EE-Informer
In a 74-2 vote in June, Hawaii lawmakers passed House Bill 623, mandating that 100% of Aloha State’s electricity needs be met from renewable resources by 2045. It was signed into law by Governor. David Ige on 8 June 2015,
It is the most ambitious renewable portfolio target among the 50 states, and nearly unrivaled anywhere else in the world, with the exception of few places such as Denmark, which is trying to become fossil-fuel free by 2050. HB 623 calls for interim targets including 30% renewable by 2020 on its way to 100% renewable nirvana from roughly 22% today.
If any state can do it, it is Hawaii. It is blessed with every imaginable source of renewable power, wind, sun, geothermal, hydro, biomass, wave and tidal energy. It is equally blessed with a mild tropical climate, which means virtually no heating and little cooling – the ocean breeze can do the job for the most part.
Moreover, its current high retail tariffs, 34 cents/kWh, are 3 times the US average – as high as 40 cents/kWh for residential consumers on some islands – means that virtually any kind of renewable generation is already cost competitive with little need for subsidies or support schemes. To top it off, Hawaii has virtually no industry to speak of, hence modest demand for electricity.
The 5 major islands are not connected to each other or anywhere else, which
makes it an ideal laboratory for experimenting with micro-grids on a massive scale. Since distances traveled within each island are typically short, electric vehicles (EVs) can manage to get you to your destination without running out of juice. Several car rental companies are already experimenting with EVs – so far with good results.
Hawaii is already ahead of the rest of America on a per capita basis in solar PVs (chart on page 12). On the island of Oahu, the most populous, some 13% of residential customers have already installed solar systems, with many more pending. The only wonder is why it has taken Hawaiian policy makers so long to do the right thing and the inevitable. Hawaii gets nearly 70% of its generation from burning oil compared to virtually nil in rest of America.
But don’t let anyone tell you that it will be a slam dunk, because it is not. The islands are already experiencing large swings in renewable generation due to variations in solar insolation and wind, which must be offset by conventional generation – since there is little storage. And since the islands are not interconnected, there is no opportunity to import or export excess generation or demand as can be easily done in, say, Denmark.
With an estimated 50,000 rooftop PVs feeding the distribution grid, rather than taking power from the grid during sunny days, Hawaii’s distribution network is already stretched beyond its design capacity. Traditional utility networks were
designed to deliver power one way to the consumers, not the other way around – as described in related article on DPRs on page 7.
This has forced Hawaii Electric Power Co (HECO) to boost investments in beefing up its feeders, transformers and the rest of its poles and wires to accommodate the upstream rush of electrons in mid-day (map on right).
Describing the situation in a recent article in the Wall Street Journal (29 June 2015), Marco Mangelsdorf, president of ProVision Solar Inc., a solar panel installer on the Big Island of Hawaii said, ―It’s a grand experiment that’s playing out right now in Hawaii.
As reported in the same WSJ article, Oahu currently has 470 MW of renewables in a system with a peak demand of about 1,100 MW – which means that at certain times more than a third of its generation comes from renewable resources – a proportion that is expected to grow by 2045. While California complains incessantly about its famous ―duck curve,‖ (graph on page 13) Hawaii has to deal with a similar problem with even bigger swings.
The situation is even worse on smaller islands, which are equally blessed with ample renewable resources. Maui, for example, has over 150 MW of renewable capacity on a system with a peak demand of around 200 MW.
One way to better manage the flow of electrons into the grid, rather than off of the grid, is to install smart inverters on homes with solar PV systems. As described in the WSJ article,
“The smart varieties of inverters can send and receive information from grid operators and are less likely to trip off if there are minor problems. Advanced models may one day allow utilities as well as homeowners to regulate the amount of power flowing on to the grid. Ultimately, they may tie a lot of separate solar power systems together so that they function more like conventional power plants whose electric output can be turned up or down.”
