Leading edge: Hawaii utilities push storage, solar integration for 100% renewables mandate

Two innovative projects on the islands could provide lessons for power providers throughout the country

In Hawaii, where leaders are planning to meet a 100% renewable energy mandate by 2045, the state’s largest utility recently began a pilot program to better understand how to integrate solar generation onto its grid, but some equally valuable lessons might be learned from the state’s smallest electricity provider.

The Hawaiian Electric Co. (HECO) was recently awarded a $2.4 million grant from the Department of Energy’s Sustainable and Holistic Integration of Energy Storage and Solar PV (SHINES) program, which is aims to enable the widespread deployment and integration of solar PV generation at a system levelized cost of energy of less than $0.14/kWh.

On Kauai, the only island not served by HECO, the Kauai Island Utility Cooperative recently signed a 20-year power purchase agreement with SolarCity under which the KIUC will pay $0.145/kWh. The product is unique in that is touted as the first fully-dispatchable solar PV plant in the world. 

SolarCity is producing the power from a 13 MW solar array backed by a 52 MWh storage system that will use Tesla Motor batteries. The Tesla Powerpack lithium-ion battery system will feed up to 13 MW into the grid during the evening peak, enabling KIUC to lower the amount of power it needs to generate from fossil fuels.

SolarCity is quick to point out that the rates are only slightly more than the cost of energy from KIUC's two existing 12 MW solar arrays. That fact has puzzled some solar developers who wonder how SolarCity can afford to sell output from a solar-plus-storage system at prices close to the cost of a stand-alone solar plant.

Developers and analysts alike have speculated that SolarCity is getting the friends and family discount from Tesla. SolarCity Chair Elon Musk is also CEO of Tesla and is the cousin of SolarCity executives Lyndon and Peter Rive.

SolarCity says that is not the case. “We compete the same way as everyone else,” spokesperson Kady Cooper said.

How did they do it? “We monetized the federal investment tax credit and accelerated depreciation and leveraged the Hawaiian state taxes,” she said.

Loss Leader

Tyler Ogden, a research associate on Lux Research’s solar team, says SolarCity is using the KIUC project as a sort of loss leader to explore a new market and gain knowledge and expertise in solar-storage system installations.

SolarCity’s new direction comes at a time when other companies in the industry are also looking for new markets. The San Mateo, Calif., company has traditionally installed photovoltaic systems for the residential sector, growing into the nationwide leader in that space, with about a third of the residential market. Last year, the company began entering new markets. It did the utility-scale deal with KIUC, and it recently launched a community solar initiative in Minnesota in partnership with Sunrise Energy Ventures.

Similarly, in late 2014, First Solar, which had concentrated on the utility-scale market, entered the residential market by forming a partnership with the Clean Energy Collective under which the companies will pursue community solar projects.

Both companies could be gearing up for the day when solar-plus-storage becomes economic. If PV and battery prices continue to decline, as expected, Ogden sees such solar-storage facilities becoming economic in about five years. So SolarCity could be giving up some margin to gain market share when economic model ripens.

From the utility’s side, KIUC also stands to gain valuable lessons in how to manage distributed energy resources on its grid, which has 1,400 miles of transmission lines, 125 MW of capacity, and a peak load of about 60 MW.

In January, KIUC hit a milestone when renewable resources met an average 77% of the island’s energy demand and, during peak solar hours, briefly spiked to 90% renewable on four separate days.

“We made it work through the liberal use of batteries,” KIUC spokesperson Jim Kelly said. He also noted that the co-op has a biomass generator that can provide as baseload power. “We are learning as we go,” he says.

On a typical day, KIUC’s renewable energy profile is 62% solar power, 8% biomass, and 7% hydroelectric. The co-op’s system also has 10.5 MW of battery storage, not including the SolarCity project and is a “smart” grid with at least 28,000 smart meters.

KIUC also is developing a 25-MW pumped storage project. The completion date is not yet set, but it will likely be by the end of the decade. And, of course, KIUC is building the SolarCity solar-plus-storage project.

KIUC put out a request for proposals for that project. Most of the offers came in close to the cost of diesel power, but SolarCity “kept coming back and sharpening their pencil,” Kelly says. “They were very enthusiastic. We think they see it as an opportunity to get into the utility space.”

Solar Penetration

The high level of solar adoption is not unique to Kauai. As of late January, 17% Hawaiian Electric customers had installed rooftop systems, resulting in solar penetrations of more than 20% on many of its circuits. 

Integrating all of that new solar has proved challenging for the utility, which has struggled to keep up with interconnection requests.

“We’ve had an explosion of distributed, behind-the-meter PV systems that we don’t have control over," Dora Nakafuji, HECO's director of renewable energy planning told Utility Dive at the recent DistribuTECH conference.

For most rooftop systems, the utility still struggles with a "lack of visibility even to where it is, when it’s producing and how much it’s producing, so that’s a challenge," she said.

In December, the company announced that after clearing a backlog of over 2,500 solar PV interconnection applications awaiting approval since October 2014, it had approved the 206 remaining applications on Oahu, the 333 remaining on Maui, and the 336 remaining on the Big Island. The last approvals were primarily systems requiring special attention because they would go onto parts of the grid with high solar penetrations and could threaten system stability. 

HECO’s participation in the SHINES program could help resolve those issues. “It is an opportunity for the utility to learn how to integrate renewables,” Ogden said.

The program will explore a new solution called SEAMS (System to Edge-of-Network Architecture and Management) that will be able to see and interface with distribution level, customer-hosted electricity resources.

The focus of the SHINES program at is "that intelligent, integrated PV storage that’s behind the meter," Nakafuji said. The company's SEAMS grant "is about connecting that into the utility operating environment so that we know what’s happening with those resources."

While the utility has currently automation and control "down to a certain level," she said, it still lacks the ability to view and control distributed resources across the grid. 

"From our edge of network, which is our last point of automation on our distribution network, to the customer’s meter, there is a gap, and this is industry-wide."

The existing utility systems see behind-the-meter distributed resources as load reduction or negative load. The SEAMS system will combine short-term forecasting and numerical weather prediction to provide grid-responsive controls to help link distributed resources with the utility’s grid.

"What that really allows us to do is to begin to take the data points that we need down to the customer side on all these resources and seamlessly integrating that information, along with the logic, so that our [energy management system] ... knows what’s happening with the rest of the system," Nakafuji said. 

The SEAMS system is being deployed by Siemens, Alstom, DNV-GL, AWS Truepower, Referentia Systems, Apparent, and Stem.

If successful, the program could provide valuable data for utilities outside of Hawaii.

“What Hawaii is going through is what the rest of the country could expect with a similar level of solar penetration,” Ogden says.

But the lesson is not just in the data that the SHINES program collects. There is just as likely to be a lesson on the role of the utility and the business model for integrating renewables.

As solar and storage become more economic, the penetration of distributed resources is going to grow, and utilities are going to have to learn how to adapt. Ogden sees the potential for that market unfolding as a series of partnerships between utilities and vendors.

In that scenario, lessons learned from HECO’s SHINES project could provide an advantage to new entrants, just as SolarCity hopes to gain an advantage through its KIUC project. And the experiences of both utilities could prove even more important in helping Hawaii meet its nation-leading renewable energy mandate.

Editor Gavin Bade contributed reporting.

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Filed Under: Generation Solar & Renewables Energy Storage Distributed Energy Regulation & Policy
Top image credit: Flickr by adamisserlis