Hawaii's Solar Energy Revolution

How the proliferation of solar panels on Honolulu homes will force Hawaiian Electric Co. to reinvent itself—or else.


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Photo: Dallas Nagata White
 

It wasn’t long ago that a company called Hawaiian Telcom reigned supreme over phone calls in Hawaii. If you talked on the telephone, your voice traveled through Hawaiian Telcom’s copper wires. But as cellphones became more affordable, demand for phones tied to walls plummeted. By 2009 the once-mighty phone company was in bankruptcy, reorganizing itself and trying to figure out how to be relevant in a world where everybody and their teenagers were awaiting the release of the latest iPhone.



Photo: Gregory Yamamoto

DONALD JAY

  • Neighborhood: Mililani
  • Cost of PV system: $97,200, before tax credits
  • Monthly electric bill before: $850
  • Monthly electric bill now: $17
“Our electric bill was so high, and I was thinking that it’s only going to get worse. The RevoluSun installer pointed out the three huge trees behind our property that might have cut down on the efficiency, so they recommended 84 panels. The system is working really well for us; in fact, it’s overproducing. I’m so happy I got in in time, because I’m hearing that right now HECO is very reluctant to sign off on new installations.”

A similar shake-up is underway with another old-line utility, Hawaiian Electric Co. It’s being driven by people such as Donald Jay, a retired civil service worker who lives in a cul de sac in Mililani. Last April, Jay put a solar photovoltaic system on his rooftop. It generates more electricity than Jay uses, and he’s slashed his electric bill to HECO’s minimum $17 charge. “I was paying about $850 a month, because I have air conditioning and a lot of appliances,” says Jay. “I hardly pay anything anymore. That really makes me happy.”

That kind of happiness, multiplied by the 26,000 other Oahu homeowners with PV on their rooftops, threatens to undo HECO in the same way that cellphones in everyone’s pockets undid Hawaiian Telcom.

In the world of cheap photovoltaics and other emerging home energy technologies, you, the ratepayer, are no longer helpless in the face of sky-high electric bills, unable to do anything beyond using Energy Star appliances and yelling at the kids to shut off the lights. The power to make and store power is shifting to your court. The dawn of the age of energy democracy is upon us. The grid is flipping. And if HECO doesn’t reinvent itself in a big way—and soon—it could go the way of the landline.

That might sound like the ravings of technology futurists or the wishful thinking of HECO haters, but it’s actually what the electric utility industry itself is saying.

The Edison Electric Institute, the trade group for investor-owned electric companies, such as HECO, warns that solar panels and other emerging technologies pose a serious threat to the industry’s health, well-being and shareholders. In a landmark report that made a big splash in wonky energy-policy circles last year, the Institute said:

“One can imagine when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this in perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically ‘cut the cord?’”

See?

The Institute warned of a death-spiral scenario, in which utilities make up for the revenue lost on their PV-owning customers by raising the rates on their other customers. That encourages some of them to get PV, which sends rates even higher, which makes PV even more attractive. Edison suggested that a short-term solution is for utilities to go after their free-riding PV customers, who are enjoying all the benefits of having the grid as their backup battery while barely paying a thing for the privilege. In the long run, utilities must deal with “the threat of disruptive forces” and assess “new business models where utilities can add value to customers and investors by providing new services.” In other words, figure out how to remain relevant while they still can. What that would look like, Edison didn’t say.

For its part, HECO says it is well aware of Hawaii’s rapidly changing energy landscape, and it is adapting. “We are engineering the ‘reinvention’ you ask about right now while we keep service to our customers as safe, reliable and low-cost as possible,” said Scott Seu, HECO’s vice president of energy resources and operations, in a written statement to HONOLULU Magazine. What that reinvention will look like, Seu didn’t say.

Energy experts fear that HECO isn’t moving fast enough, and that if the utility ever fails, taxpayers will be on the hook. “We’re all looking for HECO to lay out a clear pathway in which it can possibly operate and prosper in this new energy climate,” says Mark Glick, head of the state Energy Office. “We haven’t seen that yet.”

Last fall, state Rep. Chris Lee, chair of the House Committee on Energy and Environmental Protection, put HECO executives on the spot at a legislative briefing when he asked how the utility planned to adapt if customers started leaving the grid altogether. HECO executives could not give him an answer.

“I really think HECO is on a very short timeline,” Lee says. “They probably have a few years left to radically change their business model and the way they operate to keep up with the changing technology and the marketplace, which could very well leave them in irrelevancy.”
 

