Image source: SunPower.
Residential solar can be a disruptive force to utilities, and they know it's a big threat. But even states like California and Arizona, where there are a significant number of residential solar customers, solar on rooftops isn't a big enough piece of the energy picture to be a threat to utilities' viability.
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In Hawaii, the story is completely different. Electricity in Hawaii is so expensive, and sunlight so abundant, that residential solar is a no-brainer for the state's residents. The state's electric utility, Hawaiian Electric Industries , has fought these solar customers tooth and nail, even to the point of angering regulators last year.
But the utility recently got an important proposal from regulators that could lay the groundwork for residential solar in the rest of the country. And it presents both challenges and opportunities for the solar industry.
Hawaii is moving beyond net metering The Hawaii Public Utilities Commission recently filed a ruling to close net metering to new participants, potentially ending a contentious battle over the net metering struggle in the state.
If you're not familiar with net metering, it simply allows a homeowner with solar to send any extra electricity they create during the day to the grid and consume electrons at night at will. They only pay for the net electricity they use.
Utilities across the country have been fighting this structure, arguing that it doesn't properly compensate them for the cost associated with running the grid and creates stress on the grid in early evening hours, when the sun goes down, people get home from work, and electricity usage goes up. In Hawaii, the battle was especially fierce because the state has the highest penetration of rooftop solar in the country.
What the Hawaii PUC is recommending is a self-supply tariff and a grid-supply tariff for future rooftop solar installations. Here's how they would work.
- Self-supply tariff:Users who want to consume the solar electricity they create on site would be eligible for an expedited review of their installation (something that has recently been delayed as long as months by the utility). They could only send a limited amount of electricity back to the grid and wouldn't be compensated for what they send to the grid at all. Think energy storage.
- Grid-supply tariff:Consumers who still want to send some electricity to the grid could use the grid-supply tariff, which allows for solar energy sent back to the grid to be compensated at the wholesale rate, which can be as little as $0.15 per kWh, less than half of Hawaii's retail electricity rate of $0.30 per kWh. Electricity used on site would still avoid the higher retail electricity rate.
On top of this, there would be a $25 monthly fixed cost for each homeowner. That gives the utility some compensation for supplying the grid infrastructure in place today and mirrors minimum fees many utilities around the country are proposing.
This is a construct that makes a lot of sense for homeowners and utilities, and it could lead to disruption in the way solar companies operate.
Image source: Tesla Motors.
The birth of energy storageIf you're a fan of energy storage, this could be the break you've been looking for. One big problem with energy storage today is that it doesn't have a real business model for homeowners. Net metering literally makes it a no-value proposition for most of the country. Hawaii may have flipped that on its head.
The self-supply option in Hawaii means homeowners with energy storage could produce energy during the day, and instead of sending it back to the grid for $0.15 per kWh, they could save that energy and avoid spending $0.30 per kWh on electricity at night. That spread would easily be wide enough to justify energy storage.
This creates an incredible opportunity for SolarCity , Tesla Motors , and SunPower . Tesla is partnering with SolarCity to sell its Powerwall storage systems and the solar system to match. Hawaii's new regulatory structure could create an opportunity for the companies to install thousands of Powerwalls and solar systems, testing the systems for a broader launch in the continental U.S. down the road.
SunPower has been working on energy storage with Sunverge. It is developing software that will allow homeowners to use energy more smartly and control devices like appliances and electric car chargers. These systems are mostly in pilot programs today, but Hawaii provides an opportunity to broaden that scale, and SunPower's high-efficiency panels could add more savings than competing offerings under this model.
We've known for years that new rate structures are coming, but no one knew exactly what they would look like. Hawaii is paving the way, and these could be key changes for utilities and solar companies across the country. These two proposed structures for homeowners make a lot of sense, and they also open up a new world of energy storage that could change energy forever.
The new energy paradigm If rate structures change in a way that makes it advantageous for consumers to produce their own energy and use it on site, it changes how we'll have to look at energy in the future. Homeowners leaving the gridwill be a real option, but so will energy management, energy storage, and solar.
For companies leading the charge, this presents tens of billions in potential revenue each year. SolarCity, Tesla Motors, and SunPower are three to watch because they're already leading the way, and I think they'll continue to do that with these changes in Hawaii.
The article Hawaii May Have Just Given Energy Storage a Huge Boost originally appeared on Fool.com.
Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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