Hawai’i Enacts Legislation Creating Community-Based Renewable Energy Program

Ballard Spahr LLP

A law that could significantly expand access to renewable energy generation in Hawai’i through a new community-based renewable energy program was approved by Governor David Ing on June 8, 2015. While the new law is couched in terms of “renewable energy” generally, the predominant renewable energy sources are likely to be solar and wind energy. The law permits utilities and third parties to own or operate a community-based renewable energy project.

Also enacted was a bill establishing a goal that renewable energy serve as 100 percent of Hawaii’s power supply by 2045. Hawai’i is the first state to set a renewable portfolio standard at the 100 percent level.

The details of the community renewable energy program will be filled in through the filing−by October 1, 2015−of tariffs by electric utilities, to be reviewed and approved by the Hawaii Public Utilities Commission (PUC) if in the public interest. The law encourages the utilities to develop the tariffs in an open process, in collaboration with the Hawai’i Department of Business, Economic Development, and Tourism, as well as other stakeholders in the renewable energy industry and environmental advocacy community.

In enacting the community renewable energy law, Hawai’i joins at least 11 other states with similar programs, including a recent community solar pilot program enacted in Maryland. Community solar projects expand access to renewable energy by allowing multiple residential, commercial, or industrial electric customers to invest in or subscribe to one central solar energy project. Their electric usage or charges are offset through virtual net metering based on their share of the solar energy generated by the project. While the “traditional” solar model generally requires direct home or business premise ownership, access or control, community solar removes this obstacle. Community solar projects can be sited in a variety of places, whether ground-mounted on open land, or installed on the roof of a commercial or government building or a community center. Given the high percentage (44 percent) of Hawai’i residents who do not own their own homes and the large number of high-rise condominiums on Oahu with limited roof space, this program has the potential to greatly expand solar energy development access in the state.

The law anticipates that the tariffs filed with the PUC will accommodate a variety of projects, models, and sizes. The tariffs must incorporate a billing arrangement to compensate customers for electricity and grid services provided to the utility; provide fair compensation for electricity, grid services and other benefits provided to or by the utility, participating ratepayers and non-participating ratepayers; and standardize and streamline (to the extent possible) the interconnection process for community-based projects, a particularly important issue to lenders and investors in community solar projects.

The tight timeframe for tariff filing presumably recognizes that certain federal tax credits for solar energy facilities decrease or expire at the end of 2016, and that facilities must be operational by then to take advantage of the credits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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