The number of rooftop solar permits issued in Hawaii fell significantly in 2017. But solar advocates say they're cautiously optimistic the market will soon turn a corner despite ongoing struggles. 

On the island of Oahu, the state’s largest solar market, a total of 2,993 PV system permits were issued last year, according to data collected by Marco Mangelsdorf, president of Hilo-­based ProVision Solar. That number compares to 4,591 permits issued in 2016 and 7,493 permits issued in 2015 -- representing declines of 34 percent and 60 percent, respectively.

The all-time peak for solar permits issued on Oahu was in 2012, when the Honolulu Department of Planning and Permitting processed 16,715 applications. Compared to that banner year, the figure for 2017 was 82 percent lower.

Other islands also saw permits plummet year-over-year. Permits fell by 28 percent on Hawaii’s Big Island (from 1,256 in 2016, to 906 in 2017) and by 59 percent on Maui (from 1,657 in 2016, to 676 in 2017). Last year’s total on Maui was down a whopping 80 percent from 2015.

The change stems from the Hawaii Public Utilities Commission’s decision to end the net energy metering (NEM) program for Hawaiian Electric Co. utilities, including the Hawaiian Electric Company (HECO) on Oahu, the Maui Electric Company (MECO), and the Hawaiian Electric Light Company (HELCO) on Hawaii Island.

“Hawaii rooftop PV peaked in 2012-2013 and has been losing solar steam ever since,” Mangelsdorf wrote in an email. “With the elimination of [net energy metering] by our [Public Utilities Commission] in October 2015, one of the main incentives to go solar has been diminished as less attractive interconnect programs (Customer Grid Supply and Customer Self-Supply) were introduced.”

Kauai, which is served by the Kauai Island Utility Cooperative, saw the smallest drop-off in solar permits among Hawaii counties last year. KIUC ended its retail-rate net metering program in 2009 and switched to compensating rooftop PV customers at wholesale electricity rates, which has allowed for more market stability relative to other islands, according to Mangelsdorf.

Hawaiian Electric utilities, meanwhile, are still in the thick of enacting policy changes.

Hawaii introduces two new solar tariffs

On October 17, the PUC issued an order updating Hawaii’s existing interconnection programs. Regulators also created two new tariff programs for distributed energy resources: Smart Export (SE) and Customer Grid Supply Plus (CGS+).

Under SE, customers who install rooftop solar and home energy storage have an option to export excess power captured during the day during the non-daytime hours from 4 p.m. to 9 a.m. Under the CGS+ program, customers can install solar without adding energy storage, but have to allow their utility to control how much energy flows from that solar system to grid.

On February 20, the Hawaiian Electric companies will go live with the two new PUC-mandated interconnect programs. Customers will be able to sign up for SE and CGS+, although many of the technical details are still being worked out.  

Under the CGS+ tariff, for instance, Hawaiian Electric will have the ability -- for the first time ever -- to curtail new rooftop solar PV systems when grid conditions do not require renewable energy feeding into the grid, according to Mangelsdorf. Potential CGS+ customers must have an “acceptable telemetry interface” to allow for communication between the PV system and the utility-supplied “smart production meter.” In simpler terms, if Hawaiian Electric decides a customer’s cellphone signal isn’t strong enough to serve as a telemetry interface, the homeowner is out of luck.

If the utilities establish strict guidelines, it will disenfranchise no small number of potential CGS+ adopters, especially on the Big Island and other rural areas of Oahu and Maui, Mangelsdorf said. The PUC and the solar industry will be paying very close attention to the information Hawaiian Electric provides this week with respect to new CGS+ systems.

“Hawaiian Electric has long wanted greater control over rooftop PV,” he said. “Now they’re getting it…and trying to figure out exactly how it’s going to work in the real world of inconsistent wireless coverage across our chain of islands.”

