For anyone in sales, there are two existential questions that need to be posed and answered: what's the market for what you're peddling and how much marketshare can you expect to capture?
As the once thriving rooftop solar industry in Hawaii painfully contracts, businesses like mine and others are being forced to seriously ponder those two questions.
In a state where there's by far more installed solar capacity per home and business than any other place in the nation, and still a high dependency on imported fossil fuels, how can it be that our solarcoaster is slowing to a crippling crawl?
In a state that's pledged itself to 100 percent renewable in power generation by 2045, the first in the country to make such a commitment, how can it be that the bottom is dropping out of the rooftop solar market?
In a state that hosts no shortage of high-brow energy conferences every year, with bright and visionary thinkers who expound on cutting edge ideas and technologies, how can it be that solar PV is bleeding its way to its practical demise?
Or to paraphrase the Wicked Witch in the Wizard of Oz as she was melting: “What a world, what a world. Who would have thought that beautiful rooftop solar would be destroyed by wicked market forces.” (I'm pretty sure the line goes something like that).
But perhaps, to be less grim, we're just on the path to a new normal as far as what can be expected in new sales, that the irrationally exuberant boom time of several years ago with record sales and growth was more of a bubble and not a sustainable trend.
PV permits 2017 to date
Last month, the Honolulu Department of Planning and Permitting issued 231 PV permits compared to 368 during the same month in 2016, a drop of 37 percent. From January to June, a total of 1,171 PV permits were issued compared to 2,610 over the same period in 2016, a drop of 55 percent. Compared to the first six months of the all-time high year of 2012, PV permit numbers are down 78 percent.
The stated project value of the first six months of PV permits came to $44,342,520 compared to $93,576,042 in 2016, a reduction of 52 percent.
Last month, the Hawaii County Building Department issued 78 permits for PV systems compared to 135 PV permits issued in June 2016, a drop of 42 percent.
Over the first six months of the year, the County issued 354 PV permits compared to 703 during that same period in 2016, a drop of 50 percent. Compared to January-June 2015, the number of PV permits is down 72 percent.
The stated project value of the first six months of PV permits came to $22,196,861 compared to $31,060,143 in 2016, a reduction of 26 percent.
County of Maui
Of the three service territories served by the Hawaiian Electric companies, Maui County, comprised of Maui, Lanai and Molokai, took the biggest hit in the drop in PV permits so far this year.
Last year the County of Maui issued 1,007 PV permits over the first six months compared to 363 issued this year, a 64 percent drop-off. Compared to January-June 2015, the number of PV permits number is down 69 percent.
In contrast to the rest of the state, the Garden Isle actually saw an increase in the number of PV permits issued January-June 2017 compared to the same period last year. Kauai County issued 378 PV permits this year compared to 193 from January through June 2016 — a near doubling of 96 percent.
What accounts for this outlying behavior? There are a number of possible reasons. In contrast with its neighboring Hawaiian Electric utilities, Kauai Island Utility Cooperative does not have either circuit or system level hosting capacity restrictions that could serve to limit the installation of new rooftop solar PV systems.
Also, KIUC formally ended its Net Energy Metering program in 2009 and has had essentially just one rooftop solar PV interconnect agreement available, their schedule Q contract, rather than the somewhat challenging menu of net metering, Customer Grid Supply (CGS), Customer Self Supply (CSS) and Standard Interconnect Agreement on offer across HECO, HELCO and MECO. This could have made for a steadier incentive over the past years, compared to the more boom-bust cycle across the other islands.
The second half of 2017
Even though net metering across the Hawaiian Electric companies was formally brought to a close by a Hawaii Public Utilities Commission order in October 2015, the policy has been lingering on through a slow demise. The three Hawaiian Electric utilities have been allowing net metering reservation holders plenty of time and then some to get their systems installed and operational while also, as per PUC order, transferring net metering deadwood to the CGS program capacity limits.
With the original CGS caps having been successively reached last year for Maui, the Big Island and Oahu, the injection of additional cap space has been at least a mini lifeline to the PV industry. But all good things do eventually come to an end. As per the commission’s order last December, CGS will close for good October 21 even if there’s still cap space available.
The parties to the Distributed Energy Resources docket before the PUC have been diligently working on the next steps as far as new interconnect models for renewable energy systems connecting to the grid. There's the hope and expectation that there will be at least one option to allow home and business customer-generators to provide power back to the Hawaiian Electric companies. A concept known as “smart export” would seem to be the most likely candidate to be implemented as an option.
Under smart export, power from a renewable energy system would be allowed during certain periods of the day when power is needed the most, typically in the evening hours when demand peaks. In return for these green kilowatt-hours, the customer-generator would receive credit or compensation at a rate yet to be determined. The commission has asked the parties to this docket to come up with consensus stipulations by next month.
In the meantime, as the last of the net metered stragglers get their systems installed and this fantastically successful 16-year-old program completely disappears, most likely never to return, the self supply tariff and battery storage take center stage.
For those of us greybeards who have been in the solar industry for decades, to experience the return of battery storage, exemplified by the stratospheric trajectory of Elon Musk's Tesla brand, is something akin to déjà vu.
If one were doing solar PV back in the off-grid jungle days from the 1970s to the early 2000s, battery storage was required. As grid-tied PV began its ascent in California 2000-2001, more and more manufacturers brought battery-less inverters to market as the demand for grid-tied solar went up.
Now batteries are back in force, bigger in capacity, smaller in size, bolder in performance claims, wiser in multiple operating modes, glitzy in form and lower in price. What more can we ask for? Except perhaps for the hope that they will work as described and meet the expectations of those early buyers who have imbibed deeply enough of the sales pitch to be willing first adopters.
When Hawaii became the 38th state in the country to adopt a net metering program in 2001, after multiple prior failed attempts in our legislature to get a bill to the governor's desk, one could observe that it takes a while to get a good idea adopted across our chain of islands.
But that's certainly not the case when it comes to how fast our little state of 1.4 million people has deployed 83,000 rooftop solar PV systems, reaching levels of renewable energy penetration on our island grids that are higher than virtually anywhere else in the U.S.
There is strong consensus among Hawaii energy stakeholders that bringing considerably more rooftop solar PV online is a good thing and a high priority. But with this year on pace to see the lowest numbers since 2010, we in the industry are wondering whether what we're experiencing now is the new normal, as major players disappear completely or see their PV sales revenues drop by as much as 80 to 90 percent.
There are ongoing high-brow discussions on grid modernization, smart grids, smart inverters, smart meters, smart export, smart monitoring and controls, utility-scale battery storage, improving the power supply and the like. But the real-time and near-term effects of these efforts on the local PV industry can be rather limited as the urgencies of generating sales and revenue, meeting payroll and paying vendors is on a decidedly different track than those working groups and regulatory proceedings.
Marco Mangelsdorf has been in the renewable energy field for nearly four decades and is currently president of ProVision Solar. He has taught energy politics at UH Hilo and the University of California and is a director and secretary of the Hawaii Island Energy Cooperative, which seeks to convert the Big Island's electric utility to a co-op.