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HAWAII AND TEXAS: WHAT UTILITY EXECUTIVES LEARNED FROM A SOLAR “HOT SPOT” AND ONE THAT COULD BE SCOTTMADDEN, INC. | 15 Utility leaders, the Smart Electric Power Alliance (SEPA), and ScottMadden visited the states and got insights from the key players. Why Examine Renewables in Hawaii and Texas? Understanding Hawaii: Microgrids in the Pacific • Lacking interconnections, each island must be energy self- sufficient. Driven by expensive oil, retail electricity prices average more than 25¢/kWh, double the U.S. average • Spurred by high electricity prices, non-hydro renewables have grown rapidly and accounted for 16% of electric generation in 2014. In addition, growth of customer-sited solar continues to reduce average daily load during midday periods (see chart) Texas Two-Step: Public Power Versus Competitive Retail Texas consists of two distinct energy markets (see map) • Served by 140 providers, municipal and cooperative utilities account for 25% of ERCOT load. The utilities provide full retail service and have an ability to innovate to meet policy goals • The competitive market is driven more by near-term economics. Served by 110 registered retail electric providers; competitively served retail deregulated markets account for 75% of ERCOT load 1,200 Megawatts • SEPA and ScottMadden hosted senior utility executives on fact-finding missions to Hawaii in September 2015 and to Texas in November 2015 • The trips explored how the electric grid accommodates high penetrations of renewables (Hawaii) and the impact of the role of solar in a competitive market with retail choice (Texas) Hawaii Average Daily Load: Signs of a “Duck Curve” (2008-2014) 1,000 800 600 0:00 2:00 4:00 2008 6:00 8:00 2010 10:00 12:00 2012 14:00 16:00 18:00 20:00 22:00 2014 Sources: SNL Financial; ScottMadden analysis A Patchwork: Texas End-Use Electric Territories by Provider Type In 2015, Texas installed 207 MW of solar electric capacity, ranking it ninth nationally. The 537 MW of solar energy currently installed in Texas ranks the state tenth in the country in installed solar capacity. In 2015, $372 million was invested on solar installations in Texas. This represents a 48% increase over the previous year and SEIA expects it to grow again this year. Competitive Retail Area Municipality Owned Utilities and Electric Co-Ops *Shading and coloration for illustrative purposes Source: Texas Solar Power Association