Hawaii shuts down net metering to new customers

Net metering has been a controversial topic in the United States. The policy serves as a fundamental support for distributed solar, but is increasingly coming under fire from utilities who say that PV system owners are not paying their fair share for use of the grid.

In Hawaii, this has taken a sharp turn, with the Hawaii Public Utilities Commission (HPUC) issuing a ruling to close net metering to new applicants in the service territory of Hawaiian Electric Companies (HECO), effective immediately.

Hawaii has the highest penetration of rooftop solar in the nation, with an estimated 12% of rooftops hosting PV systems. Customer-sited distributed generation, which is dominated by rooftop PV, represented 5.7% of the electricity generated in 2014 in HECO’s service territory. This includes most of the island chain, and doesn’t count utility-scale solar.

The state has also set a mandate for utilities to procure 100% of their electricity from renewable energy sources in 2045. HPUC has stated that as it moves towards this target, net metering must go.

“A transition away from net metering is essential to ensure all customers benefit from continued growth in distributed energy, not just those who have the ability to install solar PV or other forms of distributed energy resources,” declared the agency.

The order will affect any new PV systems with application dates after October 12, but solar owners who got their applications in before the date and utility customers who are currently participating in the program will not be affected.

HPUC is replacing net metering with two options: A “self-supply” option and a “grid-supply” option. The “grid-supply” appears to work much like net metering, only at a lower rate. Under two-year “transitional” rates, the electricity exported to the grid by PV system owners will be valued at US$0.15-0.28 per kilowatt-hour (kWh), with the lowest rate on the island of Oahu.

This might seem like an enviable rate in the rest of the nation, however these customers will still be purchasing the electricity at a much higher rate. Hawaii’s average rate for residential electricity customers was at $0.30 per kWh in July.

There will also be a limit to the number of PV system owners that can participate in the “grid-supply” option.

HPUC seems to be steering utility customers who want to install solar towards their “self-supply” option, which appears similar to self-consumption policies in Europe. This policy will be for customers who intend to consume all of the electricity produced by their PV systems.

HPUC notes that systems under the “self-supply” regulation will typically be designed to include energy storage and energy management to balance on-site production with demand. These systems will receive expedited interconnection review, and there will be no limit to the number of self-supply systems allowed.

However, HECO will be allowed to raise the level of the minimum monthly bill for PV system owners under either option from $17 to $25 for residential customers, and to $50 for commercial customers.

Finally, HPUC has directed HECO to create time-of-use rates within 90 days, which it says will allow customers to save money by shifting demand to the middle of the day when PV output is high.

“By sending the right price signals to customers, customers can increase energy demand during times of high solar supply and alleviate some of the grid constraints to further renewable integration,” explains HPUC.

The Hawaii Solar Energy Association warns that the sum of these policy changes will affect solar deployment.

“These new rules are clearly going to impact rooftop, and especially pre-paid leases—which will hit lower income customers the most,” stated HSEA in a post on its site. “At the same time, the Commission has given storage a boost, and is asking industry to take the lead here.”

The Solar Energy Industries Association (SEIA) was cautious in its critique of the order. SEIA notes that Hawaii has unique circumstances, including much higher levels of solar penetration than other states. "While it may be appropriate to make certain rate changes in Hawaii now, other states are a long way from reaching that point,” noted SEIA VP of State Affairs Sean Gallagher.

This is also only the beginning. The changes set forth on Monday represented phase 1 of the of a docket which focuses on redesigning the market structure for new distributed energy resources.

HPUC says that phase 2 will focus on “further developing competitive markets for distributed energy resources, including storage”, with a priority on supplying “grid-supportive benefits”.

This article was updated at 7:15 PM U.S. Eastern Time October 14 to include SEIA’s perspective, and was modified at 10:30 AM October 19 to clarify changes to the minimum monthly bill, as well as to provide a link to documentation.