A global revolution is underway in how we are powering our world. Last December, in Paris, 195 countries reached a climate change accord where each country will begin to implement new policies and practices in order ween ourselves off of fossil fuels. In the same month a gridlocked U.S. congress brought to bear a brief moment of common sense and passed a spending bill that included extended tax credits for renewable energy in the form of the Production Tax Credit and the Investment Tax Credit, these credits provide many incentives for the wind and solar industries, among others. Unfortunately, a more comprehensive and aggressive climate policy, one that puts a price on carbon, isn’t something current right wing politicians have the intellectual rigor to develop or pass with their democratic cohorts. Locally, Governor Ige signed a bill calling for 100% renewable energy in Hawai’i by 2045. Internationally and in the neighborhood energy production, distribution, and consumption is changing.
Hawai’i is dependent on fossil fuels for 95% of our power needs. Yet, we have many resources in order to produce our own clean energy at home, like wind, solar, and geothermal. The myriad of local and global climate policies is important because they set the stage for people and industry to adopt and implement renewable energy sources. Further the reducing the amount of natural gas, coal and other fossil fuels used in energy production. Creating a viable platform technologically, economically, and politically is critically important for moving towards a clean power future.
Much of the nation looks to Hawai’i as a leader in solar power. At the end of 2014, 12% of Hawaiian Electric’s residential customers had solar panels installed. In contrast, 0.56% of electric customers have solar panels nationally. Environmentally and economically solar panels are a good thing, but utility companies don’t like them. Utility companies make money by earning a rate of return on their investments into the power grid infrastructure. Typically charges for this infrastructure are bundled into the per kilowatt hour price set by the utility company. High amounts of solar adoption in Hawai’i has led to less power being purchased and less revenue for the utility company. In response, power rates have increased to make up for lost revenue. This also shifts costs on to non-solar customers.
Hawaii pays nearly 3.5 times the national average for electricity. The local average kilowatt hour is 34 cents; the national average kilowatt hour is 10 cents. An obvious reason for this are the costs associated with the state’s extreme isolation. Hawai’i is dependent on imports oil for electricity production. The Hawai’i State Energy Office reported that in 2012 Hawai’i used oil for 71% of its electricity generation. Nationally, less than 1% of electricity production came from oil. Hawai’i’s geography further makes it expensive and complex to build energy infrastructure, such as power lines. As power rates have increased more people have installed solar panels, accelerating the transition away from utility energy consumption.
The high cost of electricity creates a big incentive for Hawai’i customers to install solar panels. Furthermore, abundant sunshine in the state creates favorable conditions for solar panels to produce a lot of power. The lifetime of a solar panel in Hawai’i will produce much more energy than that of one in many other parts of the country, due to Hawai’i’s abundant sunshine. In Hawai’i, upfront costs of installing solar panels are more quickly recovered than in other regions of the country where solar panels do not produce as much energy.
Large adoption of solar power in Hawai’i has led to problems with the electrical grid as
well. Excess solar power is problematic because Hawai’i’s grid is small and isolated. Hawai’i’s six islands each have their own separate electrical grids and require their own energy generation. The utility has difficulty in allocating and dumping excess solar power added to the system. In other regions where large scale solar has been adopted, such as California and other parts of the south west, the utility is much more interconnected, both interstate and intrastate.
Interconnection of the grid allows for a higher level of variable energy distribution and creates significant savings on energy integration costs. Energy variability and uncertainty spread out over a larger geographic area allows more reliable access, distribution, and production of energy from different sources. A unified interisland electrical grid would have economic benefits of: uniform pricing, lowering production costs, lower price volatility, and greater utilization of lower cost energy production. Environmentally a unified grid would allow for greater penetration of renewable energy sources and open up opportunity for new renewable energy locations. However, squabbling over an interisland grid connection has been going on for over a century. In 1881 King Kalakaua traveled to New York to meet with Thomas Edison. They discussed the feasibility of generating electricity from the Big Island’s volcano and using an underwater cable to bring electricity to Oahu. Edison concluded that it was possible, but would cost too much. One hundred and thirty-five years on the argument continues and there still isn’t a unified interisland power grid. Hawai’i’s extreme isolation makes energy integration and the distribution of variable power sources very difficult. Thus, the Hawai’i Public Utility Commission limited the number of customers who can install solar panels. Reducing the excess energy load being put back onto an inflexible energy grid. Currently, Hawai’i mostly relies on just a few power plants that have difficulty withstanding variable solar power production. Many residential customers are disgruntled that they cannot install solar in some areas and are stuck on multi-year waiting lists before they can utilize their systems. The result is customers being held hostage to high utility prices and increasing distain for utility companies.
Nationally utility companies are trying to end net metering, where solar panel customers are paid for excess electricity produced. Utilities would rather pay a lower fixed rate for the surplus energy produced and charge a higher fee for grid infrastructure investments and maintenance. Solar customers have mostly won over the utility companies, except for in Hawai’i and Nevada. In 2015, the Hawai’i Public Utility commission eliminated retail rate remuneration for solar customers putting energy back on the grid. Instead solar panel customers will now receive a fixed compensation. The Hawai’i Public Utility Commission claims that this change will fairly compensate customers for energy generated and eases energy cost shift on to non-solar customers. Initially this will reduce the economic incentive to install solar panels in much of the state. Many areas of the country are looking at Hawai’i to see how the market will react.
