As I’ve covered before, the State of Hawaii has halted its rooftop solar incentive program (“net metering,” where solar customers get full retail electricity credit for any surplus solar they generate). Now state regulators are proposing to replace it with two options, a “grid-supply” option and a self-supply option. The outcome will be a “postcard from the future” for other states, given that Hawaii leads the country in rooftop solar penetration and high electricity prices.
The grid-supply option would replace the full retail rate credit for surplus solar electricity that happens under net metering. Instead, customers would get a new tariff for surplus solar power, based on the avoided costs of fossil fuel-based generation during peak generation hours, as measured from July 2014 to June 2015. That translates to $0.151/kWh for Oahu, $0.154/kWh for Hawaii, and $0.172/kWh for Maui. That’s still a good payment for the surplus electricity, but it’s about half of what customers used to get under the full retail rate under net metering. Plus new customers will have to pay a minimum monthly bill of $25.
The self-supply option is primarily designed to support customers who do not export their surplus to the grid. Instead, they would earn retail rate credit for on-site generation that aligns with their demand. In other words, customers would strategically shift their electricity usage to soak up all their surplus solar power, such as by running all their appliances during peak daylight hours. Or they could buy a battery to store surplus solar power for dark times. Utilities would then be required to streamline interconnection for these systems.
The environmental and solar communities basically hate what state regulators are doing, as Utility Dive reports. But these proposals in fact may not dramatically stall the rooftop solar market. For example, my favorite utility, Kauai Island Utility Cooperative (KIUC), ended net metering in 2009 and replaced it with the similar grid-supply option, and their installations continued to climb. Plus, the self-supply option could serve to encourage ‘grid defection,’ as customers with batteries and solar realize they don’t actually need their utility anymore.
Certainly I’d prefer to see a more gradual transition away from net metering, as opposed to the sudden halt that happened in Hawaii. But in the long run, with continuing price declines on solar and batteries, we need to move in this new direction anyway. However, regulators shouldn’t pull the plug too quickly on the current incentives, or they may end up destroying the only bridge to this future. And that’s not a postcard I want to see, no matter how many palm trees are on it.
Hawaii leads all states in rooftop solar adoption, and the state has the most aggressive renewables goal in the country, with a target of 100% renewables by 2045. But paradoxically, Hawaii’s regulators just ended the policy that has led to high levels of rooftop solar uptake: net metering.
Net metering is what most states use to encourage distributed renewables. Customers don’t get cash for any energy they generate on-site but instead get a retail credit on their bill for any surplus power they generate and don’t use on-site. In Hawaii, it’s been a great deal, because electricity rates are ridiculously high, as they generate electricity from burning imported diesel. And of course sunshine abounds there.
But the policy is no more:
The PUC said nothing will change for existing net metering customers, nor those who submitted applications for the program before Monday. But those who submitted the applications afterwards will have to choose two new options when installing solar.
The self-supply option — a non-export option — allows a limited amount of inadvertent energy exportation to the grid without any compensation. Residential customers who choose this option will have a minimum bill of $25, while small commercial customers will have a $50 minimum bill.
The grid-supply option will open the door for exporting excess energy to the grid for credits against customer bills so long as the exports benefit the electric system. While similar to net metering, this option does not credit customers at the retail rate. Instead, the new grid-supply programs credits customers at a fixed rate between $0.15/kWh to $0.28/kWh, depending on the island on which they are located.
My guess is that these two options will still provide economic incentive for many Hawaii customers to go solar, just given how expensive electricity is there (typically in the 30 cents per kilowatt hour range or more). But not as much incentive, and therefore there will be less rooftop solar. And I’m dubious about utility doom-and-gloom claims that the existing amount of rooftop solar is putting grid reliability and affordability in jeopardy.
But in the long run, we know rooftop solar incentives everywhere will start to head in this direction. California regulators are already in the process of revamping and scaling back net metering incentives here, per a 2013 state law. My hope is that costs will come down on solar, both in terms of hardware and soft costs, to offset some of the incentive decreases and that the new rates will encourage energy storage purchases, such as home batteries.
But I don’t see that energy storage incentive built in to Hawaii’s two new options, which is troubling. There ought to be an incentive to encourage supply of renewables at key times, which batteries can do. In other words, we need to reward customers for supplying steady and well-timed solar power to the grid.
