Hawaii’s solar industry leaders are butting heads with the state’s largest utility company over a recent Public Utilities Commission order that sets new rates for energy customers who want to sell the solar power they generate at home for use on the grid.

The PUC’s new tariff, or rate, for customers to sell their power to Hawaiian Electric Co. is so lackluster that it will stunt the spread of solar and battery systems across the islands’ rooftops, hurting the larger push to replace fossil fuels with clean energy, according to Rocky Mould, executive director of the Hawaii Solar Energy Association.

“We’re shooting ourselves in the foot,” Mould said. “It’s making solar more expensive. It’s going to slow the trajectory toward solar growth in a significant way.”

The tariff unfairly benefits Hawaiian Electric, he said, making it far cheaper for the state’s largest power company to buy electricity from customers and put it on the grid. At the same time, it’s not nearly beneficial enough to convince new customers to sell their power, and that will slow the installation of more systems, Mould added.

But Hawaiian Electric officials said the new, cheaper tariff will help keep electricity prices in check for all ratepayers, not just those who can afford to purchase rooftop solar and battery systems. 

Customers without such systems help bear the costs for Hawaiian Electric’s purchase of rooftop solar for the grid, so there’s an equity issue to consider, they said.

“We know we have to make the deal sweet enough to our customers. On the other hand we can’t make the deal too sweet” because the cost will be picked up by all customers, said Kaiulani Shinsato, director of Hawaiian Electric’s  Customer Energy Resources Program. “It’s just this really difficult balancing approach that we have to take.”

The latest wrangling over how lucrative the incentives should be echoes a similar debate that occurred nearly a decade ago over Hawaiian Electric’s popular Net Energy Metering program. 

That program allowed customers with rooftop solar to sell back to the grid at full retail value any surplus power their panels produced during the day. The PUC in 2015 controversially closed off Net Energy Metering from accepting any new applicants – but not before some 70,000 customers with solar panels had already joined, according to Hawaiian Electric.

Those customers who got in before the PUC stopped it continue to sell back their solar power under the program.

Nonetheless, the PUC’s abrupt closure of Net Energy Metering downsized the local solar industry by 60%, resulting in the loss of some 2,000 jobs, according to the HSEA.

Now, the association and other solar and environmental advocates are bracing for a similar downturn following the PUC’s 191-page order, which was released Dec. 4. It had been in the works for at least four years.

“This decision is the most drastic misstep I have seen — up there with slamming the curtain on net metering eight years ago, but with potentially more disastrous results,” Isaac Moriwake, an attorney with Earthjustice who represents HSEA before the PUC, said in a statement.

“It took years for the industry and market to find its footing again after that, and we can’t afford to repeat that history,” Moriwake said.

Moriwake, Mould and several other solar advocates filed a motion in mid-December asking the PUC to reconsider its decision “given the critical stakes involved” and the “lasting market impacts” it would cause. 

Hawaiian Electric countered in its own motion that the commission has already considered at length all the issues involved with the tariff and that the bar to reconsider its order simply hasn’t been reached. 

On Wednesday, the state’s Division of Consumer Advocacy filed its own motion agreeing with Hawaiian Electric. 

It’s unclear whether the PUC will make any changes. The new tariff will start in March. Customers already selling their power back to Hawaiian Electric under previous programs won’t be affected.

Finding The Right Balance

According to Mould, one of the major flaws with the PUC’s order is that it rejects the ability of solar customers to earn the full retail price of the power they sell to Hawaiian Electric in the form of a credit.

Further, the order drastically reduces the one-time up-front payments that Hawaiian Electric has to provide customers when they agree to sell their power to the company over a number of years. 

It trims payments that customers currently get under Hawaiian Electric’s “Battery Bonus” program from $850 per kilowatt to just $100 per kilowatt. Then, it caps the maximum up-front payment at $500. 

That rate is simply not enough to get new customers to sign up, Mould said. “If you want a successful program, you need to design the compensation structures for people to join it,” he said.

However, Shinsato said the new rates better reflect the “normal market.” 

The rates that customers enjoy under the Battery Bonus program were especially lucrative because Hawaiian Electric needed extra help supplying power to the grid after the 2022 state-mandated closure of the AES coal-fired plant in West Oahu. The initiative had more than 6,600 participants supplying more than 40 megawatts of electricity to the grid by the end of last year, according to the utility.

The rates in the PUC’s new order don’t reflect the urgent situation that helped create Battery Bonus. 

Mould acknowledged that the rates were bound to drop, just not nearly as drastically as they did.

Further, Shinsato said it’s not realistic to expect the PUC to approve customers getting compensated for their power at the full rate. 

That’s largely because some customers under the Net Energy Metering installed solar systems that generated far more power than their homes needed, she said. The extra generation allowed them to charge Hawaiian Electric for an excessive amount of energy and take advantage of the program. 

Keeping the rate lower dissuades customers from trying to do that, Shinsato said.

The company is open to making adjustments if solar production lags too much after the tariff goes into effect, she added.

More than 103,400 residential and commercial solar systems have been installed across Hawaiian Electric’s territory, which covers most of the state, according to the company’s internal figures. 

Shinsato said 37% of homes on Oahu have installed a solar system and that’s “unheard of on the mainland.”

“We need this stuff,” she said. “So if we are seeing any big hurdles in the market we are more than willing to sit down and make adjustments.”

Mould, meanwhile, said that “there’s an overwrought concern about equity impacts, and folks not being able to afford solar bearing the costs of this.” Putting more rooftop solar-generated power onto the grid makes it more balanced and resilient, and that benefits all of Hawaiian Electric’s ratepayers — not just those providing the power, he said.

“This is for energy that is designed to balance the grid for all,” Mould said.