 

SAM & JAMI HIROTA

  • Neighborhood: Manoa Cost of PV system: $22,500, after tax credits
  • Monthly electric bill before: $350
  • Monthly electric bill now: $17
“This is the second house we’ve installed solar panels on. We moved here in February, and it just made sense. The tax credits aren’t as good as they were the first time, but HECO’s rates are a lot higher now, so it balances out. We just got used to not having an electric bill. We’ve been thinking about adding more panels. Our hot water and our pool are powered by gas, so we could potentially replace those in the future.”

Even without the gloomy forecasts of its demise, HECO had a rough 2013. The utility’s five-year plan for meeting the state’s ambitious renewable energy goals was harshly critiqued by the state. HECO’s regulator, the Public Utilities Commission, filled by Gov. Neil Abercrombie with fresh appointees, asserted that it would no longer play the traditional role of rubber stamp. Robbie Alm, the long-time public face of HECO, stepped down in July, and by the end of the year he had yet to be replaced. On top of all that, Hawaii’s booming solar industry continued to load the electric grid with unprecedented amounts of intermittent PV power, enabling an increasing number of HECO customers to slash their electric bills.

The solar industry in Hawaii has quickly grown into a force to be contended with, roughly doubling in size each year from 2008 to 2012. Rapidly dropping PV prices combined with generous tax credits, the highest electricity rates in the nation and the abundance of Hawaii sunshine drove this meteoric growth and drew hundreds of contractors and other businesses—some more reputable than others—to the gold rush.

Installations peaked in 2012, when more PV was installed than in all the previous years combined. The industry slowed a bit as it entered 2013, thanks in part to new Department of Taxation rules that closed a loophole allowing homeowners to claim multiple tax credits for the same PV project. Then, last September, it slammed into a wall.

That’s when HECO announced that so much PV had been connected to parts of Oahu’s electric grid, some circuits simply couldn’t take anymore. Of the 416 individual circuits the grid comprises, 81 of them, or 19 percent, were saturated with solar, the utility said at the time. Adding more PV to maxed-out circuits raised the potential for voltage spikes, which could cause problems ranging from flickering lights to electrocuted powerline workers.
 

PHOTOVOLTAIC FINANCING

Even with generous tax credits—30 percent federal, 35 percent state—rooftop photovoltaic systems don’t come cheap. But they do come with financing options. Here’s the rundown.
 
GET A LOAN
Many homeowners finance their PV systems by borrowing against the value of their homes, either through home equity secured loans or through mortgage refinancing. Interest payments may be tax deductible.
 
TAKE A LEASE
The company that installs your PV owns your PV. It gets the tax credits, but you get PV without the steep upfront costs. The downside: You pay more in the long run.
 
ARRANGE A POWER PURCHASE AGREEMENT
The company that installs the PV on your roof owns the system and sells you the power. You pay a fixed rate below what grid power would cost.
 
SIGN UP FOR GEMS
A new on-bill financing program, Green Energy Market Securitization, was created by the state to help renters and low-income homeowners go solar. The system is paid off over time through monthly charges on the consumer’s electric bills.

From that point onward, HECO declared, would-be PV customers must contact the utility to find out whether or not there was room on the circuit for them before they installed their solar systems. If there was room, the customer might have to foot the bill for equipment upgrades to protect the grid. Furthermore, studies would have to be done before PV projects could proceed. How much the upgrades might cost or how long the studies might take, HECO couldn’t say. But according to reports from the Neighbor Islands, where HECO’s sister companies have implemented similar policies, customers were waiting 12 to 18 months to find out if they could even hook their solar systems onto the grid, and equipment upgrades cost them thousands of dollars.

Homeowners hoping to put PV on their roofs were thrown into solar limbo, with hundreds of planned installations put on hold. Solar contractors screamed foul. Legislators held briefings.

A group of stakeholders was assembled to explore workarounds that might allow the utility to scooch up the PV saturation threshold a bit. By the end of the year, though, no scooching had been announced.

In the meantime, the solar industry found its own workaround: batteries.

Off-the-grid hippies on the Neighbor Islands have been using them with their PV systems for decades. Why not Oahu residents in solar-saturated neighborhoods? As long as excess energy is stored in the batteries and not pushed back onto the grid, the reasoning went, the voltage spike problem was solved. So too was the problem of marketing PV in solar-saturated neighborhoods. A PV owner opting for batteries wouldn’t be able to participate in HECO’s net-energy-metering program, in which the excess solar watts a home produces are credited against whatever watts the home draws from the grid when it’s dark or cloudy. But that would hardly matter to someone on a maxed-out circuit who wanted solar badly enough.

