The utility business model and its engineering model are both being tested in Hawaii.
Oahu, Hawaii's most populous island, boasts PV solar penetration rates of 10 percent on an electrical grid where most of the 35-cents-per-kilowatt-hour-power is produced by oil-fired generators.
Despite NREL studies concluding that Oahu's grid can handle 20 percent wind and solar penetration, keeping the lights on amidst record levels of distributed generation (DG) is another thing. And that's the challenge faced by utility Hawaii Electric (HECO) on the Oahu grid.
According to the HECO website, there are 40,159 solar PV systems interconnected on the Hawaiian Electric Company’s grids with a total capacity of 300 megawatts, leading the U.S. in solar watts per customer and solar installations per customer.
More than 70 percent of rooftop systems are on Oahu. With 29,558 PV systems and 221 megawatts, 10 percent of HECO's Oahu customers now have rooftop solar, a higher percentage than any utility on the mainland.
At what PV penetration rate does a residential utility circuit become unsafe? Who pays for the upgrades to handle the new hardware needs of a bidirectional grid? Does high DG penetration, along with net energy metering, threaten the utility business model as well as its engineering model? How will solar installers fare amidst this market growth and regulatory regime on the island?
That's the experiment currently in progress in Hawaii today -- an experiment that has created some tension between solar installers and the regulated utility, HECO.
A new interconnection policy
A total of 17,609 solar installations, more than 129 megawatts of capacity, were added to the HECO, MELCO (Maui) and HELCO (Hawaii) grids in 2013 -- a 39 percent increase over 2012.
According to the utility, "This unprecedented rapid growth in rooftop solar in Hawaii has resulted in some neighborhood circuits reaching extremely high levels of photovoltaic [penetration]. An increasing number of distribution-level circuits have rooftop PV capacity exceeding 100 percent of the daytime minimum load, the trigger for interconnection studies and possible implementation of safety measures or upgrades before new PV systems on that circuit can be interconnected to the grid."
HECO has enacted a new policy which seeks a more deliberate approval of solar rooftops, as well as potentially charging power users for circuit upgrades. Here's a condensed summary of HECO's policies for interconnection requirements study (IRS), drawn from the utility's website.
- Single-phase projects that are 10 kilowatts or smaller on circuits with up to 100 percent (increased from 75 percent) of daytime minimum load (DML) do not require an IRS. (Daytime minimum load refers to electricity demand from 9 a.m. to 5 p.m.)
- In some cases, protective equipment upgrades may still be needed to interconnect safely on circuits with PV penetration levels of between 75 percent and 100 percent of DML. HECO will determine if any circuit or project upgrades are needed through a supplemental review, at no cost to the customer. If the utility installs the circuit upgrades, most customers will pay a prorated share of the cost, based on the proposed PV system size.
- When customers wish to add PV systems larger than 10 kilowatts and up to 100 kilowatts on circuits with penetration levels of less than 100 percent of daytime minimum load, no IRS will be needed. If circuit upgrades are needed, HECO will install them whenever possible, with most customers paying a prorated share of the cost.
- For circuits already equal to or greater than 100 percent of daytime minimum load, where an IRS might still be needed, HECO engineers will "proactively use experience with the supplemental reviews" (at HECO's expense) and past interconnection studies to determine if upgrades are needed, avoiding additional interconnection studies, if at all possible. If upgrades are deemed necessary, customers will only pay a prorated share.
Here's the chart from HECO:
A map of daytime minimum load ranges on HECO's Oahu circuits. Areas shaded in the darkest blue have hit the utility's 100 percent DML circuit threshold.
Utility overvoltage worries
Local Oahu press has quoted a HECO spokesperson as saying that the utility cannot permit circuits to become “dangerous” or “unreliable” because of “too much PV on those circuits.” HECO’s Peter Rosegg said that the utility’s grid was never designed to convey power in two directions, and too much PV on a circuit would cause overvoltage and reliability issues.
Reports published on the investigative journalism website the Honolulu Civil Beat quote HECO vice president Scott Seu as saying, "Although more than 80 percent of circuits on Oahu have room for more solar without the need for detailed safety and reliability studies, we've now reached the point on others where the levels of solar require our utilities and the solar companies to be more cautious."
The situation on the Big Island tracks that of Oahu. A report on the website Big Island Now quotes Jay Ignacio, president of HECO subsidiary HELCO, as saying, "We have, this past year, encountered a situation where the amount of PV that people are applying to connect to the circuit reaches a point where we have concerns, either with the voltage quantity or safety issues." He continued: "We’re currently at the level [on the Big Island] where 10 percent of our circuits have reached that point, where we have to tell people applying to add PV that they need to wait.”
Ignacio added, “If there’s more generation than energy being used, the energy needs to go some place. This is a difficult technical issue, and we’re not aware of another utility in the world that has addressed it. There’s no model for us to follow, no resource for us to tap into. We’re really creating new frontiers on this."
