The Hawaii Public Utilities Commission announced on October 12th that it was ending net metering as the public had come to know it. The decision was released in a 321-page document, characterizing the Commission’s decision as “…the first step in an evolution of distributed energy resources (“DER”) policies in the State of Hawaii…” For solar, Hawai’i may be the bellwether state. For a state that passed legislation targeting deriving 100 percent of its electricity from renewables by 2045, doing anything that de-incentivizes rooftop solar seems counter intuitive.
At least 18 of the 44 States allowing net metering have been reviewing modifications to their net metering regulations, but Hawai’i has been the first to eliminate it, replacing it with a two program options. Net metering allows the customer with solar to get credit for any excess energy they generate, generally netting out their consumption against production on an annual basis, in essence, running their meter backwards. Though the Hawai’i PUC’s ruling addresses a plethora of issues, both policy and technical, their solution to accommodating the explosive growth of homeowner rooftop solar was fairly inelegant and has the feel of crisis management. It’s as if everyone was taken by surprise by how readily customers embraced solar. As early as 2008, the State and HECO, the State’s largest utility, entered into an agreement to accelerate the addition of renewable energy resources into their power resource mix. In light of the high cost of electricity in Hawai’i, this publicly stated objective and commitment, it is curious as to why they seem to have been so ill prepared for the influx of renewable energy from rooftop solar.
Under Hawai’i’s new system, one option is what’s called “self-supply,” where a solar customer may still self-generate but generation of excess power is highly discouraged, if not prohibited. Any excess power generated goes to the utility without the customer receiving compensation, and with no annualized, “netting out” accounting. Additionally, any “inadvertent” export to the grid can be for no more than 60 seconds, twice a day. A condition that will no doubt result in the downsizing of solar systems, or alternatively, stimulate investment in battery backup systems. The advantages to the customer of this program is that they qualify for fast track permitting, with minimal system impact study resulting in a much expedited grid interconnection.
In the alternative program, a customer can enter into a “grid-supply” contract, under which the excess power generated by their system every month is credited to the customer’s account at a prescribed tariff, which will range from $0.15 on the island of Oahu to $0.28 on the island of Lanai (population 3,102), approximately half the value of what the current grandfathered in net metering customer gets, which is $0.279 on Oahu and $0.3667 on Lanai. The other significant change is the billing credits true up will be calculated on a monthly basis, and not an annual basis. Should a customer purchase 500 kWh one month from the utility, but generate 600 kWh, the customer would receive no credit or compensation for the 100 kWh generated in excess of consumption.
Another uncertainty to the customer is that this program is considered “interim,” and will only be in place for 2 years, making it difficult to evaluate the true long-term economics of investing in a solar system.
Net metering has increasingly gotten muddied and dragged into the fight between the pro-renewables and anti-renewables camps. In most cases, it has been at the behest of the utility companies that net metering regulations be modified or abolished, but there has been political pressure from such organizations as ALEC, the 60 Plus Association, Americans for Prosperity, and the utility industry trade organization, the Edison Electric Institute. The 2013 battle over net metering in Arizona precipitated by one utility, Arizona Public Service Company, was particularly bruising, with lop-sided and somewhat surreptitious spending by those opposing net metering.
The argument from the anti-net metering camps is generally couched as the net metering customer is getting a free ride, not paying their fair share of maintaining the infrastructure delivery system, with the poor and non-solar customers being burdened with paying a disproportionate share. The pro-net metering proponents deny this is the case, citing the numerous studies supporting the benefits to the grid distributed power offers.
The recent ballot initiative in the State of Florida (backed by an unlikely coalition of environmental groups and Tea Party affiliates) to change the constitution to allow third party sales of power (a model championed by SolarCity) has been credited for fueling solar’s exponential growth in the U.S. Yet it has met fierce and well-financed opposition from all the utilities operating in Florida, as well as various Koch-backed entities. Even the Florida Attorney General, Pam Bondi (she also just signed onto the lawsuit against the EPA’s “Clean Power Plan”) joined in the battle, opposing the ballot initiative. Though the ballot initiative was just approved by the Florida Supreme court, it is not a done deal. Those supporting the ballot measure must now collect 683,149 signatures to get the measure on the ballet and win 60 percent voter approval.
The impact of not allowing third party funding of solar in the state should not be minimized. The Sunshine State ranks 20th nationally in the amount of rooftop solar installed, behind such not-so-sunny-states as Massachusetts (fourth), New Jersey (sixth) and New York (seventh).
There have been numerous studies on the benefits of distributed power (e.g. rooftop solar) to the grid. Though the benefits may vary within the utility grid and must take into account other variables, generally studies have determined that distributed power reduces line losses, increases efficiency of the grid, decreases the need to build new power plants, and if integrated properly into the system, increases grid reliability. In Minnesota, where power prices are generally low ($0.077 to $0.13 per kWh), the state’s largest utility Xcel, in hearings before the PUC, valued distributed power at $0.145, a price higher than retail. This valuation puts the $0.15 price the utility in Hawai’i is willing to pay in a more critical and questionable light.
If solar energy is to continue its exponential growth, it must develop a sophisticated argument against a simplistic avoided-cost formula for valuing distributed power. Distributed power must be viewed for its potential impact for developing a 21st century power grid, where distributed power is designed to be an integral component of the utility grid. The solar industry must find a way to work with the utilities not in an adversarial role, but as a partner in developing the utility grid of the future.
Unfortunately, few utilities seem to be open to this type of relationship. The utilities seem to be unable to rid themselves of their traditional territorial reflexes, and all too often the regulators support them.
Hawai’i’s decision to end the traditional net metering model will not be a death blow to solar in Hawai’i, but it will be disruptive. In other states, a similar modification to the model could have a significant impact. There needs to be well-organized and -financed intervener actions at the state levels to ensure that a Hawai’i-type solution isn’t implemented. The Arizona battle, where the utility and its allies outspent the solar industry 10 to 1 in its campaign against net metering, should be a warning – and more than likely portends battles to come.