With encouragement from the Hawaii Solar Energy Association, which held battery seminars last fall to bring its members up to speed, solar contractors began touting batteries as the solution to HECO’s roadblocks. “Get solar now,” one full-page newspaper ad read. “No waiting for utility approval. No added grid upgrade costs.”

“We are so much more flexible than the utility,” says Rolf Christ, HSEA’s secretary and owner of Hawaiian Island Solar. “If they throw one rule at us, we throw a solution back. Nobody can afford to just stop installing.”

Then HECO cleared its throat and clarified the rules. In the final days of 2013 it began running its own newspaper ads to explain that, as long as a home is still attached to the grid, batteries don’t change a thing. “PV systems with battery backup must also get an initial review by your utility to ensure the interconnection is done right,” the ad stated. “PV systems that are prematurely interconnected could be turned off by your utility.”
 

 

BEN WONG

  • Neighborhood: Kaneohe
  • Cost of PV system: $68,000, before tax credits
  • Monthly electric bill before: just under $1,000
  • Monthly electric bill now: $9 to $17
“We have a multi-family property here, and $1,000 a month for electricity is just not sustainable. The solar company asked for my last 12 months of kilowatt usage, and then they came back with an interesting question: How much of that do you want to take care of? I said I wanted to take care of as much as possible. Our system was installed in February (2013). I got the impression that Hawaiian Electric was dragging its feet. It took until October to get me hooked up for the net metering. But our bill dropped immediately—all that was left was the $17 base charge.”

While demand for battery systems on Oahu has hardly been overwhelming, there have been a few takers. Bernie Boltz, who lives in a PV-saturated Aina Haina neighborhood, is one of them. His $43,000 system (before tax credits) features a dozen 12-volt lead batteries, which look a lot like ordinary car batteries and fit into an outdoor utility closet. The system was so new it was being installed in December as HONOLULU Magazine watched, right before HECO clarified the rules. “I don’t think it was a great leap of faith to do this,” Boltz said at the time. “I couldn’t get solar any other way.”

Not everyone in the industry jumped on the battery bandwagon. Mark Duda, vice president of RevoluSun, believes the daily attention to voltage and other hassles that current battery technology entails are more than most customers are ready for. “In our judgment, it’s not the right answer for most people,” he says.

Duda is part of the working group that’s been exploring ways to raise the PV saturation threshold. He’s optimistic that a fix can be found and that HECO will eventually embrace more widespread use of home PV. “Hopefully, this is the point where they get on the path to living with PV in a meaningful way, accepting it as a large share of generation, and starting to work really seriously on a business model that works in that context for them and all of the ratepayers,” he says.

Still, he can envision a day when the technology and the economics of severing your ties to HECO altogether start to make sense. Says Duda: “I think that at some point we’ll be in a situation where the customer will be able to say to the utility, ‘What’s in it for me? Convince me to stay.’ That will be a really interesting time.”

 

SOLAR BY THE NUMBERS

Hawaii’s historically sky-high cost of conventional electricity has fueled a boom in residents and businesses investing in photovoltaic systems to get away from fossil fuels. The steep increase slowed last year in the wake of tougher tax credits and saturated neighborhoods. Expect more proposed changes to the state’s renewable energy tax credit as lawmakers learn how much the credits have cost the general fund coffers so far.



 

 

KNOW YOUR RENEWABLES

Hawaii has a rich variety of potential renewable energy sources. Here's a quick guide.

 

SOLAR

Nearly one out of 10 residential rooftops on Oahu is now adorned with solar photovoltaic panels. There’s so much PV out there that Hawaiian Electric Co. has slapped a virtual moratorium on adding any more in some neighborhoods while it studies the technical issues involved with having unprecedented amounts homemade power on the grid. (See main story.)

Meanwhile, HECO is seeking fast-track approval from the Public Utilities Commission to have nine large-scale solar farms developed. They would produce about 240 megawatts of power and offer some relief to ratepayers from the high cost of fuel oil. The utility says power from the solar farms would cost about 15.8 cents per kilowatt hour, compared with rates as high as 22.7 cents per kilowatt hour at its fossil-fuel-fired power plants.

What to watch: Where will all of these solar farms be built? How much land will they need? And which—if any—of HECO’s fossil-fuel-run power stations will be decommissioned when the solar farms come online? So far, HECO’s not saying.
 

WIND

A proposed wind farm on Molokai was defeated by intense local resistance. A similar project on Lanai appears all but dead. Kauai might have too many endangered native birds to introduce the giant, bird-killing blades of wind turbines into the environment. But successful wind farms have been built on Oahu, Maui and the Big Island. Their combined output accounts for some 30 percent of all the renewable energy in the state.