“We will find out more details tomorrow just how HECO et al. expect to implement the required communications and control systems to achieve this feat,” Mangelsdorf said. “Once again, cue the Star Trek music -- [we’re] going where no utilities have gone before.”

A brighter solar future?

While 2017 saw solar permitting lag, the outlook for rooftop solar in Hawaii is beginning to look stronger.  

The number of solar permits on Oahu last month saw an 18 percent increase over January 2017, according to Mangelsdorf’s data. Of the 229 PV permits issued on Oahu in January, 122, or 53 percent, included energy storage. That number is expected to grow as more and more self-supply systems come online.

Solar permits issued on the Big Island were also up last month, from 46 in January 2017 to 102 solar permits in January 2018. Greater access to home energy storage is one of the primary driving factors. Coupled with the introduction of new solar tariffs, Hawaii’s rooftop solar market could begin to turn a corner in 2018, Mangelsdorf said.

The CGS+ and SE tariffs could open up a combined 84 megawatts' worth of capacity space across the Hawaiian Electric service territories. Battery storage, meanwhile, has a potential new customer base of more than 80,000 homes with existing grid-tied PV systems across the islands.

Outlook for Customer Grid Supply Plus and Smart Export Tariffs
A recent report

by Hawaii's Department of Business, Economic Development and Tourism recorded an eighteenfold increase in the number of permits issued for battery storage projects coupled with rooftop solar in the city of Honolulu. City data finds 731 residential energy storage projects received permits last year, compared to just 40 in 2016.

New solar tariffs will continue to make energy storage attractive. If passed, new legislation that would establish energy storage tax credits in Hawaii (SB 2016) would give batteries an additional boost.

“As more and more storage goes live, one of the juiciest questions is when and how will storage installed at the sites of customer-generators begin to provide greater resilience within the grid,” said Mangelsdorf. “One need look no further than Puerto Rico, where 40 percent or more of residents are still without reliable electricity more than five months after Hurricane Maria, to see what can happen to an island grid without adequate redundancy and resiliency."

How permits compare to installations

Permits are just one of the solar market story in Hawaii; installations are another. And when it comes to installations, the story is a little more complex.

According to Hawaiian Electric, the number of rooftop solar systems connected or approved in 2017 increased 3.6 percent from 2016. Including utility-scale projects, HECO, MECO and HELCO collectively saw their largest year-to-year increase of installed solar since 2013 -- with 695 megawatts of cumulative installed solar, up 109 megawatts from 2016.

Due to that growth, 20 percent of residential customers at both HECO and MECO have rooftop solar installed or approved for installation, up from 17 percent at both companies in 2016. At HELCO, 16 percent of residential customers have solar installed or approved, up from 15 percent in 2016.

This 2017 success story doesn’t seem to fit with data showing the number of permits has progressively declined in recent years. But that’s because there’s a significant lag between permitting a PV system and it when actually comes online and is recorded by the utility company as new distributed energy capacity, said Mangelsdorf. Put another way, a fair amount of the PV added capacity recorded by the utility companies in 2017 represents legacy NEM systems that were permitted in 2016.

By that logic, rooftop PV installations are likely to see uneven growth through 2018 due to the low permitting numbers from 2017.

The discrepancy between permitting and installing also appeared in solar deployment figures for January 2018. The number of rooftop solar systems that Hawaiian Electric utilities brought online last month showed a slight improvement over January 2017, according to data collected by the Hawaii Solar Energy Association. But the market is still “a far cry” from where it was in years prior and where the state needs to be to achieve its 100 percent renewable energy target, according to Will Giese, HSEA executive director.

Solar Permitting Figures for January 2016, 2017 and 2018

While solar installations were up year-over-year, the outlook is less positive. Solar contractors “pull permits” when they anticipate developing a project in the near future, and over the past few years, that number has been in decline.

“These figures are absolutely unsustainable over the long term,” said Giese. “Declining trends of this nature will result in lost local jobs and an inability for consumers to choose cheap renewable energy.”