Hawaii has long been the U.S. leader in solar energy deployment, despite the fact that the state's renewable energy efforts rarely get national attention. Solar energy, in particular, makes sense in Hawaii because of the state's abundant sunshine and high electricity prices (otherwise utilities burn imported fossil fuels). Even energy storage is an area where Hawaii is charging ahead of most other states. But being a leader isn't enough.

We now know that Hawaii will be the first state to take a real crack at being powered 100% renewable energy, something regulators have been pushing for some time. And utility Hawaiian Electric Industries (NYSE:HE) is finally on board with the plan.

Getting to 100% renewables

The Hawaiian Public Utilities Commission wanted Hawaiian Electric to reach 100% renewable energy by 2045 and had twice rejected plans it didn't feel went far enough. This month, it approved the company's plan, which is actually to reach 100% renewables by 2040.

The next five years will be a key transition for the state with Hawaiian Electric planning to double renewable energy from 25% to 52% of the grid's supply. Solar will increase from 717 MW to 1,465 MW in a combination of utility scale projects and rooftop installations. Energy storage and demand response will also play a big role, highlighted by 165,000 private energy storage systems by 2030, which will provide backup for both individual homes and the grid as a whole.

Hawaii has naturally been pushing toward renewables, particularly solar energy because it's cost effective for homeowners to install. Drive around the islands and solar is on what seems like half of the homes, sometimes haphazardly installed just to gather a little bit of energy. And this creates a new opportunity for solar and energy storage companies.

Who will take the lead in Hawaii's renewables

Tesla (NASDAQ:TSLA) has been one of the leaders, building 37 MW of solar capacity and 52 MWh of batteries on Kauai, an island that doesn't fall under Hawaiian Electric's territory but is a proving ground nonetheless. AES Corp (NYSE:AES) also won a contract in Kauai to build a 28 MW solar farm with a 100 MWh battery system.

Sunrun (NASDAQ:RUN) has also talked about growing both its residential business and residential energy storage in Hawaii. And SunPower (NASDAQ:SPWR) could make a play there after winning bids to provide solar plus storage in French islands earlier this year. Energy storage company Stem is also a SunPower partner and built a 1 MW of energy storage at 29 customer sites for Hawaiian Electric earlier this year.

Hawaii is the U.S. proving grounds for renewable energy

As more renewable energy is built in high penetration states like California and Iowa, utilities and regulators will be looking for solutions to build a stable grid with a lot of renewables. And if Hawaii can push past 50% in five years on its way to 100% renewables in 2040 it'll be a big proving point for the U.S. grid. Look for companies to use it as a proving ground for their capabilities as well.