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They said it couldn’t happen: People in the islands could never have mainland electricity rates — it was a “pipe dream.”
But now, the Hawaiian Electric Co. is proposing to offer customers on Oahu electricity rates as low as some found in high-cost states on the mainland — at certain times.
The pricing is part of an effort to get customers in Hawaii to change how, and when, they consume electricity.
If state energy regulators accept the power company’s recently proposed tiered pricing, Hawaiian Electric customers will be able to voluntarily take part in a pilot project with highly differentiated time-of-use electricity rates. “Highly” is the key word.
The proposed rates vary by county, and likely would be affected by changing fees and fuel oil prices.
On Oahu, for 16 hours of the day HECO customers who opt in would pay rates akin to electric customers in mainland markets like New York, Connecticut, New Hampshire and California.
Honolulu customers who take part would pay around 13 cents per kilowatt-hour between 9 a.m. and 4 p.m., and 16 cents per kilowatt-hour between midnight and 9 a.m.
“The time-of-use rates have a very low rate. The idea is that we want to shift people’s consumption to that period,” said Richard Wallsgrove, the program director of the Blue Planet Foundation.
The catch, of course, is that those customers also would face a stunningly high rate in the evening.
Oahu residents who opt in would face shocking bills if they microwave their dinners and run the dishwasher, washing machine or electric dryer on utility electricity between 4 p.m. and midnight. The rate in that time window would be nearly triple the daytime rate.
That peak rate on Oahu would be 38.5 cents per kilowatt-hour. On the Big Island, it would be 47.9 cents for that same power.
The current residential rate on Oahu is about 24 cents per kilowatt-hour and on the Big Island it is 30 cents.
Prices can change home energy consumption, said Wallsgrove, whose organization’s goal is to facilitate the transition to renewable energy in the islands.
Hawaiian Electric’s rates may have topped out in mid-2014, but Wallsgrove said that the state’s electricity prices — which remain about two and a half time the national average — continue to create pressure for change. “If anyone is ripe for it,” he said, “I think it is Hawaii.”
In addition to having the most expensive electricity of any state, Hawaii also has the most residential solar power per capita; and it is attempting to navigate a dramatic shift toward renewable energy over the coming decades
“If anyone is ripe for (change), I think it is Hawaii.” — Richard Wallsgrove of the Blue Planet Foundation
But as we use a fast-increasing share of renewable energy, managing our fluctuating flows is difficult. One way to smooth out those fluctuation would be to store solar or wind-generated energy for later use.
Safe, reliable and affordable home or utility-scale battery storage may eventually be a workable solution; but until that arrives, the utility needs to find some way to better manage our energy flows and distribution.
This involves syncing the fast-growing supply of renewable energy to customer demand for electricity. The sun, of course, only powers photovoltaic panels when it shines during the day. Wind can only turn turbines when it blows, often at night or in the early morning.
This often leaves a large, problematic gap in renewable energy production in the very window of time when residential customers consume the most, between about 5 p.m. and 9 p.m.
To satisfy that demand, the electric utility powers up generators that mostly burn costly and polluting fuel oil. About 70 percent of the state’s electricity is produced from oil.
The idea behind sharply tiered pricing is simple: If Hawaii can’t produce more renewable power when people currently want it, how about convincing them to use more electricity when it is being generated?
“Use” can be interpreted loosely. The idea isn’t to get everyone to stay home so they can turn on their appliances during the day, or to wait until after midnight to do the same.
The utility, as well as many local energy experts, say time-of-use rates — with an assist from timers on appliances and battery storage — will help facilitate the shift.
Timers are becoming increasingly ubiquitous on appliances, while home batteries allow people to draw from their own solar panels — or the energy grid at the lowest rates — even if they don’t use that energy until peak hours.
HECO has made clear that it would like to see customers use home batteries — which are still too expensive to make sense for most people — to cover their own peak needs in the evening. Load shifting could theoretically lower costs for all customers if it softens peak demand, various experts said.
Mina Morita, the former head of the Public Utilities Commission, said the time-of-use rates are part of a crucial “paradigm shift” in which the utility must transition from simply matching the supply to the demand, to sending behavioral signals through how it sets prices.
Those signals are supposed to convince customers to satisfy more of their electric needs when renewable energy sources produce it most cheaply and abundantly, and to use less when those intermittent energy sources are less productive.
It all marks a significant shift from the pre-renewable energy era of the 1970s and 1980s, when Southern California Edison aired public-service spots asking utility customers to “give your appliances the afternoon off” to avoid overloading the electric system.
The new de facto message from Hawaiian Electric — which is likely to be the first of many — is: Work those appliances hard in the afternoon, but give them a break in the evening.
But will people do it?
“A number of things affect behavior and price is certainly one of them,” said research fellow Makena Coffman, who focuses on energy issues at the University of Hawaii Economic Research Organization.
But she noted that while studies tend to show how overall pricing affects energy consumption, there is far less substantive analysis on shifts in costs over the course of a day.
“People are going to face a lot of uncertainty about whether they want to do this,” she said.
People who don’t have timers on their appliances or some sort of home-energy display that can show their active electricity consumption translated into cost, may have a hard time calculating whether or not to sign up for the pilot program.
Shalanda Baker, the director of the Energy Justice Program at the William S. Richardson School of Law, said “I’m not sure that the market signals they are trying to send will be to the highest users at these peak times; families coming home after work with children.”
“The number of people who will be able to benefit from this flexible pricing structure might, in actuality, be quite low,” she added.
“The number of people who will be able to benefit from this flexible pricing structure might, in actuality, be quite low.” — Shalanda Baker, director of the Energy Justice Program
But, given that no one seems certain that the tiered pricing structure is the ideal one, starting small might not be a bad thing.
HECO spokesman Darren Pai highlighted that the proposed rates will go through a process in which regulators, the Consumer Advocate and others can offer their input. “We think this is going to be a constantly evolving process to see what works,” Pai said.
Time-of-use rates will be one of numerous new tools — along with smart meters, smart grid technology — aimed at helping customers better understand and manage their electricity use, he said.
It isn’t clear when regulators will make a decision on HECO’s proposal.
But if time-of-use rates do manage to convince customers to shift away from peak-time usage, which is usually the most expensive time to produce and distribute energy, Pai said it should help bring down costs for all customers.
The people who do opt in, noted Wallsgrove, are people who are most likely to be able to adjust their consumption — and their experiences could help to convince others to join in over time.
“We don’t risk harming anyone who can’t shift their load,” he said. “If they can’t shift their load, they can keep their current deal.”
He and others noted that the initial proposal may be far from perfect, but that it is a departure point for a more flexible approach to the electricity challenges it attempts to address.
“If we want to know how people change with dynamic energy prices, we have to try it,” Wallsgrove said.
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