If you wonder why America’s utilities are rattled by the explosive growth in rooftop solar -- and are pushing back -- William Walker has a story for you.
A flip-flop wearing Walker stands in his driveway pointing to a ubiquitous neighborhood feature – solar panels on the roofs of five of six houses nearby. He lives in Ewa Beach, a development on the sultry leeward coast of the Hawaiian island of Oahu built on land cleared of sugar cane fields.
Shade is scarce and residents here call their homes “hot boxes,” requiring almost round-the-clock air conditioning. Hawaii, which imports pricey oil to power its electricity grid, has the highest utility rates in the nation -- at 37 cents a kilowatt-hour, they’re more than double California and triple the national average.
With bills for 1,600 square foot houses like these running as high as $400 a month, solar is seen as less a green statement than an economic no-brainer given state and federal tax credits for as much as 65 percent of installation costs. Almost every day since Walker and his wife Mi Chong moved in last April, solar installers came rapping on the door, hawking a rooftop system.
They finally bought one: an 18-panel, $35,000 installation producing 5.9 kilowatts of power financed for $305 a month. It would be connected to the grid under a system known as net metering that essentially lets residents deduct the value of their solar-produced electricity from their power bill and even be paid for electricity in excess of that.
Paying for Itself
Walker estimates his bill would have dropped most months to an $18 service charge -- offsetting that $305 loan payment. Anticipating his power bills would continue to rise, he figured the system could pay for itself in as little as five years; his electricity after that would be free.
That is until his utility, a subsidiary of Honolulu-based Hawaiian Electric Industries Inc., told the Walkers they couldn’t connect their system to the grid. They aren’t alone. Solar installers here estimate that hundreds if not thousands of the state’s residents are being put in solar limbo by a virtual moratorium on new connections in many parts of the company’s service area.
The reason, according to the Hawaiian Electric Co.: so many Hawaiians are stampeding to solar that circuits may become oversaturated, causing voltage spikes, damaging appliances, electronics and even the utility’s equipment. The company needs more time to study the matter.
The Walkers, who say they got no advance notice of the shutdown, are now paying both their power bill and their monthly rooftop loan. HECO, as the utility is known, recently told them they will eventually be allowed to join the grid without having to pay for expensive equipment upgrades. It still can’t say when.
“Everyone is on board with getting solar and HECO has now put up a wall,” Walker said. “The only thing we can see is profit motivation.”
Spurred by a drop in panel prices, robust government subsidies and a technology that no longer appears experimental to mainstream America, rooftop photovoltaic solar is bursting out everywhere. About 200,000 U.S. homes and businesses added rooftop solar in the past two years alone – about 3 gigawatts of power and enough to replace four or five conventionally-sized coal plants.
The U.S. set a single-quarter record with 31,000 residential rooftop installations in the three months through Sept. 30. Solar represented 72 percent of all power added in the U.S. in October.
Utilities, seeing a threat to about $360 billion a year in power sales and a challenge to the hegemony of the conventional grid, are feeling the heat and fighting back. HECO, despite criticism from Hawaii’s solar industry, denies the moratorium is anything more than an honest effort to address the technical challenges of integrating the solar flooding onto its grid.
The slowdown comes in a state where 9 percent of the utility’s residential customers on Oahu are already generating most of their power from the sun and where connections have doubled yearly since 2008.
In California, where solar already powers the equivalent of 626,000 homes, utilities continue to aggressively push for grid fees that would add about $120 a year to rooftop users’ bills and, solar advocates say, slow down solar adoptions.
Similar skirmishes have broken out in as many as a dozen of the 43 states that have adopted net-metering policies as part of their push to promote renewable energy. In Colorado, Xcel Energy Inc. has proposed cutting the payments it makes for excess power generated by customers by about half, because it says higher payouts result in an unfair subsidy to solar users.
It faces a fight from solar advocates who are circulating a petition that has attracted 30,000 signers.
In Arizona, 1,000 protesters last month swarmed the state capital while local and national solar advocates lobbied against an effort by utility Arizona Public Service to impose a $50 monthly fee on new solar adopters. Solar advocates said the charge would have crippled the state’s 10,000-worker solar industry and thwarted the desire of residents to have a choice in the power consumption.