While Maui and the Big Island have Hawaii’s best wind-farm-quality wind, O‘ahu is doing its part with two wind farms on the North Shore. The 30-megawatt, 12-turbine Kahuku Wind Farm began generating electricity in 2011. A 2012 battery fire knocked it out of commission for more than a year, but it went back online in late 2013. Also in 2012, the 69-megawatt Kawailoa

Wind project on the hills outside of Haleiwa came online. Its 30 enormous turbines can be seen for miles around, outraging some North Shore residents who object to the visual impact. A third wind farm has been proposed for development in Kahuku, but it’s far from a done deal.

What to watch: The Oahu-Maui grid tie-in. Oahu doesn’t have the best wind or many more suitable sites for wind farms, but Maui’s got wind to spare. If the interisland cable connection that the state is pushing becomes reality, wind power could light up more Honolulu homes than ever.
 

GEOTHERMAL

The development of geothermal energy, which taps volcanic steam found a mile or more beneath the earth’s surface, is a high priority among state energy planners. Hawaii’s only existing geothermal plant, Puna Geothermal Venture, produces about 20 percent of all the renewable energy generated in the state—every watt of which stays on the Big Island. The Island’s electric utility, the Hawaii Electric Light Co., wants to up the Island’s current 38 megawatts of production to 88 megawatts. The state and Hawaii County are battling over who gets to decide where that future development would occur. Meanwhile, an anti-geothermal movement in Puna is trying to block further development there, and former Native Hawaiian opponents of geothermal—including Mililani Trask—are now part of a venture seeking to land the next geothermal
development contract.

What to watch: The interisland cable grid tie. Ultimately, the state wants to connect the electrical grids of Oahu, Maui and the Big Island via undersea cables. If it succeeds, Big Island volcanoes could one day illuminate Honolulu’s skyline.
 

BIOMASS

Basically, anything that can be burned to produce power counts as biomass. In Hawaii that ranges from the municipal waste incinerated at Honolulu County’s HPOWER plant to the eucalyptus trees Hawaii Electric Light Co. plans to burn on the Big Island.

What to watch: A Mainland company called Zilkha Biomass Energy is vying to supply HECO’s Kalaeloa power plant with “black pellets” made from diseased trees harvested from the pine-bark-beetle-infested forests of British Columbia.
 

HYDROELECTRIC

Hawaii’s granddaddy of renewables dates to 1888, when the newfangled electric light bulbs of Honolulu were powered by turbines spun by the flowing water of Nuuanu Stream. Hydro no longer lights the city, but it still has a place on Neighbor Island electric grids. Eight hydro plants on rainy Kauai (including one dating to 1908) generate nearly 10 percent of the Island’s power. According to a 2013 study by the Oak Ridge National Laboratory National Hydropower Asset Assessment Program, Hawaii has the potential to develop 145 megawatts of new hydropower.

What to watch: Molokai. A proposed project there would use excess solar power to pump water to an uphill storage reservoir during the day. At night, the water would flow to a lower reservoir, generating hydropower along the way. This “pumped storage hydro” project is in the early stages of development, but if all goes as planned, it could produce 80 to 90 percent of Molokai’s electricity.
 

OCEAN

Experiments in harnessing wave energy have been underway in the waters off Marine Corps Base Hawaii since 2004. A milestone was reached in 2010 when the first wave-generated electricity ever transmitted to a U.S. electrical grid was produced by a yellow, 40-kilowatt buoy bobbing off the base. The research continues.

Meanwhile, at Keahole Point on the Big Island, research continues into ocean thermal energy conversion (OTEC), which generates power using the temperature differences between deep sea water and warm surface waters. OTEC has been in development since the 1970s, but no commercial OTEC plant has been built. Yet.

What to watch: HECO has been in talks with a handful of developers to build an OTEC plant on O‘ahu’s west side. Look for a possible deal to be announced this year.
 

BIOFUEL

Biofuels offer the promise of replacing or blending liquid fossil fuels with liquid fuel made from plant oils. Biodiesel, for instance, has long been made in the Islands from used cooking oil and grease trap waste from restaurants. Fuel oil and jet fuel can also be produced from vegetable oils. According to the Hawaii State Energy Office, Hawaii has 136,000 acres of unused farm land that could be planted in biofuel crops—enough to produce roughly 160 million gallons of oil per year. If industrial scale production of biofuel crops on agricultural land ever takes off, it will require massive amounts of water, which will inevitably lead to conflicts.

What to watch: Algae. Are these fast-growing aquatic life forms the biofuel crop of the future? A pilot project using marine algae to produce biofuel is underway on the Big Island, and another is planned for a 34-acre site near Wahiawa.

 

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