And not unlike California, Hawaii is considering more energy storage, as much as 300 MW on the populous island of Oahu to better manage fluctuations in intermittent generation.
Technical issues, while daunting, are minor compared to regulatory and financial challenges facing 
Hawaii and its regulators.
Among the issue to be resolved is the fate of Hawaii’s existing net energy metering (NEM) law which – like those prevailing in other 42 states in the mainland – offer solar customers an easy way not only to avoid paying high retail tariffs but also to avoid paying a fair share of the costs of maintaining and upgrading the grid, on which they continue to rely when the solar panels are not generating.
HECO estimates that the current 50,000
solar customers are shifting roughly $53 million annually – from $38 million in 2013 – to non-solar customers, a figure that is likely to rise as their numbers grow.
In a prepared statement describing the company’s proposals to the Hawaii Public Utilities Commission (HPUC), Jim Alberts, HECO’s senior vice president of customer service said,
“We know how much our customers want the benefits of rooftop solar,” adding, “We support and expect continued growth of rooftop solar. With levels of solar energy in Hawaii that are 20 times higher than the nationwide average, these proposals provide greater access to rooftop PV while helping ensure the longevity of programs in a way that protects reliability, safety and fairness for all customers.”
Further describing the company’s plans, Alberts noted,
“We’re supporting a plan that will help us triple the amount of distributed rooftop PV by 2030 and increase renewable energy to 65% by 2030 and 100% by 2045,” adding, “To reach those goals, we will need a diverse portfolio of renewable energy resources and a smart, modern grid.”
The centerpiece of HECO’s proposal is a pricing scheme for new rooftop PV systems that more fairly shares costs for operating and maintaining the network, an argument echoed across the US.
For rooftop solar PV customers in Oahu, HECO plans to credit at a rate of 18 cents/kWh for all solar energy sent to the grid – which is currently valued at around 12 cents/kWh. The corresponding figure for Hawaii Island would be 22.5, 23.1 for Maui. Additionally, HECO has proposed that new PV customers on all islands pay a minimum monthly bill of $25, up from the current $17 on Oahu, $18 on Maui, and $20.50 on Hawaii Island.
Fixed or minimum fees, which are also gaining popularity in the mainland, are seen as a simple if partial remedy to force solar customers to pay a minimum amount for the upkeep of the network. Regulators in California, Arizona and elsewhere are sympathetic since they do not wish retail tariffs for non-solar customers to rise as solar customers avid paying for the grid.
HECO, of course, is not the only utility in favor of changing NEM laws to reduce the erosion of revenues plus the cost- shifting from solar to non- solar customers. Arizona, California, Massachusetts and Nevada, among others, are also grappling with similar issues. The problems are nearly identical, while Hawaii is facing the highest rates of solar installation in the US.
Hawaii’s regulators appear sympathetic, especially as they march towards a 100% renewable target for 2045. In a prepared statement, the HPUC said,
“It is unrealistic to expect that the high growth in distributed solar PV capacity additions experienced in the 2010-2013 time period can be sustained, in the same technical, economic and policy manner in which it occurred,” adding, “particularly when electric energy usage is declining, distribution circuit penetration levels are increasing, system level challenges are emerging and grid fixed costs are increasingly being shifted to non-solar PV customers.”
According to HECO, “These (HECO’s proposed) changes will help reduce the unfair shifting of costs from those with PV to those who don’t have PV. Contrary to what some may think, these changes won’t increase our profits.”
Amidst all the turbulence, HECO’s parent company has agreed to be acquired by much larger NextEra Energy Resources LLC, which intends to turn Hawaii into a laboratory to test the ultimate potential of distributed generation.
With the 100% renewable mandate in place, how the Aloha State manages its network and its tariffs will be closely watched.
Perry Sioshansi is president of Menlo Energy Economics, a consultancy based in San Francisco, CA and editor/publisher of EEnergy Informer, a monthly newsletter with international circulation. He can be reached at [email protected]
