A fast solar ramp in Hawaii can save $3-7 billion

By Will Driscoll

Hawaii can save $3 to $7 billion by accelerating its transition to solar, according to an independent utility modeling analysis.  That conclusion is validated by the experience of the Hawaiian island of Kauai, where a new solar-plus-storage park will bring down the island’s electricity rates. 

A new state law in Hawaii advances its commitment to pursuing renewables aggressively, so now it’s up to Hawaiian Electric to verify the massive $3-7 billion savings potential from an aggressive solar transition, and then pursue that path.

Read more: A fast solar ramp in Hawaii can save $3-7 billion

Savings of $3 to $7 billion

Hawaii’s legislature has set a goal of 100 percent renewables by 2045, and Hawaiian Electric Industries is pursuing a state-approved plan to meet that goal.

Yet a new study of Hawaii’s grid by the Rhodium Group found that moving faster on solar (with minimal growth in other renewables) would save Hawaii $3 to $7 billion between 2020 and 2045.

Whereas Hawaii on its current path would reach 40 percent renewables by 2030, the study found that the least-cost path would achieve 46 percent renewables just three years from now, by 2021, and then 58 to 84 percent renewables by 2030.

The range in savings, between $3 and $7 billion, reflects two bounding analyses: 1) moderate renewables costs combined with low oil prices (for $3 billion in savings); and 2) low renewables costs combined with high oil prices (for $7 billion in savings).  (Hawaii generates most of its electricity using imported oil.)

Beyond solar, the study found that Hawaii would need “up to two gigawatts of lithium-ion battery or functionally equivalent storage in 2030” to achieve the least-cost energy system. Kauai has shown the way here, as it is relying on battery storage provided by Tesla and the AES Corporation to store solar power for later release onto the grid.  (The study’s methodology is described in a technical note below.)

Kauai’s new solar-plus-storage park will bring down electricity rates

Kauai, where a member-owned co-op utility provides the power, shows how easy it is to adopt renewables quickly. Kauai has advanced from 8 percent renewables in 2011 to 44 percent now.

That’s well above the 27 percent for the rest of Hawaii, which is served by Hawaiian Electric.

Kauai aims to generate 50 percent of its electricity from renewables by 2023, and 70 percent by 2030. That 70 percent figure is the approximate midpoint of the 58 to 84 percent range found in the Rhodium study to be the least-cost range for Hawaii as a whole by 2030.

The cost of electricity from a new AES-built solar-plus-storage system on Kauai will be 11 cents per kilowatt-hour—significantly lower than the 14.5 cents per kWh for Tesla’s system just two years ago—and “will provide downward pressure on rates,” said the Kauai utility’s CEO David Bissell.

The Government of Hawaii wants affordable electricity and rapid integration of renewables

Hawaii’s governor recently signed a law providing that by 2020 the public utilities commission must set performance incentives and penalties to tie an electric utility’s revenues to its achievement on performance metrics—breaking the direct link between investment levels and allowed revenues. Two of the key performance measures align with the solar progress in Kauai and the results of the Rhodium Group study—namely, affordability of customer electric bills, and rapid integration of renewable energy.

Hawaii’s elected officials have been concerned about Hawaiian Electric at least since 2015, when 40 elected officials called for a study of publicly owned electric utilities, as on Kauai, for all of Hawaii.

The Rhodium Group study itself indicated interest across Hawaii in accelerating solar, as it gained the participation of Hawaiian stakeholders in 200 hours of focus groups and interviews, and was funded by a Hawaiian technology firm incubator, Elemental Excelerator.

It’s now up to Hawaiian Electric to verify the projected $3-7 billion savings, and pursue a fast solar ramp

The best course for Hawaiian Electric would be to run the Rhodium Group’s numbers through its own utility model to develop its own estimate of the cost savings possible from a fast renewables ramp. If Hawaiian Electric does not yet have a sophisticated utility planning model for this purpose, which includes, for example, battery storage as an option, the utility would be wise to first upgrade its planning model, and then re-run the Rhodium Group’s analysis. Or, if Hawaiian Electric’s most recent planning analysis, as reflected in its December 2017 Power Supply Improvement Plan, was limited by any artificial constraint on the amount of solar that it would allow, the utility would do well to re-run its analysis without any such constraint.

Assuming that Hawaiian Electric confirms the Rhodium study’s results—which Kauai’s experience already validates—then it should roll out an aggressive solar ramp. To its credit, Hawaiian Electric has been working with the National Renewable Energy Laboratory to understand how it can best modernize its island grids to incorporate low-cost solar. Hawaiian Electric could now quicken its pace to accelerate its renewables transition. Its customers would be happier paying less for electricity, and Hawaiian Electric could receive performance incentives, rather than pay penalties for failing to meet performance metrics, under Hawaii’s new state law.

Technical Note: The Rhodium Group study simulated Hawaii’s grid using a modified version of SWITCH, an “open source optimization modeling platform,” which contained detailed representations of the electric grid on Hawaii’s four most populous islands. For oil price scenarios, the study used the upper and lower bounds of electric power sector diesel and residual fuel oil prices in Hawaii between 2006 and 2017. For renewable price scenarios, the study started with renewable energy costs assumed by Hawaiian Electric in its December 2017 Power Supply Improvement Plan. Then, to account for future cost reductions for renewables due to technological improvements and economies of scale, the study “scaled those prices to projections from NREL’s mid-cost and low-cost scenarios.” The study’s authors then ran the modified version of the SWITCH model to find the least-cost energy system for 1) moderate renewables costs combined with low oil prices, and 2) low renewables costs combined with high oil prices.

See https://pv-magazine-usa.com/2018/05/07/a-fast-solar-ramp-in-hawaii-can-save-3-7-billion/