Solar installers hit by utility policy
Although the rooftop solar industry in Hawaii doubled every year from 2008 to 2012, growth slowed in the last quarter of 2013 compared to the previous year. It's caused the growth plans of installers to be scaled back, as well as prompting some layoffs.
The local press has claimed that HECO "has informed contractors and residents on Oahu that they must request permission to connect even small rooftop systems to the grid, as well as foot the bill for installation." Residents have accused "the utility of acting purely out of profit motivations in a bid to keep households dependent on the grid and away from solar PV," according to local news reports.
Hawaii's Civil Beat reports, "[C]ritics in the solar industry say HECO's new restrictions on solar are ruining a thriving market at the busiest time of year and leaving hundreds of solar customers in limbo."
"Many residential neighborhoods where single-family homes dominate and solar is most practical -- like Mililani, Ewa and Hawaii Kai -- have already reached HECO's penetration level for triggering studies. Meanwhile, neighborhoods full of high rises that are not very conducive to solar, like Waikiki and downtown Honolulu, have low solar penetration," the Civil Beat reports.
Marco Mangelsdorf, president of Hilo-based PV system installer ProVision Solar, was quoted in Civil Beat as saying, “I have maybe a handful of clients who have been put on hold because of a saturated circuit, with a number of customers who have been waiting a year,” he said. “I’m not able to proceed with a sale because of saturated circuits. But I have a couple of colleagues on Oahu, [in] areas with much higher population, where they’re running into this. They say that it could be 50 percent or 60 percent of their sales are getting the red light from HECO.”
Mangelsdorf added, "The utility companies have been having a more and more challenging time to be able to accommodate this explosive growth in PV,” he said. “What HELCO’s been doing -- and I salute them for this -- is...pushing the limits as to just how much an isolated island utility can actually accommodate in terms of non-firm power being generated and fed into the grid. [This is] not just big plants, but [also includes] mom-and-pop, residential systems.
Mangelsdorf also told GTM of "unethical and unconscionable behavior on the part of major and minor players, [such as] selling, permitting and installing PV systems before HECO approval." He suggested that "HECO and the C&C Department of Planning and Permitting agree to a regime similar to what MECO and the County of Maui established back in July 2012. In Maui County, the electrical department won’t issue a PV permit until the contractor submits a pre-approval letter from MECO. This effectively stops this kind of shameful behavior dead in its tracks."
He added, "While the bulk of the anger is being directed at HECO, the PV integrators are the guilty parties here."
Charles Wang of Hawaii's ECO Project told the audience at GTM Research's recent U.S. SMI solar event in San Diego that "the utility is [an] 800-pound gorilla. If you push it to the corner of the room, it’s going to fight back. That’s what’s happening right now.”
HECO spokesperson Peter Rosegg responded to GTM in an email:
Hawaiian Electric has not halted connection of solar systems to the grid. We are approving new solar systems daily for interconnection and net metering. In September, we announced a more cautious approach to applications for added PV systems on circuits with a large amount of PV installed, solely for reasons of safety and reliability.
On Oahu, we had been allowing small residential systems to be installed and connected before the customer filed a net metering application with the utility. Due to the unpredictably rapid growth of PV on Oahu, we changed that procedure in line with what is done on other islands and asked customers and contractors to get approval from Hawaiian Electric before installation and interconnection. (We also opened the window wider to allow more systems to connect without an interconnection requirements study or upgrades.)
Hawaiian Electric is a strong supporter of solar as part of a portfolio of renewable resources including wind, biomass and biofuel, ocean and hydroelectricity and geothermal. We are currently working to add over 250 MW of solar projects (on a grid with a roughly 1,200 MW peak) that will provide electricity for all customers at prices below other renewable projects and far below the cost of the conventional oil-fired electricity generation used here.
Like utilities across the country, the Hawaiian Electric Companies face a changing energy environment, and Hawaii leads the nation in many of these changes. Our companies have seen rooftop solar on our grids double each year from 2008 to 2012 and more solar was installed in 2013 than in 2012. Hawaiian Electric ended 2013 with almost 10% of our customers using rooftop solar, while we estimate that utilities in California, Arizona and elsewhere are at 2% to 3% [PV penetration] at most. Further, our island grids are small, remote and must stand alone, island by island, compared to mainland grids with many more customers and interties to regional grids for backup.
Excess energy from high amounts of PV on a neighborhood circuit can back-feed into the circuit, causing overvoltage and other power problems. This can be dangerous for utility crews and customers, as well as for utility and consumer equipment. It can also cause flickers or outages decreasing the quality of service our customers expect and deserve.
Hawaiian Electric spends hundreds of millions of dollars a year on grid improvements and upgrades, in part to accommodate the two-way flow of electricity from our customers with rooftop solar. We collaborate nationally and internationally on a long list of research projects aimed at finding how to safely and reliably add more distributed generation to our grids. (Here’s a link to a recent Honolulu Star-Advertiser article describing some of these efforts.)