However, this is setting the stage for residential and commercial power storage, weening more people off grid dependency, and further gutting the utility company’s revenues. Solar customers receiving the full retail rate for their surplus power generation don’t have much incentive to store it. They can simply purchase back the energy they need later, usually at night, for the same price they sold the original surplus for. When customers can’t sell their surplus power at the retail rate and they are later forced to purchase power at a higher full retail rate, the customer suddenly has incentive for an individual power storage system. Storage allows the solar customer to utilize their own cheaper generated power and use it when needed, such as at nighttime.
The utility company has begun digging their own grave. This policy encourages the development of home battery systems where customers can use more of their own power that is cheaper than what the utility offers and rely less on the grid. In this scenario, if the utility company responds by again lowering the price they pay for surplus solar energy and increasing infrastructure fees they will encourage even more people to not use their high priced electricity. Customers will obtain solar plus battery systems. Result; more people not being entirely dependent on the utility company for their power needs and less utility revenue. Bolstering systems where individual households and businesses can generate and store a large part, or even all of their energy needs, is becoming more and more feasible. In Hawai’i, we have the nation’s highest energy prices and abundant sunlight to generate power from. Creating a very favorable environment for implementing increasingly affordable and competitive solar plus storage systems. This is already being done in other parts of the world. For example, in Japan, Solar Frontier opened a new facility last year that produces solar residential systems. These systems are competitively priced to the grid and are predicted to be less expensive than power from the grid by 2018. Solar Frontier claims that there is a strong likelihood its residential systems can be expanded and produced in multiple areas in Japan and overseas. In Germany, solar energy storage is undergoing a boom. Systems there are very practical, pay off in just a few years, cut utility costs for homeowners, and the price of storage systems is rapidly falling. Interestingly, the solar storage systems benefit the grid by keeping it more stable.
Deploying solar and storage together allows for increased energy independence, which is important to many people. It will also reduce the demand and dependence on burring oil for electricity production in Hawai’i. This has a lot of benefits economically since the state spends over 5 billion per year on imported oil. It also benefits environmentally by scaling up cleaner energy sources. As more people obtain solar and storage systems they can join together creating a network of instantaneous energy held in batteries. There is potential that this energy can be controlled and dispatched through the grid if commercial and residential entities chose to work with utility companies. Furthermore, homeowners may be able to sell their stored power at wholesale prices to the utility company.
Clearly there are many benefits to solar and storage systems. In the past solar panels and storage batteries were far too expensive, pricing many people out
of these technologies. The good news is that the price
of these rapidly developing technologies is dropping quickly. A study by the Lawrence Berkeley National Laboratory found that solar energy has dropped to 5 cents per kilowatt hour on average in the U.S. This in response to more than a 50% drop in installation costs since 2009 and solar projects being able to produce more electricity more efficiently. Many labs and researchers agree that the price of solar will continue to drop in the next few decades.
Being able to generate solar energy is becoming more affordable and is on track to be the cheapest energy source in the future. Even cheaper than natural gas within the next few decades. The trick now is developing affordable batteries that can hold that energy at the point of demand for commercial and residential applications. Bloomberg New Energy Finance reported
price reductions in lithium-ion batteries at rates very close to that of solar costs. They estimate a learning rate of a little over 20%, meaning that each time these technologies double in size there is an over 20% reduction in price. Ramez Naam, energy analyst, reported the same trend but
a more conservative solar learning rate of about 16%. Many other industrial products exhibit similar learning rates. Ford’s Model T is the classical example of price falling as production scales up. A good omen for the future of solar.
In the future, when quickly declining prices in solar energy generation plus energy storage meet and fall below ever increasing utility prices people will convert to solar plus energy storage systems. Numerous energy experts and researchers agree that this trend is likely to come online with rapid adoption in the next few decades. Adoption of these systems and relying less on the grid or bailing out on the grid all together will continue to eviscerate utility revenues. Boo-hoo.
Last year the Rocky Mountain Institute published a study titled: The Economics of
Grid Defections. In the study they looked at various economic and technological scenarios that would alter the rate of development and implementation of commercial solar and storage systems. They found that solar and storage systems are already cheaper for commercial use in Hawai’i. This is attributed to very high utility costs in the state. Furthermore, in the next decade these systems will be cheap and efficient enough to undercut utility pricing for millions of customers in California and New York under a variety of market conditions. Overall the study highlighted that commercial energy parity is viable in Hawai’i now and will be for millions more in the country within next few decades. Which is good because it will allow more people to convert and utilize clean energy at affordable prices.
Hawai’i is unique from other parts of the country for a many reasons and well positioned for a future of solar plus storage. The time is now to begin implementing a range of clean power practices. Wider scale solar plus storage systems will allow us to get off the dirty energy overwhelmingly provided by the Hawaiian Electric Company and its subsidiaries. Environmental and ethical willingness to convert to cleaner energy sources by many of the state’s residents will create a high demand for these products. Favorable climatic conditions will allow for high rates of production over the life of solar panels. Hawai’i has the nation’s highest electrical prices and is one of the first locations that no longer offers net metering. This tips the economic atmosphere in favor solar plus storage implementation. Residential and commercial customers will soon be able to purchase more affordable and robust battery systems, from companies like Tesla, in the very near future. Moving forward Hawai’i can continue lead in solar energy, environmental awareness, and be at the forefront of how we retool and repower our civilization.