Earlier this year, a number of media reports discussed the issues associated with rising use of solar energy in Hawaii. Technical issues caused by the intermittent nature of electricity produced from rooftop solar panels drove Hawaii utilities to restrict some customers with solar panels from even turning on their systems — despite the fact that they were installed and ready to go. Others were forced onto multi-year waiting lists to install solar because the grid couldn’t accommodate additional solar energy production in their area.

Implicit in many of the reporting on this topic was the idea that what’s happening today in Hawaii might happen tomorrow or the next day in other states as more and more customers move to adopt solar panels.

There are a number of reasons why solar became particularly burdensome to Hawaii’s grid — but for the most part those reasons do not apply to the rest of the United States. This post reviews three of those reasons.

Hawaiians Pay Way More for Electricity Than the Rest of the Country

Installing solar panels is exceptionally attractive to Hawaiians because they pay a lot more for electricity than the typical American. The average U.S. retail price of electricity is about 10 cents per kilowatt-hour. Hawaiians pay a whopping 34 cents per kilowatt-hour — nearly 3.5 times the U.S. average and more than double the second-highest state electricity price of 16 cents per kilowatt-hour in Alaska.

Hawaiian's pay way more for electricity than other Americans. The U.S. Energy Information Administration had to add three more shades to this map just to accommodate Hawaii! (Source: EIA)

What’s behind Hawaii’s high electricity prices? The state happens to be located in the middle of the world’s largest ocean. Because Hawaii doesn’t produce any coal, oil, or natural gas itself, all of the fuel required to generate electricity must be imported by ship. And because its more cost-effective to ship dense fuels like crude oil than it is to ship natural gas or coal, the vast majority of Hawaii’s electricity is produced from oil — a very expensive electricity generating fuel used for less than 1 percent of electricity generation in the rest of the United States. On top of that, the geographic nature of Hawaii’s archipelago makes it more expensive to build power lines than in other parts of the United States, forcing the utility to charge more per kilowatt-hour to cover its upfront costs for electric delivery equipment.

Because grid electricity is so much more expensive in Hawaii than elsewhere in the country, the economics for solar panels are fundamentally improved, so a lot more customers opt to install solar.

Solar Electricity Is Cheap in Hawaii

While grid electricity is a lot more expensive in Hawaii than it is in other states, Hawaiians enjoy plentiful sunshine that makes solar electricity relatively inexpensive. The upfront cost for a solar photovoltaic system in Hawaii is similar to the upfront cost anywhere else, but a solar panel in Hawaii captures a lot more sunlight over its lifetime than is typical states outside the U.S. Southwest. When you add up all of the energy that a solar panel can produce over its lifetime in Hawaii and divide by its upfront capital cost, the effective price of solar electricity comes up a lot cheaper than in other states.

While Hawaii's grid electricity is very expensive, it has exceptional sunshine that makes solar electricity relatively cheap — driving 12 percent of Hawaiian households to adopt solar panels. (Source: NREL)

With grid electricity more than three times the U.S. average and solar energy cheaper than average, Hawaiians have a huge incentive to install solar panels. A system that might take 10 years to pay off in New Jersey might pay off in under 5 years in Hawaii — simply due to the higher electricity price and greater amount of sunshine. The result: approximately 12 percent of Hawaiian homes now have solar panels installed.

Hawaii Is Isolated from the Rest of the Country — and the Rest of the Electric Grid

One of the main reasons Hawaii has struggled with integrating all of its solar energy is that the state is electrically isolated from the mainland. With no power lines linking Hawaii’s small grid with the rest of the United States, the utility has nowhere to dump extra solar power and no access to backup electricity generation from outside the state.

Meanwhile, other leaders in solar energy like Germany and California have benefitted from the ability to exchange power within their borders and with their neighbors to mitigate some of the costs associated with solar variability. If there is extra solar energy produced in a particular area of California, the state’s grid operator can route that power to other areas where it is needed. If solar experiences a sudden generation shortfall, then power plants can send in reserve electricity. Greater interconnection between California and other states is one of the principal strategies recommended to reduce integration costs as more and more renewable energy is installed.

The same strategy won’t work in Hawaii, where there are just a handful of power plants operating to serve the state’s population of approximately 1.4 million. If the existing power plants don’t have the flexibility to make up for the variability introduced by solar, there is simply nothing the grid operator can do to access other, more flexible electricity resources. Thus, the Hawaii Public Utility Commission was forced to formally cap the number of new customers that can install solar panels that feed electricity back into the grid.

Don’t Expect Other States to Limit Rooftop Solar Panels

Hawaii has what you might call a perfect storm of factors that have caused solar panels to place additional strain on the grid: very favorable solar economics and a very small grid not capable of integrating a significant amount of renewable energy. So don’t look to Hawaii as an example for what might happen in the future on the mainland as more and more customers install solar panels. That doesn’t mean some utilities — like regulated monopolies in the southern states — won’t move to restrict solar energy for non-technical reasons. But those issues are separate from the technical issues that make Hawaii’s grid restrictive to solar energy.