If you wonder why America’s
utilities are rattled by the explosive growth in rooftop solar –
– and are pushing back — William Walker has a story for you.
A flip-flop wearing Walker stands in his driveway pointing
to a ubiquitous neighborhood feature – solar panels on the roofs
of five of six houses nearby. He lives in Ewa Beach, a
development on the sultry leeward coast of the Hawaiian island
of Oahu built on land cleared of sugar cane fields.
Shade is scarce and residents here call their homes “hot
boxes,” requiring almost round-the-clock air conditioning.
Hawaii, which imports pricey oil to power its electricity grid,
has the highest utility rates in the nation — at 37 cents a
kilowatt-hour, they’re more than double California and triple
the national average.
With bills for 1,600 square foot houses like these running
as high as $400 a month, solar is seen as less a green statement
than an economic no-brainer given state and federal tax credits
for as much as 65 percent of installation costs. Almost every
day since Walker and his wife Mi Chong moved in last April,
solar installers came rapping on the door, hawking a rooftop
They finally bought one: an 18-panel, $35,000 installation
producing 5.9 kilowatts of power financed for $305 a month. It
would be connected to the grid under a system known as net
metering that essentially lets residents deduct the value of
their solar-produced electricity from their power bill and even
be paid for electricity in excess of that.
Paying for Itself
Walker estimates his bill would have dropped most months to
an $18 service charge — offsetting that $305 loan payment.
Anticipating his power bills would continue to rise, he figured
the system could pay for itself in as little as five years; his
electricity after that would be free.
That is until his utility, a subsidiary of Honolulu-based
Hawaiian Electric Industries Inc. (HE:US), told the Walkers they
couldn’t connect their system to the grid. They aren’t alone.
Solar installers here estimate that hundreds if not thousands of
the state’s residents are being put in solar limbo by a virtual
moratorium on new connections in many parts of the company’s
The reason, according to the Hawaiian Electric Co.: so many
Hawaiians are stampeding to solar that circuits may become
oversaturated, causing voltage spikes, damaging appliances,
electronics and even the utility’s equipment. The company needs
more time to study the matter.
The Walkers, who say they got no advance notice of the
shutdown, are now paying both their power bill and their monthly
rooftop loan. HECO, as the utility is known, recently told them
they will eventually be allowed to join the grid without having
to pay for expensive equipment upgrades. It still can’t say
“Everyone is on board with getting solar and HECO has now
put up a wall,” Walker said. “The only thing we can see is
Spurred by a drop in panel prices, robust government
subsidies and a technology that no longer appears experimental
to mainstream America, rooftop photovoltaic solar is bursting
out everywhere. About 200,000 U.S. homes and businesses added
rooftop solar in the past two years alone – about 3 gigawatts of
power and enough to replace four or five conventionally-sized
The U.S. set a single-quarter record with 31,000
residential rooftop installations in the three months through
Sept. 30. Solar represented 72 percent of all power added in the
U.S. in October.
Utilities, seeing a threat to about $360 billion a year in
power sales and a challenge to the hegemony of the conventional
grid, are feeling the heat and fighting back. HECO, despite
criticism from Hawaii’s solar industry, denies the moratorium is
anything more than an honest effort to address the technical
challenges of integrating the solar flooding onto its grid.
The slowdown comes in a state where 9 percent of the
utility’s residential customers on Oahu are already generating
most of their power from the sun and where connections have
doubled yearly since 2008.
In California, where solar already powers the equivalent
of 626,000 homes, utilities continue to aggressively push for
grid fees that would add about $120 a year to rooftop users’
bills and, solar advocates say, slow down solar adoptions.
Similar skirmishes have broken out in as many as a dozen of
the 43 states that have adopted net-metering policies as part of
their push to promote renewable energy. In Colorado, Xcel Energy
Inc. (XEL:US) has proposed cutting the payments it makes for excess power
generated by customers by about half, because it says higher
payouts result in an unfair subsidy to solar users.
It faces a fight from solar advocates who are circulating a
petition that has attracted 30,000 signers.
