Customers who are planning to put solar power systems on their homes are being warned to make sure it makes financial sense first.

Solar power systems have become more popular in New Zealand as the price of the components has dropped over the past five years.

Power companies have noticed the potential: Genesis is offering a promotion for customers in Auckland, Hamilton and Whangarei to purchase systems at discount rates. Mighty River Power bought solar power firm What Power Crisis in February.

SUPPLIED Installing solar panels is a significant investment.

How does it work?

Solar panels are fitted on to a house, usually to the roof, positioned to capture as much sunshine as possible. They then generate power, which is fed back into the system.

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More expensive set-ups sometimes have batteries to hold the power that is generated. Vector is currently taking expressions of interest for a Tesla Energy battery that it will soon offer. These are expected to cost $7000 or more for the battery alone.

A cheaper, and more common, option is a grid-tied system, where power is sold back to electricity suppliers if it is not used as it is generated.

Does a solar power system save money?

Whether you end up better off depends a lot on how you use your power.

A good quality grid-tied system big enough to cater for a typical household costs about $12,000.

Some power companies used to pay the same rate for solar power as they charged customers. That meant there were big savings to be made.

Now, while most charge 25c to 30c per kWh for the power households use, they only pay 6c to 8c per kWh for the power generated from solar panels.

That means you really need to use the power as it is generated if you want to get the full value.

Tony Downward, of the University of Auckland's engineering department, said most homes used most of their power early in the morning and in the evening.

"In summer you might produce some solar energy in those periods but in winter it's most likely dark," he said.

He said it could take between 10 and 18 years for a system to pay for itself, although it could be more appealing if power prices were to rise.

A Trustpower analyst conducted a survey of the country's lines networks to assess the viability of solar. Without storage batteries, only Marlborough was in positive territory, and only for customers who could use power as it was generated.

"It didn't work for anybody who was relying on export to pay for the cost of their installation, and it didn't stack up for anybody that did install storage batteries because the payback period became excessive," Graeme Purches, community relations manager at Trustpower, said.

But solar power specialist Phil Rumble, of Rumble Electrical, said there were ways to increase the benefits.

He recommended customers make use of the timers on their appliances to set them to run when solar power was being generated.

"On top of that you can get energy management systems that can range from a basic style that looks after your hot water to one that turns on and off your spa, fridge, underfloor heating… that can refine it down to using 70 per cent or 80 per cent of your solar production."

Whangarei man Pete Squire said he had cut his power bill by $80 to about $120 a month since installing a $12,000 system on his home. His household had made small changes such as setting the dishwasher to go on at 10am and delaying the start on the washing machine.

What's changing?

People with solar panels may soon face more charges from their lines companies, too.

The problem for the distribution networks in particular is that their pricing structures are not set up to cater for anyone who is generating their own electricity.

Lines companies' costs are largely fixed but their charges are split between a daily fixed rate and a portion based on household energy consumption. When customers switch to solar, they cut this variable charge, even though they still require the infrastructure to get power to their houses for the times when solar is not providing.

Carl Hansen, of the Electricity Authority, said: "It means the company gets a lot less revenue but their costs are still fixed. The issue is what is the best way to deal with this?"

He said if prices went up to cover the cost, that could encourage more customers to go to solar, which would lead to prices going up further. "It gets out of hand."

Another way is for the companies to restructure and adapt to their new circumstances, he said.

"Customers thinking about installing solar or alternative sources of energy should look ahead and see it's a different situation in New Zealand and different environmental pay-offs here. The pricing structure is likely to change. Things to do need to change. The world is changing all around us and it isn't going to make sense to keep things the same."

Hawke's Bay's Unison Networks responded this month by introducing a new charge for customers with solar panels, of up to 26 percent of a customer's bill for solar power and batteries -- equivalent to between $128 and $258 a year.

Other companies said they were considering their options. Network Tasman said it was working on service-based pricing to better reflect the cost of providing distribution services.

Eastland Network said it was something that the industry was considering. "Our view is that solar is currently uneconomic and may not necessarily be the best investment for NZ Inc moving forward. We are blessed as a country with over 80 per cent of our electricity already being generated from renewable sources. Australia has 13 per cent. The cost of installed solar is in the range of $150/MWh to $200/MWh but additional renewable generation can be built for about $80/MWh."

Had it not introduced the new price category, Unison said the increase in solar installations across its network would result in higher power bills for those not installing their own generation.

Ramesh Rayudu, a senior lecturer in the Victoria University engineering department, said other companies would probably do the same thing and it would deter customers from taking up solar. "If they can get away with that excuse, other companies will follow suit."

He said it would require a change in policy from the Government for solar power systems to really take off in New Zealand.

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