End of Hawaii's Solar Credit Program Spells Trouble for Industry

by | March 29, 2016

By Kathryn Mykleseth

Hawaii's decision to end the state's most popular solar incentive program has caused more than a dozen solar companies to close up shop, lay off staff members or cut employee hours, according to a leading industry association.

In October the Public Utilities Commission agreed to a request from Hawaiian Electric Co. to stop offering its net energy metering program, which credits solar owners the full retail rate for any excess energy their systems send to the grid. The PUC replaced the NEM program with two less attractive options.

The end of net energy metering has led to a drop in the number of homeowners signing up for rooftop solar systems, the Hawaii Solar Energy Association board of directors said. Ten of 16 companies surveyed by the association said they either have reduced the number of people they employ or plan to in the future.

"Companies are trying to adjust, but the fact of the matter is business has contracted," said Jon Yoshimura, HSEA vice president and Hawaii director of policy and electricity markets for SolarCity Corp.

Roughly 2,814 people were employed by the solar industry in Hawaii in 2015, according to The Solar Foundation's Solar Jobs Census.

The HSEA board said solar companies are depending on a buildup of NEM applications that came in just before the rule changed. HECO has been slowly approving those. As of March 8, HECO was reviewing or studying 1,175 NEM applications.

"Frankly, the industry is living off of these approvals," said Jae Kwak, chief financial officer for Haleakala Solar. "As those get built, there is going to be more hardships. There is going to be more job losses."

In the last four months, 285 applications have been approved under the two new incentive programs. In 2013 the industry was installing twice that amount every month, said Richard Taylor, residential and commercial project developer for PhotonWorks Engineering LLP.

Taylor said his company now employs 40 people, compared with 70 employees during the company's peak before the PUC decision.

The two new incentive programs are called grid supply and self-supply. Under the grid supply program, customers are credited approximately 15 cents per kilowatt-hour for the excess energy their systems send to the grid. That is roughly 10 cents lower than the full retail rate, which customers got under the old NEM program. Grid supply also has a minimum charge of $25 a month, while NEM has a minimum of $17. In addition to a smaller credit, the grid supply program has a cap of approximately 4,500 residential systems.

Under the self-supply program, customers are not allowed to send excess energy to the grid and are not compensated for excess energy. Instead, self-supply customers use batteries linked to their PV system to store the excess energy produced. If the batteries run out, the customers purchase power from the grid at the normal retail rate.

HECO requested in January 2015 that the PUC allow the utility to cut back its solar incentive program. When announcing the change, PUC Chairman Randy Iwase said NEM had done its job and was fully subscribed.

HECO customers already on the NEM program, or with a system approved before Oct. 13, are not affected by the policy change.

HSEA board members said some in the industry are adjusting to the change by shifting their focus, while others are relocating workers out of state.

Rolf Christ, CEO of R&R Solar Supply, said his company saw a reduction of photovoltaic sales by 40 percent from October. "Right now I am selling product from China to the Philippines," Christ said.

Christ said some companies have reduced their workload to focus only on projects already in the pipeline and have stopped efforts to sell more systems.

"They have just plain given up on selling," Christ said. "They just are installing what got approved. Some are leaving the state. Some are moving from PV to lighting contracting."

Yoshimura said SolarCity relocated roughly a dozen workers since the PUC ended NEM.

"We moved some people on a temporary basis to work in California or other areas on the West Coast," he said.

Other companies have been cutting back hours to keep their workers employed, said Ron Hooson, special inspector for Solar Inspectors Hawaii.

"Their crews will be working short weeks," Hooson said. "So they still got the same body counts, but their hours are down. They're trying to hang on to people and not lay them off so they go from a five- to six-day workweek to a two- or three-day workweek."

Leslie Cole-Brooks, former executive director of HSEA, said it's time for the solar industry to move past NEM. Cole-Brooks is now executive director at Distributed Energy Resources Council of Hawaii.

"Everyone is adjusting," Cole-Brooks said. "We're adjusting. ... We're looking at the next phase."

That phase includes more use of batteries or other power storage systems and so-called "demand response" systems, which provide incentives for customers to use less power during peak times and more power during off-peak hours.

"That is part of the reason this council (Hawaii Solar Energy Association) was formed," Cole-Brooks said. "Not because of the decisions by the PUC, but that solar wasn't the only way to go anymore."

(c)2016 The Honolulu Star-Advertiser