SolarCity plans to sell Hawaii on off-grid solar package using Tesla battery

By Anne C. Mulkern | 05/06/2015 08:52 AM EDT

SolarCity Corp. next year will offer Hawaii residents the option of disconnecting from the electricity grid, using a combination of rooftop photovoltaic panels and Tesla Motors Inc.’s new Powerwall battery, a company executive said yesterday.

SolarCity Corp. next year will offer Hawaii residents the option of disconnecting from the electricity grid, using a combination of rooftop photovoltaic panels and Tesla Motors Inc.’s new Powerwall battery, a company executive said yesterday.

Peter Rive, SolarCity’s co-founder and chief technology officer, said the battery that Tesla announced last week offers a "hedge against bad policy outcomes" that penalize solar. Those include high fixed fees and changes to net metering, the system that gives customers who have rooftop solar the ability to earn bill credits for excess electricity sent to the grid.

That makes it attractive to sell as an energy storage option in Hawaii, Rive said.


"As always, Hawaii is a postcard from the future, as the high electric rates there make economic now what will be affordable in other markets with further cost reductions," Rive said during a call with stock analysts. "As a result, we will be offering a zero-down lease in Hawaii next year that will give customers the ability to go completely off-grid."

The Aloha State has the nation’s highest level of utility customers with rooftop solar, at more than 12 percent. Solar boomed on the islands in 2012 and 2013, driven by high electricity prices. Hawaii utilities largely burn fuel oil to make power, and prices spiked in those years. In addition, the islands have their own grids and can’t obtain power from each other if they need more, said Peter Rosegg, spokesman for Oahu-based Hawaiian Electric Co., or HECO.

"We’re a little petri dish where you can see exactly how these things are going to work," Rosegg said. "SolarCity is big here, and all the factors that would make someone want to look at a home battery are in place."

Utility policies in the Aloha State and tensions with residents seeking solar also appear to have motivated SolarCity’s move.

After solar adoption surged on the islands, HECO in September 2013 threw up a roadblock to new residential PV. The utility said that rooftop systems had reached levels of energy production that threatened the grid. Excess power could flow back into substations or to nearby circuits, it argued, potentially damaging equipment. On many circuits, HECO largely stopped installations for 18 months, while it said it was studying the issue.

"In Hawaii, people are frustrated with utilities for having put a hold on rooftop solar in their territories," Rive said in a blog post last week. "We hear often from people seeking a solar battery system that will allow them to sever ties from their utility completely. As I’ve written before, we don’t think this is optimal for the grid. But when the choice is between being grid-connected without solar or being off the grid with rooftop solar and a solar battery system, the choice is clear."

Utility not worried about defections

The Powerwall battery as an add-on to a photovoltaic system with SolarCity is $5,000, including the inverter, permitting and installation, SolarCity said in the conference call. Executives didn’t offer any details on how much an off-grid systems would cost, or how much battery power would be needed for a home to function free of the utility. The company didn’t respond to follow-up questions sent by email.

Tesla will be partnering with SolarCity on the systems that include the battery packs. The companies already have a tie, as Tesla Chairman and CEO Elon Musk is chairman of SolarCity.

Rosegg said that despite Rive’s statement, HECO didn’t fear that a swath of customers would leave the grid. Most people want the backup of the utility in case of emergency, he said. There are already people not connected to the grid, most of them on the Big Island, but the majority of those are off-grid because they are located far from power lines.

"It’s not impossible," Rosegg said of going off-grid. "Until now, it’s been highly expensive."

But he acknowledged that SolarCity’s marketing the batteries in the Aloha State would have an impact.

"SolarCity is one of the biggest if not the biggest solar vendor here in Hawaii," Rosegg said. "It wouldn’t be surprising for Tesla and SolarCity to try and see what the market is like" for solar with battery systems.

HECO has been watching Tesla’s moves on the battery product, and the utility is looking into how it can accommodate solar systems with storage, Rosegg said. Batteries could help even out swings in power that have posed a problem, he said.

There’s the potential to compensate customers who agree to store power and provide it when needed, Rosegg said, or who agree not to send electricity to the grid at times when there’s a surplus.

SolarCity’s Rive in the conference call said that he thought "customers removing themselves from the grid is a bad policy outcome." There are many benefits to having renewable energy distributed through a community, he said, and for that reason, utilities should seek to work with solar customers and not impose penalties that drive them away.

HECO recently revamped its policies on connecting small rooftop solar systems, amending its September 2013 decision. In the earlier one, the utility had barred new solar on any circuit that had hit 120 percent of daytime minimum load (DML), or the low point of the total power used by customers connected at the site.

Earlier this year, HECO raised the allowable level to 250 percent of daytime minimum load. Those adding systems also must include equipment that can help ride through any power surges. HECO said it made the change after testing at the National Renewable Energy Laboratory showed it was safe to go to 250 percent of DML.

But the state’s Public Utilities Commission also had told HECO’s parent company, Hawaiian Electric Industries (HEI), to make the change. The PUC rejected HECO’s request to link allowing more solar to phasing out net energy metering. The utility argues that a change is warranted because as the number of customers with rooftop solar grows, it is forcing customers without PV to pay more for transmission, grid maintenance and other ongoing costs.

The company this year in addition to reopening circuits promised to clear a backlog of applications from people wanting to have PV connected. A waiting list that had topped 3,300 names on the Oahu, Maui and the Big Island now is down to about 120, Rosegg said.

Demand for off-grid in short term ‘infinitesimally low’

Despite unhappiness with the utilities, one solar company owner agreed with Rosegg on the limited demand for going off the grid, saying that he can’t see too many people wanting to take that option.

"The number of people in the near term — three to five years — who would be serious candidates to go completely off-grid is infinitesimally low," said Marco Mangelsdorf, president of ProVision Solar on the Big Island.

Mangelsdorf said that he has lived off-grid and that it requires having a backup generator for times when you need more power than you have stored. While inexpensive ones can be purchased for $1,000, he said, most people would prefer not to think about their electricity system.

"People can cry and moan a lot about their utility bills, but compared to the time and effort that’s needed to maintain an off-grid system, it’s night and day," Mangelsdorf said. "It’s hard to convey unless you’ve actually lived off-grid how different an experience it is."

He added, however, that SolarCity is "trying to be an innovator in a new market they believe is going to be happening somewhere in the future."

Others said the batteries pose a "significant threat" to Hawaii utilities.

"It is a threat because if people leave the grid, you have a smaller and smaller base of people paying the utility," said Robert Harris, spokesman for the Alliance for Solar Choice, a coalition of companies including SolarCity Corp. and Sunrun Inc. Harris also works for Sunrun, which, like SolarCity, will be partnering with Tesla to sell the Powerwall system.

While it is better to have people connected to the grid, Harris said, "if there are no other choices, then certainly people will move forward with products that help save them money, which might include an off-grid solution."

Even if people don’t go off-grid, the batteries will change the options for customers, Harris said. There might be those who choose to stay tied to the utility but agree not to deliver any power to the grid. That would be an option for people who otherwise couldn’t get connected because they were on a circuit considered overloaded.

Others might be connected to the grid with a battery that supplies energy to the utility when needed, and turns off when needed.

"The future of solar is happening in Hawaii today," Harris said. "The advent of cheaper storage options means we’re going to see PV 2.0 very quickly in Hawaii."