Lessons From A Battery Sharing Program In Hawaii — It Isn’t Easy Being Green
Hawaii is struggling to close its oil- and coal-fired thermal generating stations. Everyone agrees it’s the right thing to do. After all, Hawaii, like most islands, is especially vulnerable to rising sea levels. Not only that, the cost of shipping oil and coal thousands of miles across the Pacific means utility rates there are some of the highest in the nation.
Factor in that Hawaii enjoys abundant sunshine and strong breezes year round and the case for renewable energy is even more compelling. That doesn’t mean making the transition to renewables is easy, however. In particular, the output from solar farms tends to wane right at the end of the day when the demand for electricity is increasing. Energy storage is the key.
Battery Bonus Program In Hawaii
Companies like ESS and Form Energy are promising affordable long term storage, but those technologies are still in their infancy. Hawaii needs battery storage immediately, if not sooner. And so last March, HECO, the state’s dominant utility company, launched a grand experiment to pay households for sharing the electricity in their residential storage batteries during the hours of high demand. Six months later, nearly 1,800 families have joined the Battery Bonus program.
Once they all get their batteries installed and verified, that will amount to 10 MWh of committed capacity helping the grid each night. The goal for the program is to deliver 50 MWh by the summer of 2023.
The program is dead simple. No smart grid controls, no fancy grid stabilization services. The batteries are simply programmed to send power back to the grid every day between 6:00 pm and 8:30 pm. The battery’s stored power is first tapped to meet the needs of the household. After that, the battery sends its leftover power to the grid for use by others.
Participants get an $850 per kilowatt ($4,250) upfront bonus when they commit to the program for 10 years. They also earn a $5 per kilowatt monthly bill credit for the duration of their participation. That’s another $3,000 in monthly credits over a decade. In addition, HECO pays retail rate for the electricity exported back to the grid.
In other words, if a typical 5 kWh home battery costs $10,000, the Battery Benefits program will pay the customer a total of $7,250 over the next ten years. That means a big chunk of the cost of a battery is paid for by HECO. In addition, homeowners are now eligible for a 30% federal tax credit whether they have a solar system or not. (Prior to the new IRA law, only systems that paired solar with a battery were eligible.)
The Devil Is In The Details
If this is such a good deal, why isn’t everyone signing up for it? That’s an excellent question. According to Canary Media, with large scale solar and battery projects running behind schedule due to supply chain issues, HECO needed whatever additional clean energy it could harness to keep the grid running smoothly after scheduled coal plant closure. Driven by necessity, regulators, solar installers and the utility banded together to quickly design and approve a workable plan to engage individual consumers in the business of supplying the power grid.
But the plan only guarantees reimbursement for electricity sent back to the grid at retail rates for three years. After that, it might continue at retail or it might be less. No one knows at this point, and as any professional sales person knows, people who have questions often defer buying decisions until their questions are answered.
“Battery Bonus is a demonstration of how [distributed energy resources] can be used as a grid service to retire fossil fuel plants and decarbonize your grid and your economy,” Rocky Mould, executive director of the Hawaii Solar Energy Association, tells Canary Media. That concept of engaging distributed energy resources is being discussed across the country but “sometimes you’ve got to learn by doing. You’re not going to know until you actually do it.” He suggests that other states could learn from Hawaii’s experience when they design their own programs to tap households (or the batteries in electric cars) for clean energy.
Now that it’s increasingly affordable for households and businesses to generate and store their own clean electricity, people across the country are figuring out ways to make that worthwhile. Efforts underway in California, Utah, and Vermont, for instance, reward customers for using their energy devices in ways that help the broader power network. This requires outreach to ensure that people are aware of the opportunity. But customers also need to feel it’s a good enough deal to justify the legwork of getting signed up.
But getting the right balance of incentives has required several revisions to the program. HECO rushed out an initial version in the summer of 2021 to head off a potential power shortage in the post-coal era, but the incentives weren’t high enough to convince many customers to sign up. After several months, the utility got together with the home solar industry to figure out a more attractive compensation package.
