NextEra Energy's bid to acquire Hawaiian Electric Industries (HECO) has raised eyebrows in the solar community, because no one is quite sure which NextEra to expect.
The clean energy giant is well-positioned to help HECO integrate large amounts of rooftop solar into its system, as the Hawaiian utility has temporarily halted new interconnections to avoid grid instability. About 11% of HECO customers now having rooftop solar,while the NextEra Energy Resources subsidiary is the largest wind and solar generator in North America.
The flip side, however, is that NextEra also owns Florida Power & Light — about 4,600 miles from Hawaii, but some say even further apart in terms of how the utilities view rooftop solar.
"The unregulated energy developer has done great things, but very little of it inside their own regulated service territory," said Adam Browning, executive director of VoteSolar.
Browning, who also co-founded the non-profit which advocates for clean energy, is quick to call NextEra Energy Resources "truly a national leader in renewable development." But by the same token the parent company has "a terrible track record" when it comes to customer-sited generation in its regulated territory.
Indeed, FPL serves some 4.7 million customers, but Browning points out that only about 1,550 have solar installations. Solar advocates say the utility lobbies hard to shut down expansion of customer-owned generation, and FPL argues solar photovoltaic is a losing proposition for customers.
GTM Research solar analyst Cory Honeyman said response to the merger has so far been a "mixed bag," with calls for both scrutiny and optimism. "There is a concern that the history of FPL is a pretty contentious one with the local solar industry in Florida. But at this point it's still a wait-and-see game," he said.
The merger
The deal was announced in early December, and values HECO at $4.3 billion. In a statement, company officials touted the clean energy expertise NextEra would bring to the table.
"Hawaiian Electric is addressing a vast array of complex and interrelated issues associated with the company’s clean energy transformation. We believe our strengths are additive to Hawaiian Electric’s, creating an opportunity to enhance value for Hawaii’s strategically important energy industry,"said NextEra Energy Chairman and CEO Jim Robo.
According to Connie Lau, Hawaiian electric's president and chief executive officer, “in NextEra Energy, Hawaiian Electric is gaining a trusted partner that can help the company accelerate its plans to achieve the clean energy future we all want for Hawaii."
Ultimately, the utility's goals include increasing renewables to 65%, tripling solar and lowering customer bills 20% by 2030. And NextEra said it shares HECO's utility vision, including integrating more rooftop solar energy. "NextEra Energy is supportive of Hawaiian Electric’s plans to accomplish these goals," the company said in a press release at the time of the merger.
Both HECO and NextEra officials declined to comment for this story.
The merger will require the approval of utility regulators in Hawaii, and is also is subject to approval by Hawaiian Electric shareholders, FERC, and the expiration or termination of the waiting period under the Hart-Scott-Rodino Act.
The companies anticipate the transaction, which has been unanimously approved by both companies’ boards of directors, to be completed within approximately a year.
Hawaii as the test case for challenges to utility business models
Hawaii's island geography has yielded an early glimpse into the business model problems utilities across the nation may face integrating large amounts of rooftop solar. The state imports oil to generate power, with petroleum making up 70% of generation. By comparison, oil produces about 1% of the U.S. generation mix.
High power prices pushed many customers to solar installations, but the numbers grew so quickly that integrating the systems in a stable manner became a challenge. HECO faced a backlog of more than 3,000 rooftop solar systems waiting to connect to the grid this fall, causing some installers to leave the state.
In response, the utility declared in November that it was partnering with SolarCity and the National Renewable Energy Laboratory to study solar interconnection issues, and almost immediately announced plans to clear the backlogged systems. Many energy experts say HECO's situation is an early warning for utilities on the mainland — that they will deal with the same issues as solar drops in price.
"At this point Hawaii is at the forefront of dealing with these grid saturation challenges due to higher penetrations of [distributed generation]," said GTM Research solar analyst Cory Honeyman. "And so there is value in stepping in and managing a utility that has to deal with challenges that no other utility in the U.S. is currently dealing with to this extent."
One idea is that NextEra's acquisition is a bit like purchasing a renewables integration laboratory, allowing the company to implement new ideas and then roll them out to other customers or in other territories. NextEra has repeatedly refused to confirm that such thinking played a role in their acquisition of HECO, but at the time of the sale a spokesman told Utility Dive that the idea was "interesting."
Whether or not that is true, or was considered as a value addition to the deal, Honeyman said NextEra clearly understood the challenges they were taking on.
"There is a bit of cautious optimism that the NextEra Energy Resources relationship with solar is the one which will extend and hold true in Hawaii's market as well," he said.
HECO and FPL do have similarities. Both utilities chose Silver Spring as an advanced metering and communications provider, according to Ben Kellison, director of grid research for GTM Research. And both tapped Alstom as their distribution management system provider.
"When you look at some of the software and some of the pieces of building a grid that can handle renewables … there is some ability to take expertise at FPL and implement things at a wider scale over the next few years," Kellison said.
