Hawaii Rejects Proposed Ban on Solar Energy

State's largest utility loses skirmish to solar industry group but could still halt feed-in tariff program

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The latest skirmish in an ongoing struggle between Hawaii’s largest utility and the state’s solar industry was settled earlier this month when state energy regulators rejected a proposed moratorium on new solar intallations and instead greenlighted a program intended to accelerate small solar development.

The state’s Public Utilities Commission approved a feed-in tariff program that would allow renewable energy projects of up to 500 kilowatts to get paid for the power they feed back into the electrical grid.

The decision came despite requests from Hawaiian Electric Company (HECO) to postpone the program over concerns that added distributed generation resources could destabilize the islands’ power grids.

Centralized or Distributed Generation?

At the heart of the conflict is how to meet the state’s aggressive renewable energy standards—whether with large utility-owned generating stations or from dispersed privately owned systems, such as residential and commercial solar installations.

“Will system of the future be a biofuel-powered central generation [plant] or a fleet of distributed generation?” asked Mark Duda, president of the Honolulu-based Hawaii Solar Energy Association, which opposed HECO’s proposed delays.

According to Duda and other distributed generation advocates, HECO’s move to postpone the feed-in tariff is one of several attempts the utility has made to tip the scales toward central generation. Earlier this year, HECO proposed a moratorium on new solar installations on four of the Hawaiian islands until it could conduct a study about how added renewables could impact grid reliability.

While HECO retracted the proposed ban, it continued to push for a deferment of the feed-in tariff program. However, none of HECO’s objections “appeared to be fatal flaws that warranted any further delay in the development and implementation of the FIT [feed-in tariff] program,” according to statement released by the PUC.

The commission ordered HECO, which serves about 95 percent of the state’s 1.2 million residents, and other utilities to rollout the program within six weeks. Next, the PUC plans to develop a program for larger projects.

Feed-in tariffs are designed to encourage investment in solar development by providing renewable power producers with a long-term guarantee to purchase the power they generate. In Hawaii, project developers have had to go through lengthy negotiations with the state’s utilities to sell electricity generated from renewable projects.

The program would streamline and accelerate the development process by providing consistent pricing and procedures, and assure developers and investors can sell the electricity the projects generate, the commission said.

Driving renewable development in the state, where the cost for grid power is more than twice the national average, is a clean energy mandate that is among the most aggressive in the country.

40% Clean by 2030

In 2009, state lawmakers established a renewable portfolio standard requiring 40 percent of the Hawaii’s electricity to come from renewables by 2030. The state’s Clean Energy Initiative includes an agreement between the state and utilities to meet 70 percent of its overall energy needs, including transportation, from cleaner energy sources in the next two decades.

“There is a concerted push in Hawaii to meet fairly aggressive RPS goals, but all ideas being advocated by utilities involve central station generation,” said Isaac Moriwake, an attorney from environmental nonprofit Earthjustice, which represented the Hawaii Solar Energy Association. “[HECO is] predisposed to big projects and has a blind spot to DG [distributed generation], and that’s something we’re trying to work on.”

For HECO, the choice comes down to maintaining the reliability of the islands’ electrical grids, said Peter Rosegg, a spokesman for the utility.

The islands’ electrical systems were designed for central station power. Power grids on the mainland rely on interconnections to ensure a stable power supply. But the Hawaiian islands’ isolated electric grids are more challenging to keep stable, and are more vulnerable to power fluctuations associated with intermittent resources, such as solar, HECO spokesman Peter Rosegg said.

So the utility is also looking to “firm” renewable resources such as biomass gasification plants and geothermal power.

“They think we hide behind the reliability shield,” Rosegg said. “But we’re legally responsible for reliability. We’re the ones customers call.”

While the PUC’s decision was a partial victory for distributed generation advocates, elements of the feed-in tariff could keep it from supporting renewable growth as intended, Duda said.

Utility Could Still Curtail Program

Under the new program, utilities have the option to curtail or halt the power production of renewable projects and impose unspecified grid-connection costs.

While HECO said curtailment of renewables is sometimes necessary to balance generation and demand given the complexity of reducing output of larger central systems, it acknowledged that it also creates an uncertain revenue stream and can reduce incentives for project developers and investors.

“How do you sell something that has a big black hole on it?” Moriwake asked, referring to the uncertain payback from projects.

The answer to that question may not be revealed for a while, as the state’s solar industry waits to see how developers and investors respond to the new program.

For its part, the PUC acknowledged that the program is a work in progress. With a variety of ways to implement feed-in tariffs, there are “virtually unlimited adjustments that could theoretically be made,” according to the PUC.

The commission determined that the best course of action was to implement the program and make any necessary changes when it reviews the program in two years.

“If done right, this could definitely expand our market and our industry,” Duda said  “But we’re not sure what we’ve got at this point.”

See Also

Hawaiian Utility Fights Solar Industry Over Private Installations

DOE: Big Utilities Can Get Reliable Power from Small Solar PV Arrays

Aloha Oil: Hawaii Targets 70% Renewable Energy by 2030

New Hampshire Utility’s Move to Control Green Energy Dollars is Rebuffed

Energy Co’s Use Ballot Initiatives, Other Tools to Fight for Continued Market Dominance

Why Isn’t the U.S. Embracing Feed-in Tariffs?