State regulators, after two days of often contentious debate, voted to allow the state’s largest utility to charge customers about $4.90 a month for solar connections after Dec. 31 -- less than 10 percent of what it was asking for.
Don Brandt, chief executive officer of APS and its parent company Pinnacle West Capital Corp., panned the deal, saying that while it nods to the impact that net metering is having on utility operations and revenues, it “falls well short of protecting the interests of the 1 million residential customers who do not have solar panels.”
Lyndon Rive, CEO of SolarCity Corp., said it was “crazy for a utility to charge for services they didn’t deliver.
‘‘Why not tax energy efficient homes, or small homes that consume less than average?’’ said Rive, whose company is the nation’s second-largest rooftop solar installer. ‘‘APS just doesn’t want to lose control.”
The battle is far from over.
On the island of Oahu, HECO is “working really hard” to find a solution to oversaturated circuits caused by the rapid solar rollout, CEO Richard Rosenblum said. The utility’s engineering studies on solar are expected to be done by March, he said.
“We see ourselves as a trailblazer,” said Rosenblum. And one of the problems of being a trailblazer is sometimes the trail is not clear.’’
Rosenblum pointed to planned HECO grid investments in smart meters and other communications devices he said that will help it speed up and smooth out the embrace of solar going forward.
Representative Cynthia Thielen, a Republican state legislator who has publicly pushed for the utility to liberalize its solar policies, is more than skeptical.
“This is a company with a drenched-in-oil mentality,” said Thielen, who has served in the legislature since 1990. “They’ve fought from day one on renewables. I look at the company as ultimately becoming obsolete unless it changes its practices.”
What’s mind-boggling to many of the stewards of America’s 3,200 utilities is how fast solar has mutated from a fringe power source to a technology being peddled today at outlets like IKEA Group and Home Depot Inc.
Sure, environmental groups like the Sierra Club are aboard. But solar is also being embraced by middle-class home owners like the Walkers, Republican legislators like Thielen and corporations like Wal-Mart Stores Inc., which expects 1,000 of its approximately 4,500 stores to be solar powered by 2020.
A pro-solar group in Georgia consisting of Sierra Club members and Tea Party founders calls itself the Green Tea Coalition.
The fuss might seem overheated based on current numbers -- solar power provides less than 1 percent of the nation’s energy needs. Yet it’s the rapid escalation of solar and the exponential long-term projections for its rollout that caused Fitch Ratings Ltd. in July of this year to warn that the solar juggernaut is “casting a shadow on U.S. utility rate design.”
Moreover, solar’s potential is coming as escalating fossil fuel prices make it competitive -- even without subsidies -- with conventional electricity.
That’s already occurred “at a domestic level in many countries” with some U.S. states like Hawaii and California already at or near parity and others to follow soon, according to an Aug. 8 research report by Citigroup Inc. Parity will only escalate as fossil fuels get more expensive and solar gets cheaper.
“This dynamic is not being fully appreciated in the power sector,” according to the report, written by a group of analysts including Shahriar Pourreza and Ryan Levine. “Not only does solar steal share of new electricity demand, it parasitically steals demand from previously installed generation, and does at the most valuable ‘peak’ part of the demand curve.”
As for solar’s ultimate potential, California alone could produce 76,000 megawatts of solar power -- more than the state’s total installed capacity in 2012 -- if it deployed all the rooftop solar it has room for, according to data from the Solar Energy Industries Association, a trade group.
All of which makes the fights being played out in Hawaii and Arizona pivotal -- they are certain to set the stage and tone for future battles in other states. And given what’s happened, those future fights may be messy.
Money poured in to Arizona in the weeks leading up to the November vote by state regulators on the proposed monthly solar charge. APS and its backers spent $3.7 million on an ad campaign while solar advocates mustered $350,000. Lobbyists, hired-gun activists and pollsters all waded into the fray, with ads that took on the appearance of a negative electoral campaign.