In Arizona, 1,000 protesters last month swarmed the state
capital while local and national solar advocates lobbied against
an effort by utility Arizona Public Service to impose a $50
monthly fee on new solar adopters. Solar advocates said the
charge would have crippled the state’s 10,000-worker solar
industry and thwarted the desire of residents to have a choice
in the power consumption.
State regulators, after two days of often contentious
debate, voted to allow the state’s largest utility to charge
customers about $4.90 a month for solar connections after Dec.
31 — less than 10 percent of what it was asking for.
Don Brandt, chief executive officer of APS and its parent
company Pinnacle West Capital Corp. (PNW:US), panned the deal, saying
that while it nods to the impact that net metering is having on
utility operations and revenues, it “falls well short of
protecting the interests of the 1 million residential customers
who do not have solar panels.”
Lyndon Rive, CEO of SolarCity Corp., said it was “crazy
for a utility to charge for services they didn’t deliver.
‘‘Why not tax energy efficient homes, or small homes that
consume less than average?’’ said Rive, whose company is the
nation’s second-largest rooftop solar installer. ‘‘APS just
doesn’t want to lose control.”
The battle is far from over.
On the island of Oahu, HECO is “working really hard” to
find a solution to oversaturated circuits caused by the rapid
solar rollout, CEO Richard Rosenblum said. The utility’s
engineering studies on solar are expected to be done by March,
“We see ourselves as a trailblazer,” said Rosenblum. And
one of the problems of being a trailblazer is sometimes the
trail is not clear.’’
Rosenblum pointed to planned HECO grid investments in smart
meters and other communications devices he said that will help
it speed up and smooth out the embrace of solar going forward.
Representative Cynthia Thielen, a Republican state
legislator who has publicly pushed for the utility to liberalize
its solar policies, is more than skeptical.
“This is a company with a drenched-in-oil mentality,”
said Thielen, who has served in the legislature since 1990.
“They’ve fought from day one on renewables. I look at the
company as ultimately becoming obsolete unless it changes its
What’s mind-boggling to many of the stewards of America’s
3,200 utilities is how fast solar has mutated from a fringe
power source to a technology being peddled today at outlets like
IKEA Group and Home Depot Inc.
Sure, environmental groups like the Sierra Club are aboard.
But solar is also being embraced by middle-class home owners
like the Walkers, Republican legislators like Thielen and
corporations like Wal-Mart Stores Inc. (WMT:US), which expects 1,000 of
its approximately 4,500 stores to be solar powered by 2020.
A pro-solar group in Georgia consisting of Sierra Club
members and Tea Party founders calls itself the Green Tea
The fuss might seem overheated based on current numbers —
solar power provides less than 1 percent of the nation’s energy
needs. Yet it’s the rapid escalation of solar and the
exponential long-term projections for its rollout that caused
Fitch Ratings Ltd. in July of this year to warn that the solar
juggernaut is “casting a shadow on U.S. utility rate design.”
Moreover, solar’s potential is coming as escalating fossil
fuel prices make it competitive — even without subsidies —
with conventional electricity.
That’s already occurred “at a domestic level in many
countries” with some U.S. states like Hawaii and California
already at or near parity and others to follow soon, according
to an Aug. 8 research report by Citigroup Inc. Parity will only
escalate as fossil fuels get more expensive and solar gets
“This dynamic is not being fully appreciated in the power
sector,” according to the report, written by a group of
analysts including Shahriar Pourreza and Ryan Levine. “Not only
does solar steal share of new electricity demand, it
parasitically steals demand from previously installed
generation, and does at the most valuable ‘peak’ part of the
As for solar’s ultimate potential, California alone could
produce 76,000 megawatts of solar power — more than the state’s
total installed capacity in 2012 — if it deployed all the
rooftop solar it has room for, according to data from the Solar
Energy Industries Association, a trade group.
All of which makes the fights being played out in Hawaii
and Arizona pivotal — they are certain to set the stage and
tone for future battles in other states. And given what’s
happened, those future fights may be messy.
Money poured in to Arizona in the weeks leading up to the
November vote by state regulators on the proposed monthly solar
charge. APS and its backers spent $3.7 million on an ad campaign
while solar advocates mustered $350,000. Lobbyists, hired-gun
activists and pollsters all waded into the fray, with ads that
took on the appearance of a negative electoral campaign.
