh. This is a striking 75% increase. This even beats the country’s average inflation of 2% per year.
To recap the key differences between solar and grid power, solar power is virtually free once you have paid off the equipment needed for harnessing sunshine. Most home solar systems in NZ pay off in less than 10 years, which means you still get 20 or more years of free energy and freedom from price hikes and blackouts.
Check out this image below showing how the cost of your grid power is distributed across five different categories.
Now compare this with solar, and you will notice that many of the above numbers turn to zero or near zero. Home solar energy does not have to rely on polluting fuels, ageing transmission systems, or companies that decide pricing without customers having a say in it.
‘So why isn’t everybody going solar?’, you may ask. The main reason for this is the way we perceive numbers. When talking about the cost of solar power systems, we’re usually talking about thousands of dollars. When we speak about monthly electric bills, we’re talking about a couple of hundred dollars. At first thought, it may not seem intuitive to spend thousands upfront to save a couple of hundred dollars.
This is why the term Levelized Cost of Electricity (LCOE) is an important indicator of savings. Beneath the fancy-sounding words, it really is just how much you’d be paying per kilowatt-hour (kWh) with solar versus grid power. In many cases, the LCOE of your grid power expenditure over 30 years (typical lifespan of solar panels) is generally about twice the LCOE with solar. For example, a home may have a grid power LCOE of 40 cents/kWh over 30 years, which drops to just 20 cents/kWh with solar.
Another way to say this is that over the lifespan of your solar energy system, you save twice or more of the invested amount. That’s not all, many solar companies today work with lenders to offer financing options, including loan interest loans from the big banks. This takes away the burden of a large upfront cost. Plus, while you owe a fixed monthly installment to the lender, your energy bill drops down by a comparable margin, which means your net expense per month is not drastic, and often not even noticeable.
Moreover, with relatively low interest rates or ‘green loans’ with incentivised rates and conditions, getting a solar loan and putting panels on your roof makes more sense than ever. And of course, there are other advantages of installing solar, such as lowering your carbon footprint and seeing an increase in your property’s value.
When all is said and done, we understand that it really comes down to how much a system would cost your house and how much it could save you over the years, specifically. This is why we work with vetted companies to get you three no-obligation solar quotes with information on system size and potential savings.
In conclusion, solar is no longer ‘a good alternative’ to grid energy, it is now the only sensible choice.
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