Hawaii is paying home-battery owners to help the grid. How’s that going?

HONOLULU, Hawaii — In March, Oahu, the most populous island in Hawaii, launched a grand experiment to pay households for sharing clean power from home batteries during the island grid’s high-demand hours. Six months in, nearly 1,800 families have heeded the call, while concerns about the long-term certainty of the compensation scheme have kept others away.

The Battery Bonus program offers thousands of dollars of incentives to households that store their rooftop solar production in batteries and share it with the grid for two hours every night. The program took effect this spring as Oahu was preparing for its last coal plant to shut down in September of this year.

With large-scale solar and battery projects running behind schedule, Oahu needed whatever additional clean energy it could harness to keep the grid running smoothly after the scheduled coal-plant closure. Driven by necessity, regulators, solar installers and utility Hawaiian Electric banded together to quickly design and approve a workable plan to engage individual consumers in the business of supplying the power grid.

So far, it’s getting results: 1,784 customers had signed up for the program through August, up from 1,420 in July. Once they all get their batteries installed and verified, that will amount to 10 megawatts of committed capacity helping the grid each night. The goal for the program is to deliver 50 megawatts by summer 2023.

“Battery Bonus is a demonstration of how [distributed energy resources] can be used as a grid service to retire fossil fuel plants and decarbonize your grid and your economy,” said Rocky Mould, executive director of the Hawaii Solar Energy Association, over a smoothie in the Honolulu neighborhood of Kaimuki in August. That concept of engaging distributed energy resources is discussed across the country. But ​“sometimes, you’ve got to learn by doing — you’re not going to know until you actually do it.”

Hawaii has already learned some lessons from actually doing it. Chief among them is that if customers don’t have long-term certainty over what they will get paid to export their kilowatt-hours, they’re likely to shy away from committing. It’s something that states on the mainland would do well to consider as they craft their own programs to tap households for clean energy.

Iterate to get solar customers on board

Now that it’s increasingly affordable for households and businesses to generate and store their own clean electricity, people across the country are figuring out ways to make that worthwhile. Efforts underway in California, Utah and Vermont, for instance, reward customers for using their energy devices in ways that help the broader power network. This requires outreach to ensure that people are aware of the opportunity. But customers also need to feel it’s a good enough deal to justify the legwork of getting signed up.

The actual effort required of Battery Bonus participants is relatively minimal. They need to buy a battery that’s programmed to respond to a utility signal to export power every night between 6 p.m. and 8:30 p.m., starting with a half-hour ramp-up period from 6:00 to 6:30. The battery’s stored power is first tapped to meet the needs of the household. After supplying the participant’s own needs, the battery sends its leftover power to the grid for use by other people.

As grid wonks will notice, that’s a fairly low-tech form of grid orchestration. It doesn’t require feedback systems to respond to the intricacies of supply and demand in real time. And it leaves out a range of grid services that batteries are capable of providing. The flip side of that is it’s easy to set up.

Home battery product prices cluster around $10,000 for a typical 5-kilowatt unit, plus the costs of installation. Hawaiian Electric pays Battery Bonus participants enough to cover a substantial portion of the cost:

• Participants get an $850-per-kilowatt upfront bonus when they commit to the program for 10 years.
• They also earn a $5-per-kilowatt monthly bill credit for the duration of their participation.
• A 5-kilowatt battery thus nets $4,250 upfront and a total of $3,000 in monthly credits over a decade.
• The utility pays the customer for each kilowatt-hour of electricity exported during the program at the same rate they would pay to buy power. But this rate is only guaranteed for the first three years.

Buyers of home batteries can also get a federal tax credit. Energy storage historically was eligible for a 30 percent federal tax credit only if the battery was charged by solar. Now storage is eligible for a tax credit of its own thanks to the Inflation Reduction Act. If a family already wanted a battery — for backup power or to shift their solar production for use at night — stacking these incentives makes it pretty darn cheap.

But getting the right balance of incentives required several stages of revisions. Hawaiian Electric rushed out an initial version of the program in the summer of 2021 to head off a potential power shortage in the post-coal era, but the incentives weren’t high enough to convince many customers to sign up. After several months, the utility got together with the home solar industry to figure out a more attractive compensation package.

“When we did launch, we knew it probably wasn’t going to be perfect and we would need to adjust down the road,” said Kaiulani Shinsato, director of customer energy resources programs at Hawaiian Electric. ​“The challenging part is that we can’t be changing things too often because…[customers] need to have a certain amount of security.”

Applications picked up after the incentives were increased earlier this year, Shinsato said. But Hawaiian Electric doesn’t want to overpay, because that would unfairly shift costs onto customers who don’t have batteries, she said. This logic is familiar to anyone following debates over net metering for solar; utilities regularly point to equity as a justification for paying less than the full retail rate for the solar customers generate on their rooftops.

“We have to be looking out for all of our customers, including customers right now who are struggling economically,” she said.

Controversial cost controls

The lone point of formal disagreement between Hawaiian Electric and the solar industry was the utility’s resistance to setting a long-term export rate for the program.