A utility-supporting group ran a 30-second television ad
comparing California solar companies helping to fund the pro-solar campaign to Solyndra LLC, the Obama-backed solar-panel
maker that went bust after defaulting on a $535 million federal
stimulus loan guarantee.
Meanwhile, solar supporters used Barry Goldwater Jr., son
of deceased Republican Senator Barry Goldwater, in a radio spot
that featured the sound of a trumpeting elephant, the symbol of
the Republican party, and called on listeners to prevent APS
from “trying to kill energy choice.”
When you speak with Jeff Guldner, APS’s senior vice
president of customers and regulation, he echoes a familiar and
reasonable argument as to why solar users connected to the grid
should help pay to maintain it.
A system of generous net metering rules may have made sense
at the outset of the solar revolution to get the party started.
Now, however, it’s clear that it will have enormous disruptive
impacts on APS and other utilities that bear the burden of
keeping the grid operating.
“Somebody has to pay for maintenance and upkeep,” Guldner
said, and solar users in the current rate structure aren’t doing
One problem with those economic arguments is that the
politics aren’t yet lining up to support that. People may be
fond of Apple Inc., Google Inc. or Walt Disney Inc. but the
public doesn’t often love its power supplier — no power or gas
utility appeared on Fortune magazine’s list of the 50 most
admired companies in 2013.
Republican and libertarian support for solar is informed by
a “don’t tread on me” response to the utility monopoly system,
making foes of those that might have been friends. It’s a wing
of the pro-solar coalition that no one — and certainly not the
anti-solar crowd — anticipated.
Bill Hansen is part of that unexpected pro-solar crowd.
On the warm, blue-sky day when Arizona began two days of
hearing on APS’s $50 monthly solar charge, Hansen, a retired
83-year-old former Iowa lawmaker and lifelong Republican, rose
at 6 a.m. and made the 35-mile drive from his Sun City home to
Phoenix to give the utility and the Arizona Corporation
Hansen, president of the Sun City West Property Owners
Residents Association, represents the retirement community’s
24,000-plus residents, 10 percent of whom have investments in
He had plenty of company. On the day of the vote, the pro-solar demonstrators vastly outnumbered those who had come to
plead the utility’s cause. They were also in a far better mood –
– outside, a brass band tooted out standards, a DJ played loud
rock music and organizers doled out t-shirts, water bottles and
pizza to people holding signs that said “People Power Over
Monopoly Power: No to Solar Tax!” and “Solar Works For
Inside, it was clear that APS and its supporters were out
of luck. The idea for the $4.90 fee came from the solar side —
and very likely swung the vote.
The charge won’t be enough to cover the utility’s grid
costs until their next rate case in 2015, APS’s Guldner said,
and will probably require the company to ask for much bigger
fees down the road.
“In 2016, that rate increase could be a big one” and the
utility will probably win the argument, Guldner said.
Bob Stump, chairman of the Arizona Corporation Commission,
said he voted in favor the $4.90 charge because he feared the
higher fee sought by APS would have slowed solar development in
the state, jeopardizing the ability to produce 15 percent of its
power from renewables as required by law.
“It’s a fair outcome,” said Stump.
Utilities may be missing out on some big solar positives,
said Jigar Shah, head of a consulting company and author of
“Creating Climate Wealth.” Solar generation peaks at the
hottest time of the day, the time most people switch on their
air conditioners, thus taking the strain off conventional power
plants when they most need the relief.
Aggregated solar power will also let utilities put off
building costly plants and transmission lines, saving investors
and ratepayers money, said Shah, the former CEO of SunEdison
Shah’s advice: get with the program, otherwise utilities
are simply inviting people to leave the grid.
“The utilities are playing this wrong, saying you’re with
us or against us,” he said. “It’s not the solar industry
that’s the problem — it’s their refusal to recognize the
benefits of new technologies.”
Policy decisions are already affecting solar installations.
HECO’s moratorium in Hawaii is putting a damper on what had been
a booming home-grown solar industry there.
