Dive Brief:

The Kauai Island Electric Cooperative and AES Corp. announced plans to pair a 28 MW solar array with a 20 MW, 100 MWh battery system to deliver dispatchable renewable generation to the Hawaiian island.

KIUC will pay $0.11/kWh for power delivered from the solar-plus-storage system, according to a release, below the cost of oil-fired power that comprises the island's current baseload generation.

The project is the second flexible solar facility for the small co-op. In 2015, KIUC signed a deal with SolarCity to pair a 13 MW solar array with a 52 MWh battery that will deliver power for $0.145/kWh.

Dive Insight:

If there's one place solar-plus-storage can find a friendly market, it's on Kauai. The small Hawaiian island is the only one not served by the Hawaiian Electric Co., the state's investor-owned utility, and its electric cooperative is embracing the cutting edge of dispatchable renewable energy technology.

In 2015, KIUC signed a PPA with SolarCity to source renewable power from its dispatchable solar-plus-storage system for $0.145/kWh. At the time, it was billed as the world's first fully-dispatchable solar PV project.

That project was slated to come online at the end of 2016 and help the utility displace pricey, carbon-intensive oil generation. But already it appears expensive by comparison. The new deal signed with AES promises power delivered for $0.11/kWh — a nearly 30% drop in the PPA price in less than two years.

"The project delivers power to the island's electrical grid at significantly less than the current cost of oil-fired power and should help stabilize and even reduce electric rates to KIUC's members," co-op President David Bissell said in a statement. "It is remarkable that we are able to obtain fixed pricing for dispatchable solar-based renewable energy, backed by a significant battery system, at about half the cost of what a basic direct to grid solar project cost a few years ago."

The project is expected to provide 11% of Kauai's energy needs, "increasing KIUC's renewable sourced generation to well over 50%," Bissell said. The island has been known to reach renewable energy penetrations of above 90% during peak wind and solar generating hours.

Not only are the costs of both solar-plus-storage facilities below the cost of fossil fuel to power the island, they often beat the cost of the fuel alone. According to co-op documents, KIUC has paid between $0.122/kWh and $0.18/kWh in just fuel and commodity costs since Dec. 2014, with Nov. 2016 costs coming in above $0.15/kWh.

In 2015, the most recent year reported, KIUC's average residential electric rates were $0.323/kWh — lower than past years due to dipping oil prices. Rates for other customer classes were higher.

Like other Hawaii jurisdictions, the island experiences a glut of solar generation during peak hours, and then must ramp up its fossil fuel generation to meet peak demand in the evening, making dispatchable renewables especially appealing:

If KIUC could move some of it solar generation to later hours, it could decrease its reliance on dirty fuel oil, prevent solar curtailment at midday, and save customers money. DOE solar DG presentation

Details of the AES contract were not released, so it is difficult to ascertain whether the KIUC contract could be replicated in other parts of the country. But the price alone is encouraging. U.S. residential electricity prices averaged $0.125/kWh in Oct. 2016, the most recent data, and higher in many regions such as the Northeast and West Coast.

This post has been updated to include information on Kauai's power mix and renewable energy penetrations.