Industry Market Trends

Hawaii Removes Barriers to Distributed Solar Energy Generation

Mar 05, 2013

Credit: Liz Noffsinger. Credit: Liz Noffsinger.

It's no news that Hawaii gets a lot of sun. Because of it (among other reasons), the state sees most of its income come from tourism. The state's sunny climate may boost its leadership in another category as well: rooftop solar panels.

Last year, Hawaii installed more solar power per person than any other state except Nevada, making it the ninth-largest state for solar photovoltaic systems, according to the Interstate Renewable Energy Council (IREC), a nonprofit advocacy group. In 2012, Hawaii issued as many permits for new solar installations on the island of Oahu alone as it did for the entire state just a few years before.

It's not simply about being green: increasingly, it's about cost savings. Hawaii has the highest electric rates in the U.S. For starters, the state traditionally relies on pricey oil shipped from Asia to generate electricity. Secondly, maintaining a power grid that is geographically broken up to serve six different seismologically active islands presents technical challenges other states don't face. Hawaiians pay an average of 36 cents per kilowatt-hour of electricity, which is roughly twice the rate in the next most expensive state, Connecticut.

Under these circumstances, solar installations simply make sense. A 2012 estimate found that in Hawaii, a typical solar panel installation pays for itself in only four years, and returns a profit of over four times its cost over its life. Hawaii's 35 percent tax credit (up to $5,000) on solar installations is the second highest in the country (after Louisiana). The state also offers Net Energy Metering ("NEM"), which means utilities are required to keep track of how much energy solar households both consume and generate. Citizens who generate a surplus are credited for it on future bills at the current retail rate for electricity. Finally, it's about home value: the Web site SolarPowerRocks estimates that adding a rooftop solar panel system to a home will instantly increase the home's value by more than $50,000.

But as in many western U.S. states, Hawaii's rooftop solar panels have been a victim of their own success. Many solar installations benefit (in theory) from tying themselves to the state's main power grid, enabling them to feed excess energy back in. Until recently, this made most state utilities leery, worrying that too much excess capacity coming in could harm the main grid.

In January, the state's solar advocates struck an agreement with Hawaiian Electric Co., or HECO, Hawaii's main electrical utility, for a new "proactive" solar program when it comes to home-generated power. This involved removing regulatory obstacles to rooftop solar panels that are connected to the grid, producing electricity not only for the site they are installed on, but feeding excess energy back into the grid in a model called "distributed generation." Distributed generation sends electricity from the home or business it's produced in to local power lines to nearby substations. For years, states feared that distributed rooftop solar systems might overload substations with electricity, frying circuits and resulting in blackouts.

Rooftop solar panels are a common sight in the Hawaiian Islands. Image from Rooftop solar panels are a common sight in the Hawaiian Islands. Image from

To try and prevent this, many states have adopted regulations in recent years that govern how utility companies handle electricity returned to the grid from solar and wind installations. In Hawaii, as in many other states, rules dictated that that once distributed energy reaches 15 percent of peak demand on a local circuit, homes or businesses adding more electricity must subject themselves to an expensive technical review (which the home or business was required to pay for). This effectively limited distributed generation to a low, rather arbitrary level. As the demand for solar has increased, however, renewable energy developers and advocates began complaining that the 15 percent threshold was too low and the studies too cumbersome and expensive.

"The study requirement has been a virtual deal killer," Isaac Moriwake, a Honolulu-based attorney with Earthjustice, a national environmental law firm, told InsideClimate News.

Experts say concerns about surges and blackouts were overblown, and last year, Hawaii revised its standard, allowing distributed generation to reach 75 percent of minimum daytime energy load, which translates to about 23 percent of peak load, before an inspection is required. The removal of this regulation in Hawaii may position the state as the nation's leader in the integration of small scale solar resources, according to the IREC. Ultimately, Hawaii hopes to reach California's standard, which allows distributed generation to reach 100 percent of daytime load.

Earthjustice and the IREC worked with HECO and state agencies, forming the "Reliability Standards Working Group" (RSWG) to effect the new changes. Hawaii's Public Utilities Commission (PUC) convened the RSWG in September 2011.

In the near future, HECO will take the initiative to determine how continued growth in rooftop solar may affect the utility circuits, and how the grid can be improved and upgraded to enable further expansion of grid-connected home solar power generation.

HECO spokesman Peter Rosegg told the Los Angeles Times that the RSWG was effective in finding ways around the technical roadblocks that stood in the way of distributed solar generation growth.

"The proactive approach identifies parts of the grid where [photovoltaic] additions can happen more easily and at lower interconnection cost. It also identifies and implements needed improvements to the grid ahead of a request to add [solar power], thus accelerating the interconnection process," he said.

Soon, the utility will begin installing equipment such as grounding transformers to help meet future demand for new solar connections and keep the grid safe at the same time.

It's a timely move, considering what tasks Hawaii has set for itself: namely, its renewable energy mandate. The state has passed legislation mandating that it acquire 40 percent of its electricity from renewable sources by 2030, and it seems unlikely to happen without high levels of solar energy generation.

Expect more states to follow Hawaii and California's example. The nation's total installed capacity of solar photovoltaics - the technology used in rooftop panels-has grown ten-fold since 2005, according to a recent study from the Solar Energy Industry Association and Boston-based GTM Research. As this number grows thanks to dropping solar panel prices, and the distributed energy levels approach the 15 percent mark for many installed solar projects, groups like Earthjustice may step in as they did in Hawaii to help change minds and erase arbitrary regulation.

In addition to solving the distributed energy problem, the State of Hawaii recently went one step further by passing regulations for community generation of solar power. While a resident of an apartment building may not be able to install solar panels on the roof of a building he or she doesn't own, that tenant now has the ability to invest in a system located elsewhere and reap the benefits of distributed generation, thanks to new state legislation.

"Today, someone living in a second-floor condominium in a 10-story building simply doesn't have the option of putting solar on their roof," said Jeff Mikulina, Executive Director of clean energy advocacy nonprofit Blue Planet Foundation. "Community-based renewable energy gives them this option by enabling them to invest in a system elsewhere and reap the benefits as direct reductions on their own electricity bills."

What this means, essentially, is that Hawaii has now joined California to lead the nation in solar power-friendly policies. There are still barriers, of course. Distributed generation ceilings remain in many solar states. In addition, a recent study by Lawrence Berkeley National Labs found that the U.S. still has some of the highest "soft costs" when it comes to solar installations, despite dropping prices for the equipment itself. Until these final barriers are lifted, the nation is unlikely to become a leader in distributed solar energy generation.