Is Hawaii the future of American energy? by Scott Nyquist

The Aloha state is unlike any other. It is home to active volcanoes—the eruption of Kilauea on May 13 has spewed lava and fear and has destroyed dozens of building. It is a collection of tropical islands. It was once an independent monarchy. It is thousands of miles from the continental United States. And it has great weather—271 days of sun. Kansas in January, it ain’t.

Hawaii is also an outlier in other ways. For example, it has the highest electricity prices of any state (27.5 cents per kilowatt hour, compared to the US average of 12.5 cents); the highest price at the gas pump ($3.65 per gallon); and the highest degree of petroleum dependency (69 percent of its power comes from oil, compared to less than 1 percent for the rest of the country).

About a decade ago, Hawaii created the Clean Energy Initiative (CEI), a program to diversify its use of energy and to improve efficiency. The guiding idea was for Hawaii to reduce its reliance on coal and oil for both economic and environmental reasons. The goal: to convert to using 60 to 70 percent renewable energy in its electricity supply by 2030.

The road to a different energy future is strewn with good (and expensive) intentions. But as a recent report from McKinsey noted, Hawaii is an outlier in this regard, too: the CEI seems to be working. While oil still accounts for 69 percent of its power, that is down considerably from 2008 (83 percent). At the same time, the growth of solar has been hot, hot, hot.

The state’s most probable (or mid-range) scenario envisioned that there could be 377 megawatts of solar power by 2030, with photo-voltaic systems (such as rooftop panels, as opposed to large-scale installations) accounting for a little more than half. Hawaii got it wrong by a long shot—on the positive side. In fact, there are now more than 700 megawatts of solar capacity, compared to 79 in 2011; 90 percent of that is PV. Although the state cut back incentives for small-scale installations, growth is still going strong. Wind has also grown faster than expected (though not as fast as solar), with 206 MW installed, compared to a mid-range projection of 140 MW.

Electricity use is more efficient, too: average monthly residential use, in kilowatt hours, has declined almost 20 percent since 2011 (from 584 to 484). One result: the state is using almost 9 million fewer barrels of oil. Another: greenhouse-gas emissions were down 15.5 percent in 2015, far ahead of the state’s 2030 mid-range scenario and not far from the high-range one. And electricity prices have declined, by 20 percent since 2012. (Of course, a good deal of that has to do with the lower price of oil.)

All in all, then, the state is well on track to meet its goal of 30 percent renewables by 2020: Hawaiian Electric, which covers 95 percent of the state, is at 27 percent renewables now.

Because Hawaii is so distinctive, at first blush it might seem that there is little to learn from its experience. Not so. The most important lesson is that if—and only if—the economics make sense, change can happen quickly: as recently as 2011, renewables made up only 12 percent of the power supply. But the cost of solar, particularly PV, dropped drastically over that period. Looking at their power bills, consumers could do the math and conclude that installing solar simply made sense. And they did—now almost one in five homes has solar panels.

Second, it’s important to ensure that the power system as a whole works efficiently. For example, Hawaii initially promoted “net metering”—allowing homes to sell excess solar power back to the grid at retail prices. This was a real incentive to install solar. But doing so became so popular that it began to be a burden on utilities. In 2015, the state scaled the program back. The rate of solar growth did decline at first, but the utility system is crucial to delivering power 24/7. The fact is, any big change brings trade-offs, and this was one. And solar growth picked up again in 2017, indicating that consumers did not need special treatment to do in this direction. In addition, Maui just added the island’s biggest solar project—and one that is set to deliver power at about 11 cents per kilowatt hour, below the national average.  

The goal now is to be at 100 percent renewable by 2045. Because of intermittency issues, that can only happen if battery storage becomes more economic. That is beginning to happen—costs are down three-quarters since 2010, and are going lower. Hawaiians are taking note. One industrial-scale lithium-ion battery storage project is already operating in the state, and small-scale ones are growing fast because it can make sense for owners of residential solar project systems to save power for later use. There were 731 solar-plus-storage permit applications last year, up from five just 2 years before, and Hawaiian Electric is planning two new grid-scale projects.

Hawaii has changed so fast because of its starting point: the highest price for electricity in the country. That is not a model any other state should want to adopt: low power costs are important for households, and good for the economy. But the fact of high prices created a healthy competitive situation: when renewable costs came into line with traditional sources, they began to gain market share, and the state’s temperate climate made it particularly suitable for solar.

Bottom line: Unlike many other ambitious projections that get quietly shelved, I think 100 percent renewable for Hawaii is a possible dream, for the most down-to-earth of reasons: the economics work.