This post is the second of a blog mini-series that will explain the various net metering battles occurring across the United States. The first piece in the series covered California.
As solar power becomes cheaper and more accessible, utilities, installers, and consumer advocates are working with state public utility commissions (PUCs) across the country to secure a sustainable future for solar energy. Each group has a different idea of how to ensure “solar sustainability”: utilities are focused on the cost of maintaining the electric grid as distributed solar generation grows, while installers and consumer advocates want to make sure that net metering policies will adequately compensate solar homeowners for the power they generate. Many states are beginning the negotiation process, but one state has already reached its conclusion – in a ruling released on October 12, Hawaii became the first state in the country to eliminate net metering.
Why was Hawaii the first state to end net metering?
One in eight homes in Hawaii have installed solar panels, giving the state the highest rate of solar penetration in the country. In many ways, Hawaii is the ideal test case for integrating distributed solar generation into the electric system. The state sources most of its non-renewable energy generation from imported petroleum, resulting in the highest electricity costs in the country, and it benefits from consistent sunlight throughout the year. The state also has a goal of meeting all of its electricity demand with renewable resources by 2050.
The same environment that made Hawaii so well-suited for the solar energy market has also created the explosive growth in solar, forcing the state to contend with the practical challenges of incorporating significant amounts of distributed solar electricity generation into its grid. Beginning in late 2013, Hawaiian Electric Companies (HECO), which serves 95% of Hawaii’s population, faced a mounting backlog of net metering applications from customers awaiting approval. HECO cited technical limitations to the grid as the cause for the holdup – when solar panels in a particular area produce more than the area is consuming, it can cause service disruptions – and significant changes were needed to accommodate the growth.
As a result of their interconnection issues, HECO signaled in early 2015 that they would begin evaluating a transitional program that would change the way customers received credit for the solar energy they produced. The end result was an October ruling by the Hawaii PUC that ended the existing net metering program and established a new set of regulations, which include two new tariffs for customers:
- Self-supply option: Customers with energy storage can send a limited amount of electricity back to the grid, but receive no credit for it.
- Grid-supply option: Customers can send their electricity back to the grid and will be credited at the cost of wholesale power from the islands’ utilities, which ranges from $0.15/kWh to $0.28/kWh.
In both cases, solar homeowners who remain connected to the grid will pay a minimum monthly bill of $25 to cover fixed costs like grid maintenance.
What happens now for solar shoppers in Hawaii?
The changes announced by Hawaii PUC will take place immediately, but won’t have an impact on existing customers who are receiving credits on their bills through the old net metering policies. Homeowners with net metering applications pending approval will also be eligible for net metering credits at the earlier rate.
Solar power development won’t disappear in Hawaii – the state’s renewable portfolio standard and its high electricity costs will ensure that there is still a market for solar, even for homeowners. The changes could also lead customers to invest in battery storage and demand flexibility technologies, like smart electric vehicle chargers that take advantage of peak hours of solar power generation.
The PUC’s changes may also contribute to a shift away from distributed solar generation in favor of utility-scale solar. There has been some evidence of that on the island of Kauai, where the Kauai Island Utility Cooperative (KIUC) ended net metering for new customers four years ago. KIUC owns the state’s largest solar farm and just announced that it would be building the first-ever utility-scale solar energy storage system, which will supply solar electricity to the grid between 5 p.m. and 10 p.m.
Shifting incentives mean that now is the time to go solar
As solar net metering policies continue to be negotiated, keep in mind that most changes will only impact new solar installations. If you are considering going solar, now is the time – the federal investment tax credit (ITC) is scheduled to expire at the end of 2016, and as states reach their net metering caps, there’s no guarantee that policies for consumers will remain as favorable as they are right now. Get multiple quotes from solar installers to find the right combination of equipment and financing options for your property’s needs today.
(Update: On December 18, 2015, Congress extended the solar tax credit for homeowners through 2021. Learn more about the extension.)