The fourth quarter is typically the busiest time of the
year for solar installers as homeowners rush to take advantage
of federal and state tax incentives. Installers can rack up as
much as two thirds of their annual sales in the last three
months of the year. Instead, solar companies in Hawaii say their
revenue has been reduced by half or more compared with the same
time last year. Inventory is piling up.
The new restrictions “are slowing things down with no easy
solution,” said Leslie Cole-Brooks, executive director of the
Hawaii Solar Energy Association. “It’s not good news for the
solar industry or for customers who want to invest in solar.”
One of the island’s biggest solar wholesale businesses is
run out of a group of drab cinder-block warehouses at the
terminus of a narrow, dead end-road near the edge of downtown
Honolulu’s Chinatown. Rolf Christ, a German native and the
company’s owner and president, has been working in the Hawaii
solar industry since 1980.
The past three and a half years have been crazy, he said.
Solar sales on Oahu were so robust that Christ has more than
quadrupled his warehouse space for RR Solar Supply to 25,000
square feet from 6,000 square feet. Now, a lot of that space is
stuffed with solar modules stacked two-stories high on shipping
Christ typically orders modules before the fourth quarter.
HECO’s moratorium has “pretty much brought the whole industry
to a screeching halt,” he said.
“It was the worst time of year to do it,” he said of the
policy change. “It was the worst way to do it.”
HECO has been around a long time and some, like Thielen,
think that may be its problem. It traces its roots to 1881 when
Hawaii’s King Kalakaua met Thomas Edison and five years later
decided to light his palace with electricity. Its subsidiaries
serve 95 percent of the state’s residents, bringing power to
Oahu, the Big Island, Maui, Molokai and Lanai.
The issue, according to HECO, is that for about 20 percent
of Oahu’s grid there is so much solar connected you can’t add
more without further study because of the potential for
reliability and safety issues. Solar advocates have said the
figure is arbitrary.
Arbitrary or not, it means new solar customers must await
engineering studies to determine if they can connect without
causing surges that may damage appliances, electronics or
utility equipment. Some might have to pay for utility equipment
upgrades that could cost thousands of dollars before getting
approval to connect.
“This is about safety,” said Scott Seu, HECO vice
president for energy resources and operations. “We are so far
ahead of the rest of the nation as far as the amount of
distributed rooftop solar in our neighborhoods that we are now
at points where there are potential safety and operating
The issue of solar saturation is complicated and
controversial and both sides in Hawaii have their points, said
Michael Coddington, a senior engineer at the National Renewable
Energy Laboratory in Golden, Colorado. HECO’s policies on solar
connections are “similar to many other states” and could be
considered “progressive” relative to the policies of many
utilities, he said.
“The utility is following the rules per se,” said
Coddington, who co-wrote an NREL study on the matter. On the
other hand, if you are a solar photovoltaic developer or
customer, “you want the ’fast track’ approach, as detailed
impact studies are often costly and time-consuming and could
require costly mitigation strategies. I understand the
Customers like the Walkers are more than a little
frustrated. They see the company as dragging its feet in an
effort to stave off a threat to its very business model. And
even when they finally get to connect, they wonder if the hassle
has been worth it.
‘Driving Us Off’
“I feel like they are driving us off the grid,” Mi Chong
Phil Undercuffler hopes HECO will drive lots of people off
the grid. Then he will sell them batteries.
Battery storage is the holy grail of the off-the-grid
crowd. They let users store up excess energy for rainy or cloudy
days when solar isn’t working. In theory, you don’t need a power
company if you have solar tied to battery storage, especially
here. Oahu gets an average of 271 sunny or partly sunny days a
Last month, Undercuffler spoke to a standing-room-only
audience of more than 100 solar installers in a Honolulu
Marriott who came to hear his pitch for battery storage units
sold by Outback Power Inc.
The vast majority of HECO solar customers don’t have
battery storage; it’s considered too expensive. With the
possibility that the moratorium in some sections of Hawaii could
go on for two more years, homeowners could make batteries work
financially and cut the cord from the utility altogether, said
Undercuffler, Outback’s director of product management and
“You watch, all these installers are going to go to
batteries,” said Jeff Davis, a partner in an Oahu company
called Kamiyama Solar Electric who is known as the Solar Guy on
a local talk radio program. “The utility has opened up the