Ultimately, we’ll need to encourage everyone to purchase both solar and storage, and smart rate design should find the sweet spot between those two. Hawaii would be a great place to start figuring that out.
Hawaii is the best state in America — when it comes to rooftop solar at least. With over 51,000 solar customers, the state has between 9 to 12 percent solar penetration on some islands, compared to a measly .5% nationwide. And it’s hard not to see why, from an economics perspective. Utility rates are some of the highest in the country, averaging more than 30 cents a kilowatt hour (and more on some islands). And the sun abounds in the islands, of course.
The solar incentives are also fantastic: in addition to the 30% federal tax credit, the state offers a tax credit on up to 35% of a solar PV system or $5000, whichever is less. And with the “net metering” rate program in effect, solar customers get retail rate credit for surplus electricity they generate but don’t use on-site. At over 30 cents per kwh, that’s a good deal and a lot of credit.
So it’s no surprise then that the payback period for buying these systems is really short — 5 years average in Oahu and 4 years in Maui (California probably takes close to twice that time for a typical residential system).
But now Hawaii’s primary electric utility, Hawaii Electric Companies (HECO) (which serve Oahu, Maui, and Hawaii), wants to dramatically roll back the net metering program:
HECO filed a Transitional Distributed Generation (TDG) program Jan. 20 with the Hawaii Public Utilities Commission. … [T]he TDG program includes a cut in the value of the credit solar owners earn for the electricity their systems send to the grid. Instead of being credited at the retail electricity rate of $0.295 cents per kilowatt-hour (kWh), Oahu solar owners would get a TDG-estimated tariff rate of $0.147 per kWh; on Maui, solar owners would go from $0.351 per kWh to $0.223 per kWh; and on Hawaii, the credit would drop from $0.359 to $0.18.6 per kWh.
HECO says it will honor NEM agreements with current rooftop solar owners and those with pending interconnection applications.
In addition, HECO wants to install special inverters with new solar systems that will allow the utility to cut off the solar energy whenever they want to.
The plan is unfortunate in many ways. First, HECO and the Hawaii PUC have not yet thoroughly studied the benefits brought by all this distributed solar generation. Those costs and benefits should be quantified before new rates are adopted. Second, the rates do not reflect time of use, so they don’t encourage conservation or solar energy generation at times that would be most beneficial for the grid, in terms of reliability and cost savings. Finally, and somewhat related to #2, they don’t include any incentives for energy storage. A relatively small battery could store surplus solar for dispatch when the grid (i.e. HECO) really needs that power, thereby reducing the costs on the system from managing the power from these rooftop solar arrays. Right now those batteries are pricy, but HECO could greatly encourage people to purchase them if they knew there was a guaranteed and adequate revenue stream.
I hope this opening salvo from HECO is dramatically altered before it comes anywhere close to final. It’s easy to see the utility argument that net metered customers aren’t always paying their fair share for the grid, but this proposal fails to take into account what those costs might be and what specific policies might address them. The whole country has a stake in seeing Hawaii get these policies right and not jeopardizing the groundbreaking progress the state has made to date on solar.
We know we need more renewable energy to have a fighting chance at reducing greenhouse gas emissions enough to avoid fully baking the planet. But for many people, rooftop solar is not an option. They may not have enough sun exposure, they may rent their place and not own their roof, they may be in a condo or apartment without ownership of the roof, or they may not use enough electricity to justify installing solar.
So enter “virtual” net metering. For those who don’t know, basic net metering is the primary incentive program for rooftop solar, where excess solar power a building owner generates beyond his or her needs gets sold to the utility for retail credit (i.e. the meter “spins backward”).
But with virtual net metering, the customer can get the benefits of this retail credit with a solar installation that’s not directly on the property. Typically the panels would be installed somewhere nearby with good solar exposure and possibly more room for panels. And with this arrangement, solar customers can co-own a solar panel array with neighbors and others, allowing for economies of scale to take hold.
Dick Munson at EDF lists the top five reasons why virtual net metering is better than plain ol’ net metering. It’s worth reading them all in full.
Of special note, California has authorized virtual net metering for certain multi-family dwellings, although the state could certainly do more to expand this program. Munson’s list makes the case for why it’s important for the state to do so. Eventually, these community solar plots can be coupled with energy storage to allow whole neighborhoods to go “off the grid” and be their own utility via a neighborhood microgrid.
But it all starts with a virtual reality.
