How the proliferation of solar panels on Honolulu homes will force Hawaiian Electric Co. to reinvent itself—or else.
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Photo: Dallas Nagata White
It wasn’t long ago that a company called Hawaiian Telcom reigned supreme over phone calls in Hawaii. If you talked on the telephone, your voice traveled through Hawaiian Telcom’s copper wires. But as cellphones became more affordable, demand for phones tied to walls plummeted. By 2009 the once-mighty phone company was in bankruptcy, reorganizing itself and trying to figure out how to be relevant in a world where everybody and their teenagers were awaiting the release of the latest iPhone.
Photo: Gregory Yamamoto
Cost of PV system: $97,200, before tax credits
Monthly electric bill before: $850
Monthly electric bill now: $17
“Our electric bill was so high, and I was thinking that it’s only going to get worse. The RevoluSun installer pointed out the three huge trees behind our property that might have cut down on the efficiency, so they recommended 84 panels. The system is working really well for us; in fact, it’s overproducing. I’m so happy I got in in time, because I’m hearing that right now HECO is very reluctant to sign off on new installations.”
A similar shake-up is underway with another old-line utility, Hawaiian Electric Co. It’s being driven by people such as Donald Jay, a retired civil service worker who lives in a cul de sac in Mililani. Last April, Jay put a solar photovoltaic system on his rooftop. It generates more electricity than Jay uses, and he’s slashed his electric bill to HECO’s minimum $17 charge. “I was paying about $850 a month, because I have air conditioning and a lot of appliances,” says Jay. “I hardly pay anything anymore. That really makes me happy.”
That kind of happiness, multiplied by the 26,000 other Oahu homeowners with PV on their rooftops, threatens to undo HECO in the same way that cellphones in everyone’s pockets undid Hawaiian Telcom.
In the world of cheap photovoltaics and other emerging home energy technologies, you, the ratepayer, are no longer helpless in the face of sky-high electric bills, unable to do anything beyond using Energy Star appliances and yelling at the kids to shut off the lights. The power to make and store power is shifting to your court. The dawn of the age of energy democracy is upon us. The grid is flipping. And if HECO doesn’t reinvent itself in a big way—and soon—it could go the way of the landline.
That might sound like the ravings of technology futurists or the wishful thinking of HECO haters, but it’s actually what the electric utility industry itself is saying.
The Edison Electric Institute, the trade group for investor-owned electric companies, such as HECO, warns that solar panels and other emerging technologies pose a serious threat to the industry’s health, well-being and shareholders. In a landmark report that made a big splash in wonky energy-policy circles last year, the Institute said:
“One can imagine when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this in perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically ‘cut the cord?’”
The Institute warned of a death-spiral scenario, in which utilities make up for the revenue lost on their PV-owning customers by raising the rates on their other customers. That encourages some of them to get PV, which sends rates even higher, which makes PV even more attractive. Edison suggested that a short-term solution is for utilities to go after their free-riding PV customers, who are enjoying all the benefits of having the grid as their backup battery while barely paying a thing for the privilege. In the long run, utilities must deal with “the threat of disruptive forces” and assess “new business models where utilities can add value to customers and investors by providing new services.” In other words, figure out how to remain relevant while they still can. What that would look like, Edison didn’t say.
For its part, HECO says it is well aware of Hawaii’s rapidly changing energy landscape, and it is adapting. “We are engineering the ‘reinvention’ you ask about right now while we keep service to our customers as safe, reliable and low-cost as possible,” said Scott Seu, HECO’s vice president of energy resources and operations, in a written statement to HONOLULU Magazine. What that reinvention will look like, Seu didn’t say.
Energy experts fear that HECO isn’t moving fast enough, and that if the utility ever fails, taxpayers will be on the hook. “We’re all looking for HECO to lay out a clear pathway in which it can possibly operate and prosper in this new energy climate,” says Mark Glick, head of the state Energy Office. “We haven’t seen that yet.”
Last fall, state Rep. Chris Lee, chair of the House Committee on Energy and Environmental Protection, put HECO executives on the spot at a legislative briefing when he asked how the utility planned to adapt if customers started leaving the grid altogether. HECO executives could not give him an answer.
“I really think HECO is on a very short timeline,” Lee says. “They probably have a few years left to radically change their business model and the way they operate to keep up with the changing technology and the marketplace, which could very well leave them in irrelevancy.”
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