It’s all a matter of time: Hawaii’s shared renewables plan

Hawaii
April 7, 2017

Hawaii, as we have written, has shown it is at the forefront of what might be called “solar consciousness” in America. The state boasts more rooftop solar systems than any other state. About 10 percent of households have solar. Hawaii’s recently rejected a proposed merger between utility Hawaiian Electric (HECO) and NextEra in large part because of concerns the utility would not honor the state’s passionate commitment to renewable energy.

Now, Hawaii’s Public Utilities Commission is turning its attention towards community solar. A proposed new program, officially called “Community-Based Renewable Energy” (CBRE), or, unofficially, “shared renewables,” will try to solve three challenges at once: incentivizing the adoption of community solar power, encouraging the combination of solar power and energy storage, and utilizing energy resources in such a way as to optimize the function of the electric grid.

Hawaii’s energy system faces an interesting problem: partly because of the high penetration of rooftop solar in the state, the grid is suffering a surplus of energy at midday (9 a.m. to 5 p.m.) Hawaii’s challenge is to continue to grow renewables, while at the same time shifting power generation from midday towards times of “peak” usage (5 p.m. to 10 p.m.) when the grid needs electricity most. In other words, can the system not only generate sufficient clean energy for its needs, but clean energy at the specific times at which the grid most demands it?

In 2015, HECO proposed a program to develop community solar in response to a law mandating that Hawaii’s utilities come up with a CBRE program. The Hawaii PUC rejected this proposal and released an alternative one. The CBRE program, if ultimately approved, will phase in over a period of several years.

It remains unclear when the program will begin to be implemented. Even if the order is signed soon (and the PUC has given no indication one way or the other), there are other details to be taken care of, such as contracts to be signed. However, Richard Wallsgrove, Policy Director for the pro-clean energy community organization Blue Planet Foundation, believes that it’s not a matter of “if,” but rather “when” a CBRE program will be approved.

Based upon the process so far, it won’t take very long because changes to the structure would probably be minor before the final order is promulgated. He also points out that the legislation that authorized the program gives the PUC considerable leeway to implement CBRE as long as they believe it’s in the public interest. All evidence points to the fact that the commission does think CBRE is in the public interest, according to Wallsgrove.

The first phase will last two years, with 18 MW of standard facilities allowed at the beginning and 62 MW across three different types of projects available during the second year. Phase two will begin after the commission makes necessary tweaks following their examination of the first phase. Included in the program is a time-of-use (TOU) rate intended to answer concerns about mismatched electricity supply and demand. Time-of-use rates are electrical rates adjusted by time of day, depending on the needs of the grid. This ensures that electricity sent to the grid is compensated most when it is most needed, and least when it is least needed.

The PUC’s proposal received strong support from Blue Planet Foundation. However, the organization has a number of reservations and suggestions for the PUC. In this article, for example, Wallsgrove expressed a preference for “a dynamic TOU rate that applies on both sides of the equation”: that is, on the energy consumption side (the energy consumed by the solar subscriber’s household) as well as on the energy production side.

“By ‘dynamic,’ I mean a rate that changes in real-time (or near real-time) to reflect the needs and state of our electric system.” Wallsgrove said. “In some places, this is day-ahead pricing, which allows generators, demand response providers, and customers to plan how they will interact with the energy market. But a truly dynamic TOU rate would be more than day-ahead pricing; it would provide a market signal to providers, users and storers of energy that would actually help to balance our electric system from moment to moment.”

Hawaii’s proposed plan divides all shared solar project options into three categories: a) Standard projects, b) Peaker projects and c) Utility projects:

  • Standard projects are developed, owned and operated by a third party.
  • Peaker projects must deliver 85 percent of monthly output during peak hours, for which they can earn a higher per-kilowatt-hour “Peaker Credit Rate” during peak hours. This rate, determined during the competitive bidding process, will be capped at $0.10 per kilowatt-hour above the on-peak rate.
  • Utility facilities must provide at least 75 percent of their capacity to low-to-moderate-income (LMI) customers.

“The concept of Peaker projects is designed to allow a path specifically for CBRE projects that will attack our energy peak,” Wallsgrove said. “Standard projects are designed to provide an entry point for projects that won’t have this focus on the peak, although they would still benefit by providing on-peak energy because the TOU rate is higher at that time. Utility projects are intended to allow the utility to work on specific issues that aren’t being otherwise addressed by CBRE projects: for example, enabling projects for participation by low- and middle-income customers, if those ‘LMI’ customers are not being sufficient represented in non-utility projects.”

As to exactly why the PUC chose to have the utilities fulfill this role with LMI customers, Wallsgrove said, “I don’t know if it’s spelled out in the PUC’s documents. My guess is that one of the commission’s open questions is: what is the utilities’ primary role in community solar, as a provider of energy or as an administrator? For phase 1, the commission decided that the utilities’ role should be primarily administrative. They didn’t want to make the CBRE program utility-centric; they wanted to give space to other players. But this applies only to Phase 1, not necessarily to Phase 2, which could be entirely different.”

The particular – indeed unique – energy circumstances in Hawaii have led some to presume that what the state is planning to do with CBRE might not easily be replicated elsewhere, but Wallsgrove disagrees.

“The PUC’s proposed program and pricing mechanism is based on the marginal energy costs (and some other factors) on each of Hawaii’s island grids. The concept of a ‘peaker’ category for CBRE projects is based on the fact that rooftop solar has driven our energy peak to the evening hours.”

Wallsgrove also pointed out that the assumption that adopting CBRE is easier in Hawaii is a false one: “The high penetration of solar [in Hawaii] will make it more difficult to interconnect CBRE solar projects, unless/until our utility takes more steps to balance the grid,” he said. States with low solar penetration, he argues, could provide CBRE interconnection with greater ease and speed.

A major challenge of a successful CBRE program would be to convey the concept of dispatchability and TOU to the general public. Even those who might be interested in community solar might not be willing to commit to something they don’t understand. So how can time-of-use pricing be communicated to ratepayers in such a way that they will embrace it?

“Launching rooftop solar in Hawaii was successful, in part, because it was simple: solar panels generate clean energy on a ratepayer’s roof, and the ratepayer gets a bill credit,” Wallsgrove said. “For CBRE to succeed, we need to aim for the same simplicity. Over time, the concept of TOU will become more widely understood. In fact, this is not new: consumers are intimately familiar with different rates for different times/days in phone and cell phone service. Our hope is that the CBRE program will be driven by two forces: (1) existing communities/networks that decide they want to generate clean energy with a CBRE project; and (2) developers who want to sign up subscribers.

“We hope that the utility will embrace these concepts, and will continuously work to use their customer engagement opportunities to help consumers understand these issues,” Wallsgrove said.