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20/04/2016

What the UK sustainable energy market can learn from Hawaii

Hawaii has set an ambitious target to derive 100% of its energy from renewable resources by 2045. In 2015, $331 million was invested in solar PV installations in Hawaii, a figure which is expected to continue to rise over the next year. It is ranked 13th nationally for solar electric capacity and 564MW of solar energy is currently installed in the state. This dramatic increase in solar PV has put increasing strain on the grid, government finances and the future of renewable energy in the region.

In the UK, despite the lower irradiation levels and cheaper electricity costs, solar PV systems have also seen a huge increase in investment over previous years [i] . Certain areas, particularly in the south west of England, are experiencing grid constraints similar to that of Hawaii and renewable energy subsidies are being cut as the government’s budget becomes increasingly tight. While some regions in the UK do have the capacity for more solar PV installations the government may wish to look over to Hawaii for policies and actions which will allow them to ensure the electricity market maintains quality and reliability. The UK government must also bear in mind that with these policies, they have to continue investment in renewables so that the UK can achieve its 2020 targets of 15% of energy coming from renewables.

Figure 1 : Solar PV Capacity in the UK

Image_1_UK_Solar_Capacity

Source: (Stoker, 2016)

The Situation in Hawaii

The coupling of high electricity prices in Hawaii (due to the high cost of importing fossil fuels) and ample solar resources has made investments in PV very attractive amongst the residents. However, the state is already experiencing issues with high levels of solar energy connected to the grid. On the island of Oahu, over 13% of Hawaiian Electric (HECO) customers have installed rooftop solar panels morphing their homes into mini power plants, where some customers have managed to reduce their electricity bill from HECO to zero[ii] causing several technical and economic problems. Solar customers generating their own power avoid paying the fixed costs of utility companies shifting the operations and maintenance costs of the grid to the shrinking pool of utility customers reliant on the grid. In 2014, it was reported that non-solar customers paid an extra $53 million in operating and maintenance costs due to the increase in residents installing solar PV. Solar customers benefited from ‘Net Metering’ a programme enabling them to sell surplus energy to the grid for credit at the same retail rate the utility charges to generate energy. Since the inception of the net metering programme in 2001 there has been a rapid increase in the number of installed PV in Hawaii, with over 60,000 customers installing solar PV.[iii]

Figure 2: Cumulative Installed PV in Hawaii

Image_2_Cumulative_Installed_PV

Source: HECO (2015)

HECO expressed concerns regarding the safety and reliability of the grid. Due to the intermittent nature of solar energy, it is critical that utilities are able to keep the overall supply steady, ensuring that the demand on the power grid matches the supply. Insufficient electricity or an oversupply could be detrimental to equipment or cause a blackout. Tension in Hawaii exists between the installers of solar PV and the utility companies that approve the interconnection of Solar PV projects. This is because Hawaiian utility companies have imposed restrictions to avoid solar generation loads on their systems[iv] . The Hawaii Public Utilities Commission (PUC) have closed the new metering program to new participants to prevent damage to the grid and make room for other renewable energy source such as wind and geothermal.[v] This will also reduce the burden on non-solar customers who are paying more.

New solar customers will now have to make a choice between two new tariffs; ‘Grid Supply’ and a ‘Self Supply’ Option. The grid supply option, similar to the existing net metering programme however customers will receive a reduced amount for any excess energy exported to the grid ($0.15–0.28 per kWh, initially $0.38 per kWh in 2014). The self-supply option does not allow customers to export unused energy to the grid, any unused energy is not compensated by the utility. Typically, solar customers consume about half of the energy produced by their PV systems, and the unused energy is exported to the grid. This increase the need for demand flexibility and battery storage systems allowing residents to use solar generated power after sun set, capturing the full value of solar PV and reducing the problem caused by the high levels of solar power exported to the grid.

Lessons learnt from Hawaii

The challenges of excess solar PV in Hawaii can also be observed within some regions of the UK, providing insight into how the future of UK solar may look if further investment in infrastructure and a rethink of policy does not occur.