A utility-supporting group ran a 30-second television ad comparing California solar companies helping to fund the pro-solar campaign to Solyndra LLC, the Obama-backed solar-panel maker that went bust after defaulting on a $535 million federal stimulus loan guarantee.
Meanwhile, solar supporters used Barry Goldwater Jr., son of deceased Republican Senator Barry Goldwater, in a radio spot that featured the sound of a trumpeting elephant, the symbol of the Republican party, and called on listeners to prevent APS from “trying to kill energy choice.”
When you speak with Jeff Guldner, APS’s senior vice president of customers and regulation, he echoes a familiar and reasonable argument as to why solar users connected to the grid should help pay to maintain it.
A system of generous net metering rules may have made sense at the outset of the solar revolution to get the party started. Now, however, it’s clear that it will have enormous disruptive impacts on APS and other utilities that bear the burden of keeping the grid operating.
“Somebody has to pay for maintenance and upkeep,” Guldner said, and solar users in the current rate structure aren’t doing so.
One problem with those economic arguments is that the politics aren’t yet lining up to support that. People may be fond of Apple Inc., Google Inc. or Walt Disney Inc. but the public doesn’t often love its power supplier -- no power or gas utility appeared on Fortune magazine’s list of the 50 most admired companies in 2013.
Republican and libertarian support for solar is informed by a “don’t tread on me” response to the utility monopoly system, making foes of those that might have been friends. It’s a wing of the pro-solar coalition that no one -- and certainly not the anti-solar crowd -- anticipated.
Bill Hansen is part of that unexpected pro-solar crowd.
On the warm, blue-sky day when Arizona began two days of hearing on APS’s $50 monthly solar charge, Hansen, a retired 83-year-old former Iowa lawmaker and lifelong Republican, rose at 6 a.m. and made the 35-mile drive from his Sun City home to Phoenix to give the utility and the Arizona Corporation Commission hell.
Hansen, president of the Sun City West Property Owners & Residents Association, represents the retirement community’s 24,000-plus residents, 10 percent of whom have investments in solar-energy companies.
He had plenty of company. On the day of the vote, the pro-solar demonstrators vastly outnumbered those who had come to plead the utility’s cause. They were also in a far better mood - - outside, a brass band tooted out standards, a DJ played loud rock music and organizers doled out t-shirts, water bottles and pizza to people holding signs that said “People Power Over Monopoly Power: No to Solar Tax!” and “Solar Works For Arizona.”
Inside, it was clear that APS and its supporters were out of luck. The idea for the $4.90 fee came from the solar side -- and very likely swung the vote.
The charge won’t be enough to cover the utility’s grid costs until their next rate case in 2015, APS’s Guldner said, and will probably require the company to ask for much bigger fees down the road.
“In 2016, that rate increase could be a big one” and the utility will probably win the argument, Guldner said.
Bob Stump, chairman of the Arizona Corporation Commission, said he voted in favor the $4.90 charge because he feared the higher fee sought by APS would have slowed solar development in the state, jeopardizing the ability to produce 15 percent of its power from renewables as required by law.
“It’s a fair outcome,” said Stump.
Utilities may be missing out on some big solar positives, said Jigar Shah, head of a consulting company and author of “Creating Climate Wealth.” Solar generation peaks at the hottest time of the day, the time most people switch on their air conditioners, thus taking the strain off conventional power plants when they most need the relief.
Aggregated solar power will also let utilities put off building costly plants and transmission lines, saving investors and ratepayers money, said Shah, the former CEO of SunEdison LLC.
Shah’s advice: get with the program, otherwise utilities are simply inviting people to leave the grid.
“The utilities are playing this wrong, saying you’re with us or against us,” he said. “It’s not the solar industry that’s the problem -- it’s their refusal to recognize the benefits of new technologies.”
Policy decisions are already affecting solar installations. HECO’s moratorium in Hawaii is putting a damper on what had been a booming home-grown solar industry there.