“When we did launch, we knew it probably wasn’t going to be perfect and we would need to adjust down the road,” said Kaiulani Shinsato, director of customer energy resources programs at HECO. “The challenging part is that we can’t be changing things too often because…[customers] need to have a certain amount of security.”
Applications picked up after the incentives were increased earlier this year, Shinsato said. But HECO doesn’t want to overpay because that would unfairly shift costs onto customers who don’t have batteries. This logic is familiar to anyone following debates over net metering for solar. Utilities regularly point to equity as a justification for paying less than the full retail rate for the solar customers generate on their rooftops.
The Net Metering Conundrum
The lone point of formal disagreement between Hawaiian Electric and the solar industry was the utility’s resistance to setting a long term export rate for the program. If customers get the full retail rate, there is no economic penalty for participating. If they get less than the full retail rate, it might make better sense for them to keep their electricity in their battery and use it for their own needs rather than sharing it with the grid.
“An export that doesn’t get retail [rate compensation] is an economic loss on the margin,” Mould says. “And what happens is, that builds up over time. It eats into that upfront payment that you’re getting.”
If Hawaiian Electric does end up reducing that compensation down the road, customers would be stuck. If they pull out of Battery Bonus before the 10-year period is up, HECO can claw back a prorated chunk of the upfront bonus payment, which could amount to thousands of dollars.
The result has been that most Battery Bonus participants are people who installed rooftop solar systems before 2015 because they are grandfathered in under the old net metering rules which pay the full retail rate for all exports back to the grid. Hawaii ended its solar net metering program in 2015 for new rooftop installations amid concerns about too much solar power rushing onto the grid on sunny afternoons and potentially destabilizing it.
“The way we’ve been positioning Battery Bonus is that it’s a tremendous opportunity for our customers with existing net metered systems,” said David Gorman, president of Oahu-based solar installer RevoluSun.
The island of Oahu, where the battery bonus program is being offered, has 48,310 net metering solar customers with a total of 328 megawatts of photovoltaic capacity, Mould says, so there’s still a large pool of prime potential participants. Now that early friction with permitting and validation has been smoothed out, the pace of signups could grow. “When people start getting those checks and talking about them at the water cooler, it has this exponential demand effect — it’s not linear,” Gorman said.
But the program would fall short of its visionary potential if the only households financially incentivized to participate are those that signed up for solar on a tariff that the utility eliminated during the Obama presidency. And it’s not clear that paying retail rate for customer battery exports is actually a bad deal for utility customers overall. The alternative is burning more oil, which is so expensive right now that HECO has raised its rates repeatedly throughout the year, to much public consternation.
Shinsato acknowledged that the uncertainty after year three is a challenge for adoption. “Longer term, we want the devices to be operationally more flexible so that we can call on them when the grid needs it, even outside that two hour window in the peak. It’s absolutely critical, especially on this island. We’re going to need our customers to help us” in order to get to 100% renewables.
HECO is working with Siemens and Kitu Systems on the software to manage a variety of energy devices across its territory. But national standards for how all these distributed energy devices should communicate won’t be finalized by the time Hawaii needs to implement them. “We’re blazing new territory on several of these issues,” Shinsato says.
Households could soon take on more of the roles traditionally served by centralized power plants. That would mean the collective population of Oahu wouldn’t need to fund the construction and operation of more large scale grid infrastructure because they will be better utilizing the small scale equipment that’s already there.
That’s the billion-dollar prize that could make a huge difference in places such as California, which has thousands of untapped household battery systems — and a chronic problem finding enough power to keep ACs running in a heat wave. Hawaii leapt into action to ward off an emergency and now is fine tuning its approach for the long haul. What HECO learns could provide important lessons for utility companies in other states to emulate as they design their own shared energy systems.
[Author’s note: I actually know the correct spelling for America’s 50th state is Hawai’i and that native Hawaiians get offended when clueless mainlanders don’t know this. However, Google insists I spell it without the apostrophe in order to perfect the search optimization protocol that is essential to online resources such as CleanTechnica. If you are annoyed by this, please make your displeasure known to Google, not me. Thanks for understanding.]
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