Hawaii Waters Down Solar Incentives, Possibly Pushing Customers to Build Smarter Systems

The state will pay less for customers' unused solar power, but a green energy advocacy institute says that presents an opportunity for people to use as much of their own power as possible instead of sending it back to the grid.

by / October 22, 2015

New power grid rules in Hawaii could water down or remove incentives to go solar, but might encourage more efficient use of electricity in the long run, according to renewable energy advocates.

The new rules, proposed by the Hawaiian Electric Co. (HECO) and approved by the state Public Utilities Commission last week, replace the net energy metering scheme with a customer’s choice of two different kinds of tariffs that pay less or nothing for customers who use photovoltaic panels to augment power usage. Net energy metering is a system where utilities pay customers for any surplus power they’ve generated using solar or other electricity generation systems, but the first new tariff option in Hawaii reduces the amount that the utility will pay for excess power. Under the second option, the customer is not allowed to export power back to the grid except for limited amounts — that they won’t be compensated for.

Customers who already have net metering agreements will be grandfathered in, according to the Hawaii Solar Energy Association.

Net energy metering (NEM) has served as the backdrop for Hawaii’s rise to its status as the highest-participation solar market in the country. According to HECO., about 12 percent of its customers have rooftop solar, compared with a national average of 0.5 percent. It may, however, have been too much — in 2013, the company stopped approving most new net metering agreements on Oahu, saying the market was oversaturated.

The move comes as Hawaii sets its sights on some of the most ambitious renewable energy goals in the country. State legislators voted this year to require 100 percent of the state's power to come from renewable sources by 2045.

Solar may be less appealing to customers without net energy metering, according to the green power advocacy group Rocky Mountain Institute (RMI).

“These options, compared to NEM, are bad news for traditional PV [photovoltaic] customers for one main reason: Typical solar customers in HECO only directly consume about half of the energy that their PV systems produce,” RMI representatives wrote in a blog post. “The rest of the solar kilowatt-hours are exported to the HECO grid. With NEM, the number of solar kilowatt-hours consumed on-site doesn’t matter, but under both of these new tariffs, exported energy is worth either less or nothing depending on the tariff.”

But power in the remote state is more expensive than anywhere else in the nation, and RMI said that solar will still be a smart investment for electricity customers who will receive 15 to 28 cents per kilowatt hour under the first tariff option. On top of that, RMI said the new tariff scheme will likely push solar customers to make their systems smarter to get more out of them.

Hawaiians with photovoltaic panels on their roofs may only use half of the power they generate, but RMI estimates that that number could rise to 90 percent using a combination of systems that work to use power when it’s being generated in abundance — the middle of the day. Smart meters can direct water heaters to pre-heat water when solar power is abundant, electric dryers can be equipped with timers that work when photovoltaics are generating and electric vehicles can use the sun instead of other sources of energy if they’re plugged in during the day instead of at night.

Those strategies are collectively called “demand flexibility.”

Then there’s on-site storage, or the installation of battery packs that allow customers to store power for later. RMI has done previous work showing that both residential and commercial customers who install on-site storage capacity are able to cut costs by charging up batteries during low-usage times of day and then using that stored energy instead of grid-supplied power during peak usage times. Peak power costs more per kilowatt hour than during non-peak hours.

Storage capacity also presents numerous possible benefits to the grid, according to RMI. When batteries are available, there isn’t as much demand for the creation of new generation — especially the quick-start natural gas plants that are used to meet energy needs during peak usage hours. Because they reduce strain on the grid during peak hours, they decrease the likelihood of blackouts. And when blackouts do happen, batteries can be used as “black start” assets that provide the kickstart needed to bring bigger power plants back online.

“We should move toward a more-integrated grid where the new solar customer described above can contribute to grid functions, lowering their neighbors’ costs as well as their own,” the blog post reads. “With this ruling, innovative third parties have an opportunity to bundle distributed energy resources in ways that make them more valuable to customers and the grid.”