Solar executive's reading of the tea leaves shows a mixed future.
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In June 2001, Hawaii became the 35th state in the nation to adopt a Net Energy Metering (NEM) law to promote the installation of small renewable energy grid-connected systems across the Hawaiian Islands. What effect has the availability of this law had on the diffusion of NEM photovoltaic (PV) systems in Hawaii?
I wrote those words back in September 2002 for the beginning of the abstract for a conference paper. Following that last question, I then observed: “Given the typical abundant sunshine here coupled with consistently high electric utility rates, NEM should be taking off, yet consumer adoption has been slow.”
My, oh my, what a difference 10 years make. After Hawaii’s first NEM law—which allowed homeowners and businesses to receive full retail credit for the power they produced—went into effect July 1, 2001, adoption putt-putted along in a decidedly incremental fashion.
For the first 6.5 years, from mid-2001 through 2007, a total of 386 NEM systems were installed across the state. In 2008 alone, 565 systems 1 went in and from 2009-2010, 3,399 systems2 were installed. By the end of last year, a total of 9,625 NEM systems3 were sitting on people’s roofs and on ground-mounted arrays across the state producing solar electricity from the sun. And right now any PV integrator worth their sea salt is likely doing record business this year as 2012 looks to be another big banner year over 2011, which was a banner year over 2010, which was a banner year over 2009.
In the first six months of this year alone, an additional 4,519 NEM systems went in across HECO, MECO and HELCO territories.4 Given the anticipation of the usual end-of-the-year rush, more like madness, to get systems installed and placed in service by the December 31 tax credit deadline, the total number of NEM systems installed in 2012 will be close to, if not higher than, the figure for all of the NEM systems installed during the previous 10.5 years.
In that 2002 paper, I identified a number of challenges and obstacles to greater adoption of grid-tied PV: technical, practical, financial and psychological.
By technical, I addressed whether PV modules and grid-tie DC-AC inverters had achieved standards of technological maturity and reliability to provide for consumer confidence and utility acceptance. By that time, that answer was yes. By practical, I asked whether the required system components and adequately trained professionals were readily available, as well as the ability to obtain the required government permits. Again, the answer was yes. So no real impediments in those areas were present.
Regarding financial challenges to going PV in 2002, the purchase price of a solar electric system was two to three times higher on a dollar per installed watt basis compared to the present. Back then, a homeowner looking for a good rate of return on their investment was not looking at grid-tie PV as that kind of attractive opportunity as the simple payback for a residential NEM system was in the 20+ year range. Early adopters were excited about achieving a level of energy independence and self-sufficiency and watching their electric meter spin backward and, fortunately for those few of us who were in the PV business back then, were not all that concerned about reaching a breakeven point for decades.
What I referred to as the psychological challenge to going grid-tie PV had to do with the disconnect between complaining about paying the power bill every month and caring enough, feeling comfortable and confident enough to do something about it by going solar electric. The relative newness and lack of widespread adoption, as in not seeing any of your neighbors do it, presented a significant obstacle to breaking from the grumble-grumble status quo of writing that check every month to the electric company and doing something proactive about it. First adopters go out and buy the first newfangled gizmos on their block because it’s a cool and exciting thing to do. In 2002, the mass adopters were far over the distant horizon and were waiting to feel that needed comfort level to embrace the product.
Over the past years these financial and psychological challenges of years gone by have been all but obliterated by dramatically lower prices, a hypercompetitive market among providers, no money out-of-pocket financing schemes and not only the perception that PV is now mainstream, but the acute and growing sense of urgency that one had better get on the PV bandwagon NOW before the grid closes and tax credits go away and it’s too late.
More on the brave new world of PV financing options: a homeowner can now go solar and virtually not have to pay for it. Even better than the great American consumer’s dream of get-it-now-and-pay-for-it-later, 3rd party financing allows homeowners and businesses to have solar electric systems installed on their roofs for little to nothing down with a positive cash flow from day one. Taking advantage of the state and federal tax credits available as well as the accelerated depreciation schedule available, Mainland companies like San Jose-based SunPower, San Francisco-based SunRun, IPO-bound Foster City-based Solar City and Provo-based Vivint—which was purchased last month by the Blackstone Group for over $2 billion—have been landing on our shores over the past couple of years and are battling for market share similar to a scene of rapacious locusts swarming over a ripe-for-the-picking field.
What lies ahead for NEM prospects in Hawaii? My reading of the tea leaves shows a mixed future. In the very short term, large numbers of NEM systems will continue to be sold at a rapid pace. (On O’ahu, now that the City and County of Honolulu has gone to on-line permitting with little to zero scrutiny of the PV system design for electrical code compliance and safety, hundreds of solar electric system permits can been issued each day.) Utility grid saturation issues and a probable reduction to state tax credit caps, perhaps taking place as early as this January, will likely lead to a cresting of the NEM wave in 2013 or 2014. This will lead to a consolidation in the PV industry as the market contracts, leaving not a small number of all those systems being sold now effectively orphaned.
In the meantime, though, almost anyone and everyone in this business is having a helluva time riding this wave that took years to build to the mammoth height that it has become today.
1. Figure also includes PV systems installed on Kauai under Kauai Island Utility Coop’s Schedule Q contract where the customer-generator is not getting credited for surplus kWhs fed into the grid at the retail rate but at the “avoided cost,” or wholesale, rate. As of 2010, NEM was no longer available on Kauai though KIUC did accept another ten NEM systems in 2011 under a pilot program. ↩
2. Includes Schedule Q contract customers on Kauai. ↩
4. To-date in 2012, another 267 Schedule Q contracts have been executed on Kauai. ↩
About the author:Marco Mangelsdorf has been in the renewable energy field for 33 years and is president of ProVision Solar Inc., a Hilo- and Maui-based solar electric integrator that’s been designing and installing PV projects across the islands since 2000. He also teaches energy politics at UH Hilo.
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