In the short term, we are testing devices that would go on the customer side of the meter, such as so-called smart inverters and additional protection devices, that may limit some adverse impacts associated with high levels of distributed generation on a circuit. And we are working on smart grid improvements that can help provide more information to enable more customer-sited power and other renewable energy sources.
Circuits vary greatly in length; number, size and kinds of customers; and in the equipment already installed, among other variables. We have no hard and fast level of “too much PV.” Instead, there are thresholds at which it is prudent to examine the circuit to see what the impact of adding more PV will be. If it would result in risks to safety and reliability, the next step is to determine what steps can be taken to accommodate additional PV.
In addition to the research described above, Hawaiian Electric is doing sample interconnection studies of four representative circuits to be used in evaluating other circuits with high amount of PV already installed. These studies will be used to help identify possible circuit upgrades or other measures to help ensure higher amounts of PV can still be installed reliably and safely on those circuits with very high amounts of PV interconnected.
In recent years, based on operating experience with increasing amounts of solar and the results of research and studies done here and elsewhere, we have widened the window for systems to be installed without interconnection studies. Without going into elaborate detail, the present threshold is that when someone wishes to add solar on a neighborhood circuit where installed solar already exceeds 100% of daytime minimum load, it is prudent to consider the effect on safety and reliability that circuit will have.
Peter Rosegg [HECO]
GTM solar analysts take a look at Oahu solar
Cory Honeyman, solar analyst and specialist in U.S. state markets at GTM Research, notes, "As of September, nearly 40 percent of all circuits on Oahu had PV penetration levels at or above 75 percent minimum DTL. The number of additional customers that can add PV to a particular circuit and costs borne by those customers that are allowed to add solar to that same circuit depend on the type of equipment upgrade that HECO makes. For example, an owner of a new 3-kilowatt system is expected to pay anywhere between $900 and $2500 depending on the upgrade."
"The two biggest stories, however, are how HECO is managing the implementation of these rules and how installers are responding with more systems at the risk of paying for equipment upgrades and interconnection studies," added Honeyman.
He points out that HECO now requires each customer to submit a net metering agreement for approval before going ahead with an installation to verify if the customer's circuit can handle additional capacity at that time or if upgrades are needed. He said, "Anecdotally, we've heard HECO has received net metering agreements at a rate of up to 50 to 60 per day, as installers push projects through completion to monetize the in-state and federal tax credits."
This policy has slowed the pace of rooftop solar growth in the last quarter of last year, according to the GTM analyst.
"With HECO receiving this influx of NEM applications, the utility has faced difficulties with keeping up. The backlog in applications has delayed development timelines for customers by up to two months. In turn, we expect new installed capacity in Hawaii to still see the usual uptick in Q4, but not to the same record-breaking extent we saw in Q4 2012."
"With higher numbers of circuits at risk of [requiring] equipment upgrades, installers are faced with the difficult challenge of securing new customers in the face of uncertain added equipment upgrade costs and interconnection studies. Equally important, for the customers they do acquire, the question is then who bears responsibility for these equipment upgrade fees."
MJ Shiao, Director of GTM Solar Research, notes, "At low levels of penetration, PV simply looks like a load reduction -- but at high levels of penetration, it can increase circuit voltage beyond regulated maximums or create other issues at the circuit level. "
"The question, of course, is where the line is between 'low penetration' and 'high penetration' -- or rather, how much PV can be installed before the utility has issues maintaining reliability," adds Shiao.
"We understand so little about the actual effects, and it is so locationally dependent, that I don't think there's a good rule-of-thumb answer. Penalties for non-compliance on voltage and outages further incentivizes utilities to be conservative when drawing that line. Having a technical grounding doesn't make the price for interconnection studies or grid upgrades any easier to incorporate for PV installers though. Also, having homeowners pay for major grid upgrades like cap banks is more severe than the situation in other markets. Then again, in Hawaii, approximately one in every fifteen households has a PV system -- and that far exceeds any other state."
Aloha for now
The solar DG experiment on the Hawaiian grid continues -- just as the island is deactivating more than 200 megawatts of older, inefficient fossil-fuel plants.
HECO makes most of its revenue by buying oil, burning it, and selling the generated electricity at a profit. A solar revolution may not exactly be part of its business plan. But the company is having to come to grips with the reality of 10 percent PV penetration, with 12 percent not far off.
A cautious approach to circuit capacity makes sense if the thresholds for studies and equipment upgrade charges are justified and vetted by the utility commissioners. The utilities are looking for solutions -- Maui and Oahu are home to several pilot and commercial projects using utility-scale energy storage for power smoothing and voltage support.
As Marco Mangelsdorf said in the same article referenced above, “We are all participating in a grand experiment. How far can a utility go in accepting non-firm power? As of last year, more than 40 percent of the kilowatt-hours sold by HELCO came from renewable resources. And that has progressively been going up.”
HEI (HECO's parent company) financials from its 2012 Annual Report