Anyone who knows about the ocean knows what happens after you throw out chum to a nearby shark. More and more sharks show up leading to a bloody feeding frenzy.

We are now witnessing such a feeding frenzy in the solar electric, or photovoltaic (PV), world on O’ahu. Residential and commercial demand for PV systems has taken off dramatically across the state these past several years with O’ahu leading the way in what has become a ferocious and ultimately unsustainable competition for sales and market share.

Over the first six months of 2012, 114 different companies pulled over 5,000 PV electrical permits according to data from the City and County of Honolulu Department of Planning and Permitting.

Ten years ago one could count the number of PV providers on the island on one, maybe two hands. Now, new entrants—both local and from the Mainland—are popping up every month. Radio and television blurbs and expensive full-color, full-page ads in the state’s newspapers are being taken out by solar companies claiming, among other things, that they’re no. 1, the best, biggest, most popular, most experienced, most reliable, best positioned to be around in the long-run, most local and most professional. Call or email us today! The hype, spin and sales spiel has become so thick as to resemble a very voggy day in Kona.

Beyond the spin, what do the actual numbers indicate? I have been analyzing O’ahu PV permit data over the past several years and have organized the numbers for the first six months of 2011 and 2012 to see who the real players are and to explore the future and prospects for this currently white-hot construction trade.

Below are the top 15 PV providers for 2011 and 2012, beyond the sales hype and braggadocio, based on the stated total value of solar electric systems from the submitted electrical permit applications.

For the top 15 PV providers on O’ahu, more than three times the number of permits were pulled in the first half of this year compared to 2011 while there was an almost 300 percent increase in the stated value of those projects. In 2012, those top 15 were also responsible for obtaining more than 70 percent of all PV permits issued.

In 2011, two companies dominated the PV scene on the island—RevoluSun & DEP Hawaii (controlled by the same individuals) and Sunetric. The founders of Sunetric, Sean Mullen and his wife Beth-Ann, started the company in 2004 as Elemental Energy and Suntech Hawaii before changing the name to Sunetric in 2009. In early 2009 a number of Sean’s top lieutenants were either let go or left voluntarily in an acrimonious parting of ways. These individuals, including Mark Duda, Todd Georgopapadakos, Josh Powell, Eric Carlson and Rod Braunthal went on to form RevoluSun & DEP Hawaii and the competition between these two companies has been intense and sometimes personal ever since.

Over the first half of 2012, RevoluSun & DEP Hawaii, now including a joint venture (DEP/APB JV LLC) with their contracting partner American Piping and Boiler to develop and install commercial projects, has put more distance between themselves and the rest of the pack with a gross of nearly $50 million while Sunetric has been joined by Alternate Energy, Hawaii Energy Connection and newcomer Vivint Solar in the $10+ million tier of providers. Vivint Solar’s entry into the O’ahu PV market has been nothing short of phenomenal. Vivint, a Utah-based company that has been providing home automation systems before getting into PV in October 2011, only started in the solar electric business on O’ahu in March 2012, which makes its first half numbers even more impressive.

How is Vivint Solar doing it? By going to door-to-door, mining referrals and offering a U.S. Bank-financed power purchase agreement (PPA) option to homeowners with little or nothing out-of-pocket. According to COO Brendon Merkley, the “vast majority” of its sales on O’ahu have closed using PPAs.

It has been reported that the volume of PV projects going in on the island has caused lengthy delays, as long as several months, in getting those systems inspected by city and county electrical inspectors, leading to frustration among many home and business owners who are not supposed to operate their systems until inspection approval is granted. An even more serious issue is that the Hawaiian Electric grid is rapidly getting more saturated by the exploding number of PV systems feeding into their power network.

While the actual calculation as to how much distributed generation (DG), in this case PV power, can be safely and reliably accepted into the HECO grid is complex and subject to dispute, it is indisputable that more and more circuits on O’ahu are reaching levels of high saturation. Below are what HECO describes as Locational Value Maps (LVM) which show different percentages of DG penetration. Those circuits with the highest level of saturation are marked in red. While a red circuit does not necessarily mean a full-stop to accepting more PV into that circuit, it does mean that a higher degree of scrutiny, or “supplemental review,” will be required by HECO, which can lead to delays and the possibility of having to pay for a costly interconnect requirement study and ultimately not being able to proceed with the project.

Below are LVMs for June 2011 and June 2012.

According to HECO, out of a total of 465 circuits on the island, 76 are now in the red high saturation category. And with the volume of sales that those 114 PV providers are racking up it’s inevitable that more and more circuits will be going red at an accelerating pace.

What observations and conclusions can be drawn about the present and future for the solar electric industry on O’ahu?

  • This kind of growth curve is not sustainable given the size of the island market and grid limitations.

  • There is a greater sense of awareness about the benefits of installing your very own solar electric power plant among consumers and an increasing urgency to act sooner rather than later before the grid is effectively closed or tax credits are diminished or go away.

  • More and more homeowners are being attracted to the 3rd party-owned option, where little if any upfront money comes out of their pocket as the system is either leased back to them or the electricity produced is sold at a rate below HECO power prices.

  • Similar to the global PV manufacturing industry that has too much production capacity compared to demand, the O’ahu market cannot support 100 or more companies and as things inevitably cool down there will be fewer players.

  • Given the intense competition among providers there has been a race to the pricing bottom leading to marginal profit margins and questionable long-term viability for many firms.

  • Over time there will be a growing number of orphaned PV systems with the company that provided the system no longer in business or unable and/or unwilling to service or maintain their installations.

  • Given the volume of systems going in and the City and County of Honolulu’s overloaded permitting department and inspection staff, it’s an open question as to whether all the project designs that are being approved are being adequately scrutinized and being installed to the highest professional standards.

Over the past couple of years, Hawai’i has vaulted into the impressive ranks of being one of the most solar electrified states in the nation on a per capita basis, attracting all kinds of attention near and far for this laudable commitment to clean, green and homegrown energy. And for that we should all be proud. To what extent this recent pace can be kept up is, however, a very open question.