The sun is shining on Hawaii's solar power plans. The state has been a leader in solar power installations, but rooftop solar panel kits are set to hit unprecedented numbers. Here's what the sunny state has planned, along with NextEra Energy's (NYSE:NEE) and SolarCity Corporation's (NASDAQ:SCTY.DL) plans to soar alongside.
Hawaii's solar situation
Hawaii has the nation's most expensive electricity. It relies on imported fuels for more than 90% of its total energy, pushing prices up to an average $0.34 per kWh (kilowatt hour) for 2014 (most recent data, prices through November), compared to $0.11 per kWh for the nation. Imported oil currently accounts for around 71% of Hawaii's electricity generation, followed by 16% from coal and 13% from other renewables.
Those expensive prices have given solar a competitive edge. According to the U.S. Energy Information Administration (EIA), wind and solar in Hawaii are "economically attractive alternatives, especially as their technology costs have come down in recent years." Between 2010 and 2014, solar capacity has soared across Hawaii's main islands.
But solar power could be about to hit new potential in Hawaii. By 2030, Hawaii wants to triple its solar capacity and have renewables supply 65% of the state's electricity.
Investment Option No. 1: The utility
In December 2014, NextEra Energy announced it would acquire Hawaiian Electric Industries, the utility corporation, for 95% of all Hawaiians. Valued at $4.3 billion, the deal is expected to be cost-neutral for NextEra Energy shareholders for the first full year, and accretive (positively affecting earnings per share) thereafter.
NextEra Energy is no stranger to renewables. It's the largest producer of wind energy (nearly 11,300 MW) in America and currently operates 785 MW worth of solar facilities. The majority of its facilities are larger than 20 MW, opening new opportunities for Hawaii to embrace utility-scale solar, an often cheaper alternative to rooftop solar panel kits. Two weeks ago, NextEra Energy filed an application with Hawaii regulators to modernize its grid, reduce oil imports, install more rooftop solar panel kits, and lower electricity costs. NextEra Energy is making moves, and there's major potential for this utility to revamp Hawaii's power plans.
Investment Option No. 2: The installer
But NextEra Energy can't do it alone.
As this regulated utility looks to expand rooftop solar panel kits, it'll need installer partners. SolarCity Corporation is that partner. NextEra Energy, the government-run National Renewable Energy Laboratory, and SolarCity Corporation recently teamed up to study an unprecedented question: What happens when we load large amounts of rooftop solar energy onto the grid -- and something breaks?
Preliminary research testing some of utilities' biggest concerns with adding individual solar panel kits to the grid suggest that systems are already surprisingly capable of handling these plentiful power sources. In a November statement, Hawaiian Electric Senior Vice President of Customer Service Jim Alberts noted, "Applying results of recent inverter testing, over the next five months we expect that we'll be able to approve almost all of the customers who have been waiting for interconnection on these high solar circuits."
As the leading full-service solar energy provider in Hawaii, SolarCity stands to benefit alongside NextEra Energy. If approved, the utility's recent regulatory filing would more than double the amount of solar power allowed on the grid. While Hawaii already has 48,000 customers with rooftop solar panel kits, there are nearly 500,000 households across the state -- meaning solar power installations could potentially expand tenfold in the years to come.
Time to stock up on solar?
Recent oil price dips have caused some investors to question the future of renewables. But oil prices are volatile, and Hawaii is a pilot project for a steadier and sunnier American energy future. As solar prices continue to decline and grids gear up for integration, first-movers like NextEra Energy and SolarCity Corporation will be poised for profitable penetration -- in Hawaii and elsewhere.
Justin Loiseau has no position in any stocks mentioned, although shoveling four feet of snow off his Bostonian sidewalk does elicit an inherent bias toward Hawaiian weather. The Motley Fool recommends SolarCity and wearing glove liners when it drops below zero degrees Fahrenheit. The Motley Fool owns shares of SolarCity.
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