The UK gas and electricity regulator Ofgem has encouraged distribution network operators (DNO’s) to increase the capacity of their networks as the number of solar PV installations are far exceeding what was initially predicted[vi]. This has been a particular problem in South West England where the DNO Western Power Network (WPN) has had to put a halt on large scale solar projects as the grid does not have the capacity to sustain them. Smaller projects are facing delays of up to 6 years to be connected to the grid.  The constraints on the network in the South West will take between 3 -5 years to correct and will cost several million to improve, the main constraints and their location are shown on the image below.

Figure 3: Grid Constraint Issues In South West England

Image_3_Hawaii

Source: Western Power Distribution Board (2015)

Hawaii demonstrates how overloading the grid with solar power can have negative impacts on the infrastructure. Improvements to the South West infrastructure may take up to a minimum of 2 years and therefore, in order to address capacity issues, WPN has decided to target behavioural aspects of consumers. They are trialling a system which offers a lower energy tariff during peak solar hours and a commercial project which pays industrial customers to shift their demand to the sunniest hours of the day [vii]. These policies are aimed at demand-side management by increasing demand when the PV supply is at its highest. The success of these trials is yet to be determined, however if the uptake of PV continues to grow across the country it is unlikely such a policy will ensure demand offsets supply as during summer months or regular working hours PV systems generate the most and demand is at its lowest. In order to ensure the gird works efficiently, the UK government may wish to adopt firmer supply-side policies, similar to that of the Hawaiian government, to limit what is being fed into the grid and the negative effects of excess supply.

Another important lesson from Hawaii is the impact subsidies have had on the rapid growth of the solar market and the negative impact on government expenditure. The current and previous UK government subsidies have provided strong incentives for investment in solar. Consequently, the industry grew much faster than predicted and the infrastructure has not been able to adapt to accommodate this. The Hawaiian government provides an extreme example of such a case. While the UK government has reduced subsidies due to overspending on their budget, a more dramatic approach is required to slow down, or stop feed-in-tariffs, reducing the uptake in solar PV. This will allow DNO’s time to increase investment and prepare the grid for more capacity. If the UK government acts quickly there is potential to control the investment in PV until the grid is ready to accommodate it.  Meanwhile, it would be beneficial for the UK to put similar subsidies in place for battery storage systems.

Conclusions

The clear lesson from Hawaii is that continuously putting solar energy into the grid in the day will not fix the problem; there needs to be limits on how much PV energy is fed back into the grid until the capacity is increased. The UK government is still currently trying to increase solar investments without any clear commitment on improvements to the grid system.

If the UK is to truly work towards a society run on renewable energy it will need to update its grid entirely. Turning the UK grid into a ‘smart grid’ will allow it to accommodate small decentralised power generators, as opposed to the current grid which focuses on large centralised power stations. The DECC has already noted the need to move towards such a ‘smart grid’ [viii], where with increased system monitoring and intelligent control we can ensure the grid will be securely managed and able to cope with the intermittent energy supply of renewables. In Hawaii, it was the anarchic design of the grid, focused around a large central power station, which resulted in many of the supply and constraint issues.

Looking at Hawaii, policy is currently working on reducing incentives for renewable energy and this should be avoided if the UK is to meet its 2020 renewable energy objectives. Therefore, subsidies and incentives may benefit from moving towards an approach which promotes a storage system so that solar PV systems can work without feeding into the grid. At the same time, the UK government should continue to push DNO’s to increase grid capacity to ensure we have the infrastructure to reach the 2020 targets.

Copyright © 2015 Sia Partners

 


References

[i] (DECC, 2016)

[ii] (Lyte, 2016)

[iii] (HECO, 2015)

[iv] (State Solar Policy, 2016)

[v] (Mykleseth, 2015)

[vi] (Timperley, 2016).

[vii] (Pratt, 2016)

[viii] (DECC and Ofgem, 2014)

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