Battery Bonus initially treats the nightly battery exports like net metering, meaning the household earns the full retail rate for the electricity it sends to Oahu’s grid. That way, there’s no economic penalty for participating. If customers earned less than the rate they pay to buy power, they’d be losing money by exporting instead of just storing and consuming the power themselves.

The problem is that Battery Bonus only guarantees the full retail rate for the first three years of the customer’s 10-year commitment. The level of compensation for exports in later years has not yet been decided. Solar-plus-battery installers report that customers are understandably skeptical of pledging their exports for a decade without knowing if they’ll lose money on each export for most of that interval.

“An export that doesn’t get retail [rate compensation] is an economic loss on the margin,” Mould said. ​“And what happens is, that builds up over time — it eats into that upfront payment that you’re getting.”

If Hawaiian Electric does end up slashing that compensation down the road, customers would be stuck. If they pull out of Battery Bonus before the 10-year obligation is up, the utility can claw back a prorated chunk of the upfront bonus payment, which could easily be thousands of dollars.

The result has been that most Battery Bonus participants are people who installed rooftop solar systems before 2015. That group is allowed to continue under the old net-metering rules, which pay the full retail rate for all exports. Hawaii axed its solar net-metering program in 2015 for new rooftop installations amid concerns about too much solar power rushing onto the grid on sunny afternoons and potentially destabilizing it.

“The way we’ve been positioning Battery Bonus is that it’s a tremendous opportunity for our customers with existing net-metered systems,” said David Gorman, president of Oahu-based solar installer RevoluSun.

For customers who missed the window for net metering, RevoluSun recommends signing up for a different battery program administered by startup Swell, which pays monthly credits for batteries enrolled and avoids the Battery Bonus risk of future changes in compensation. Swell controls participants’ batteries to deliver a range of grid services under a contract it has with the utility.

Thus far, Battery Bonus is a program for early solar adopters: net-metering customers made up 85.6 percent of participants who signed up through August.

That’s not necessarily a deal-breaker for the effort to get 50 megawatts of battery capacity on board. Oahu has 48,310 net-metering solar customers with a total of 328 megawatts of photovoltaic capacity, Mould said (a tremendous rate of rooftop solar adoption for an island grid that peaks at around 1,100 megawatts of demand). So there’s still a large pool of prime potential participants, and now that early friction with permitting and validation has been smoothed out, the pace of signups could grow.

“When people start getting those checks and talking about them at the water cooler, it has this exponential demand effect — it’s not linear,” Gorman said.

But the program would fall short of its visionary potential if the only households financially incentivized to participate were those that signed up for solar on a tariff that the utility eliminated during the Obama presidency. And it’s not clear that paying retail rate for customer battery exports is actually a bad deal for utility customers overall: The alternative is burning more oil, which is so expensive right now that Hawaiian Electric has raised its rates repeatedly throughout the year, to much public consternation.

Long-term resolution within reach

Hawaii boasts an unusually collegial energy policy community, and the key players understand where the hang-ups are for Battery Bonus.

Hawaiian Electric’s Shinsato acknowledged that the uncertainty after year three is a challenge for adoption. She explained that the utility hopes to create long-term certainty through an ongoing regulatory proceeding to establish a new ​“bring-your-own-device” program for customer participation in the grid, hopefully by June 2023.

Battery Bonus got launched rapidly to respond to a looming crisis; hence the simplicity (or, perhaps, elegance) of the hardwired, ​“discharge at this time every day” programming. BYOD is meant to be the more nuanced successor program. It would expand the range of ways people can use their energy systems to help the grid and earn money doing so.

“Longer-term, we want the devices to be operationally more flexible so that we can call on them when the grid needs it, even outside that two-hour window in the peak,” Shinsato said. ​“It’s absolutely critical, especially on this island. We’re going to need our customers to help us” in order to get to 100 percent renewables.

Mould, from the state’s solar association, similarly hopes to deliver long-term certainty in the regulatory proceeding on distributed energy. His group proposed that the ruling should extend the retail-rate payments to Battery Bonus participants for the whole 10-year commitment. The docket could then create new and more nuanced grid programs for customers to switch to if they desire.

Hawaiian Electric is working with vendors Siemens and Kitu Systems on the software to manage a variety of energy gadgets across its territory. But national standards for how all these distributed energy devices should communicate won’t be finalized by the time Hawaii needs to implement them.

“We’re blazing new territory on several of these issues,” Shinsato said.

Households could soon take on more of the roles traditionally served by centralized power plants. That would mean the collective population of Oahu wouldn’t need to fund the construction and operation of as much large-scale grid infrastructure, because they’ll be better utilizing the small-scale equipment that’s already there.

That’s the billion-dollar prize that could make a huge difference in places such as California, which has thousands of untapped household battery systems — and a chronic problem finding enough power to keep ACs running in a heat wave. Hawaii leapt into action to ward off an emergency and now is fine-tuning its approach for the long haul. Its mainland successors will at least have a map to follow.