Hawaii’s PUC ponders on-bill financing of solar energy systems

09. January 2013 | Markets & Trends, Global PV markets | By:  Cheryl Kaften

America’s Aloha State soon may help residents to welcome solar energy into their homes at a reasonable monthly rate. The model is of wider interest as it may prove to be one where residential photovoltaics can be installed more widely, with utilities retaining their customer base.

A PV installation in Hawaii.

Hawaii households may be able purchase photovoltaic systems through an "on-bill" payment system through their utilities.

Hawaii’s Public Utilities Commission is considering a system under which customers could finance the hefty up-front purchase and installation expenses of distributed, grid-tied solar generation by paying an extra assessment on their electric bills.

The momentum for the initiative started in July 2011, when Hawaii Governor Neil Abercrombie signed State HB 1520, mandating that "the Public Utilities Commission … investigate the viability of an on-bill financing program to allow electric utility company customers to finance purchases of renewable energy systems or energy efficient devices…by providing for billing and payment of such a system or device through an assessment on the electric utility company customer’s electricity bill."

On January 4, the Public Utilities Commission (PUC) released a report conducted on its behalf by Harcourt, Brown & Cary, a Colorado-based energy and finance consulting firm, which concluded that the on-bill financing program makes sense for Hawaii.

After completing its analysis, HB&C asserted that there are several reasons that an on-bill finance program would be effective for Hawaii - including the high energy costs of importing fossil fuels to the islands, the ability of on-bill programs to serve renters as well as owners, and the opportunity to promote capital-intensive solar technologies.

Residential market profile

Looking at the residential clean energy market profile, the consultants believe that Hawaii residents would readily adopt the new program.

Indeed, according to a statement by Executive Director Jeff Mikulina of Honolulu-based Blue Planet Foundation— a local non-profit organization committed to ending the use of fossil fuels on Earth, starting in Hawaii—"Blue Planet appreciates all efforts to make clean energy more accessible to customers, particularly with the astronomically high electricity rates tied to imported oil. Blue Planet has made on-bill repayment a priority initiative over the past year, building public interest, passing enabling legislation, and funding efforts to help study and structure the program."

On the eight Hawaiian Islands, three utilities - Hawaiian Electric Company (HECO), Hawaii Electric Light Company (HELCO) and Maui Electric Company, Ltd. (MECO)—serve approximately 390,000 residential customers, with total annual residential sales of 27,697,000 kWh. Renters represent about 40 percent of the residential sector. The median household income is approximately $66,000.

The consultants point to one technology in particular - solar thermal hot water - as a primary driver for the on-bill program."With a saturation rate for solar water heating of 28 percent, this technology can grow substantially," said the HB&C report. “[We expect] that the program will generate adoption rates of approximately .5 percent to 1 percent of the households in the program's first year, which may represent approximately 2,400 installations for this technology. Based on our experience in other cases, we estimate that the following three to four years should see growth of approximately 50 percent until growth begins to tail off.

In addition to the opportunity to deploy solar thermal technology, they say "a substantial opportunity exists to install solar PV technology." As the following table indicates, Hawaii electric utility customers have a 2 percent adoption rate for solar PV. This metric is a fairly accurate measure of the saturation rate of solar PV throughout Hawaii.

In conclusion, HB&C recommends that Hawaii adopt an on-bill program with the following structure and elements:
• All residential households (owners and tenants) would be eligible to participate;
• The financing program could support solar PV and thermal and all permanently installed energy improvements offered by Hawaii Energy programs;
• Eligible projects must achieve "bill neutrality"—defined as the energy savings exceeding the project costs when financed over 12 years;
• The program would be contractor-centric and participating contractors would be certified and managed to maintain high installation quality;
• The program would be a service offered to customers as a tariff;
• The installation benefits and payments would be transferable to the successor owners/tenants;
• The procedures for non-payment would follow the PUC-approved procedures for utility tariff non-payment, including shut-off;
• An appropriate capital source and service provider selected through an RFP (request for proposal) process should support the program.; and
• The basis for funding the on-bill program should be the Public Benefit Fund (PBF), leveraged with third-party capital.

To date, Hawaii has not made a formal announcement about adoption of the program. Many environmentalists—including those at the National Resources Defense Council (NRDC) in Washington, DC—support on-bill financing.


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