A Green Party policy to to install solar panels in homes would only push up power prices and drive out competition, Prime Minister John Key says.



The Green Party has promised cheap government loans to households that install solar panels, which they said would see typical savings of $100 a year on power costs.



The election campaign pledge would see loans of up to $15,000 offered to those who installed the panels, to be repaid over 15 years through rates bills.



Making the repayments that way would mean the loan, like the solar panels, would remain with the house when the property changed hands.



"This allows families and businesses to invest without the concern they will lose their investment if they move house within a few years," Green co-leader Russel Norman said.



Any excess power could be sold back to the national grid at a fair price.



But Key told Breakfast this morning the policy would force people to keep their excess power generation.



"If you look at the big emissions at the moment in New Zealand, it's Genesis through Huntly where they have coal fired power plants, and the plan that [the Greens] have got is going to reduce all competition and in my view, put up power costs to consumers, not reduce it, [and] actually locks that in," he said.



"Once you start locking in the market it doesn't work."



A 3 kilowatt solar array, which would produce about $1000 of electricity a year at today's prices, would cost about $10,000.



The repayments on the loan over 15 years would be about $900 a year at present rates, generating a net $100 saving.



Energy and Resources Minister Simon Bridges said the Green Party was making "magic money" with the policy.



"I have news for the Greens - if it's a lower interest rate than normal, it must involve a government subsidy," he said.



"And if it makes the cost of solar power cheaper for families than existing power options it also must involve a subsidy."



He said solar power was about three times more expensive than grid-scale generation from wind, hydro or geothermal power stations.



But Dr Norman said there was no subsidy, because the loans would be repaid with interest determined by the Crown's cost of borrowing.



"The biggest obstacle stopping most families from going solar today is the up-front cost," he said.



"This is where we can leverage our government's lower cost of borrowing to allow tens of thousands of homes and businesses to install solar power, at virtually no cost to the taxpayer."



Only about 600 solar installations are completed each year at present, but the Greens aim to have 30,000 installations in the first three years, which they estimate would create 1000 new jobs.



People were paying too much for power and the policy "will help free Kiwis from the worry and stress of rising electricity prices", Norman said.



While gross government debt would increase, up to a cap of $300 million, net debt would not change, he added.



"Solar Homes lets Kiwis take the power back and break free from the big energy companies," he said.



"The policy is about energy freedom."