The fourth quarter is typically the busiest time of the year for solar installers as homeowners rush to take advantage of federal and state tax incentives. Installers can rack up as much as two thirds of their annual sales in the last three months of the year. Instead, solar companies in Hawaii say their revenue has been reduced by half or more compared with the same time last year. Inventory is piling up.
The new restrictions “are slowing things down with no easy solution,” said Leslie Cole-Brooks, executive director of the Hawaii Solar Energy Association. “It’s not good news for the solar industry or for customers who want to invest in solar.”
One of the island’s biggest solar wholesale businesses is run out of a group of drab cinder-block warehouses at the terminus of a narrow, dead end-road near the edge of downtown Honolulu’s Chinatown. Rolf Christ, a German native and the company’s owner and president, has been working in the Hawaii solar industry since 1980.
The past three and a half years have been crazy, he said. Solar sales on Oahu were so robust that Christ has more than quadrupled his warehouse space for R&R Solar Supply to 25,000 square feet from 6,000 square feet. Now, a lot of that space is stuffed with solar modules stacked two-stories high on shipping pallets.
Christ typically orders modules before the fourth quarter. HECO’s moratorium has “pretty much brought the whole industry to a screeching halt,” he said.
“It was the worst time of year to do it,” he said of the policy change. “It was the worst way to do it.”
HECO has been around a long time and some, like Thielen, think that may be its problem. It traces its roots to 1881 when Hawaii’s King Kalakaua met Thomas Edison and five years later decided to light his palace with electricity. Its subsidiaries serve 95 percent of the state’s residents, bringing power to Oahu, the Big Island, Maui, Molokai and Lanai.
The issue, according to HECO, is that for about 20 percent of Oahu’s grid there is so much solar connected you can’t add more without further study because of the potential for reliability and safety issues. Solar advocates have said the figure is arbitrary.
Arbitrary or not, it means new solar customers must await engineering studies to determine if they can connect without causing surges that may damage appliances, electronics or utility equipment. Some might have to pay for utility equipment upgrades that could cost thousands of dollars before getting approval to connect.
“This is about safety,” said Scott Seu, HECO vice president for energy resources and operations. “We are so far ahead of the rest of the nation as far as the amount of distributed rooftop solar in our neighborhoods that we are now at points where there are potential safety and operating liability issues.”
The issue of solar saturation is complicated and controversial and both sides in Hawaii have their points, said Michael Coddington, a senior engineer at the National Renewable Energy Laboratory in Golden, Colorado. HECO’s policies on solar connections are “similar to many other states” and could be considered “progressive” relative to the policies of many utilities, he said.
“The utility is following the rules per se,” said Coddington, who co-wrote an NREL study on the matter. On the other hand, if you are a solar photovoltaic developer or customer, “you want the ’fast track’ approach, as detailed impact studies are often costly and time-consuming and could require costly mitigation strategies. I understand the frustration.”
Customers like the Walkers are more than a little frustrated. They see the company as dragging its feet in an effort to stave off a threat to its very business model. And even when they finally get to connect, they wonder if the hassle has been worth it.
‘Driving Us Off’
“I feel like they are driving us off the grid,” Mi Chong said.
Phil Undercuffler hopes HECO will drive lots of people off the grid. Then he will sell them batteries.
Battery storage is the holy grail of the off-the-grid crowd. They let users store up excess energy for rainy or cloudy days when solar isn’t working. In theory, you don’t need a power company if you have solar tied to battery storage, especially here. Oahu gets an average of 271 sunny or partly sunny days a year.
Last month, Undercuffler spoke to a standing-room-only audience of more than 100 solar installers in a Honolulu Marriott who came to hear his pitch for battery storage units sold by Outback Power Inc.
The vast majority of HECO solar customers don’t have battery storage; it’s considered too expensive. With the possibility that the moratorium in some sections of Hawaii could go on for two more years, homeowners could make batteries work financially and cut the cord from the utility altogether, said Undercuffler, Outback’s director of product management and strategy.
“You watch, all these installers are going to go to batteries,” said Jeff Davis, a partner in an Oahu company called Kamiyama Solar Electric who is known as the Solar Guy on a local talk radio program. “The utility has opened up the genie bottle.”