Much has been made of the impact of inflation on Australian businesses and households over recent months. This week, we decided to take a look at one of the largest outlays modern Australians need to make – the cost of powering our lifestyles. Traditionally, we have powered our homes and workplaces by burning fossil fuels. But things are changing and the future actually looks very promising. Put simply, many Australians can simultaneously improve their personal finances while reducing their use of fossil fuels.
For households and small businesses, a great place to start thinking about saving money and reducing emissions is through the work of Australian scientist Saul Griffith. Saul is the author of a number of books, as well as the most recent Quarterly Essay, The Wires That Bind.
Saul really represents a new way of thinking about climate change and our response to it. His approach is optimistic and realistic and fits into what he himself describes as an ‘abundance agenda.’ In a nutshell, Saul assures us that transitioning to a zero carbon economy is not only achievable, but will lead to large productivity gains for an economy like ours. It will also make individual households better off.
The thinking divides into two main parts. The first is that the cost of electricity from renewable sources such as wind and rooftop solar in Australia is now lower than the cost of any other way of making electricity. What’s more, most of the cost of renewable energy is ‘upfront’ in the infrastructure required, such as the installation of solar panels on your roof. This means that, once the infrastructure is in place, the marginal cost of generating a unit of electricity is virtually zero.
We have done some of our own research and calculate that the cost of a 6.6kwh system would be recouped after between 4 and 6 years through reduced electricity bills, depending on factors such as where you are, how you use your power (for example, more in the day or more at night, etc). After the ‘payback’ period, you will basically get free electricity while the sun is shining and will only need to pay for electricity that you purchase from the grid when your own supply is not available, such as at night. (You can augment your system with a home battery, but this is not quite cost-effective just yet).
So, the first part of Saul’s thinking is for us as a community to maximise the amount of renewable energy we produce, knowing that the marginal cost of electricity created in this way is much lower than the cost of generating electricity in any other way.
If we generated 100% of our electricity from renewable sources, electricity would then also be a zero-emission fuel.
This leads to the second part of Saul’s argument. This is that we should ‘electrify everything.’ Anything that requires energy in our homes and businesses should be electric. For households and small businesses, this means choosing electricity-powered tools to power, heat and cool our homes or workplaces and to fuel our cars and other engines. Understanding that there is often a large upfront cost to obtaining new (electric) devices, such as hot water systems or cars, Saul does not suggest that we rush out and replace everything right now. Instead, when each item next needs replacing, we should aim to make the replacement technology electric. If you currently have a gas hot water service, for example, when it reaches the end of its useful life, replace it with an electric one. Over the next 10-20 years, our lives would ‘morph’ into electricity for everything.
If, in the meantime, you have arranged for your household to use renewable energy – for example by putting solar panels on your roof – then you will have positioned yourself to create free energy whenever your solar panels are generating power.
What’s more, with the cost of things like batteries likely to keep dropping, in the same way that solar panels have, at some stage in the future you will be able to store renewable energy to use at some later stage – such as using solar-generated electricity at night. Excitingly, there are potential options for battery storage that make even more economic sense, such as several homes within a suburb sharing a local battery, or even the battery that powers a car being ‘reversed’ at night to also provide power to your home.
It is all quite exciting. And the great news is that Australia has heaps of sun and wind. That means we will not have to ‘skimp’ on energy. If we want to cool our houses with air conditioning, we can do so guilt-free.
For many people, rooftop solar is now an economically good idea. It will reduce your power bills over time. If you are contemplating installing rooftop solar, then you will usually receive detailed quotes from reputable installers. These quotes will include a lot of financial information about costs, payback periods, etc, as well as details of how the electricity is generated. We are not scientists with a detailed understanding of how photo-voltaic systems operate, so we cannot help you with the physics of the proposed system. However, we do understand money, so we would be more than happy to help you understand the financial elements of the proposed system.