SolarCity now has a product suitable for Hawaii's Customer Self-Supply program.

It's a home energy system made up of:

A SolarCity PV panel installation (with SolarEdge optimizers?)

Battery storage from Tesla

A smart thermostat from Nest

A smart electric heater from Steffes

A gateway that controls the hardware to maximize solar generation and self-consumption

Here's a quick review of the recent policy path: Late last year, Hawaii's Public Utilities Commission issued a ruling (PDF) that ended net energy metering (NEM) as we know it on the Hawaiian islands. Hawaii's NEM program had proven to be too successful. Although it created a strong solar industry, the deep penetration of solar on the utility's distribution grid forced Hawaiian Electric (HECO) and the PUC to react.

Hawaii's new distributed solar tariff offers the option of Customer Grid-Supply (CGS), which credits surplus power provided to the utility at roughly half of the retail rate (for the next two years). The CGS program is capped at 25 megawatts for Oahu and 5 megawatts for both Maui and the Big Island.

The Customer Self-Supply (CSS) tariff allows only for inadvertent export to the grid (at zero compensation) -- so SolarCity's combination of solar, batteries, a smart electric water heater and a Nest thermostat must allow the system to store power when abundant and then deliver it to the home at night or to precool the house during the day. The system relieves some of the duck-curve pressure faced by the utility. Intelligently aggregated, the storage and water heaters can help contribute to balancing the grid.

Of course, the system provides emergency backup power for customers on the sensitive island grid.

The CSS option also provides a fast-track interconnection review and approval process, "even in heavily saturated distribution circuits that otherwise would not permit interconnection," according to the current ruling. HECO had proposed a minimum bill for CSS customers.

Jon Yoshimura, director of government affairs at SolarCity, is based on the islands. He told GTM, "You can control the use of your home-generated electricity. It's designed to heat your hot water at times when you've got ample sun during the day, and it's also designed to cool your home during the day when you have a lot of sun and maybe not as much load from your home." Presumably, excess power production can be used to preheat the water tanks, or the tanks can be aggregated in a demand response program.

Yoshimura said CSS customers "can apply for self-supply tariff with this product and virtually have the approval all wrapped up within 30 days."

SolarCity has a lease option for this system. "The product will be leased at $0.26 per kilowatt-hour, and that includes everything, even your electric hot water heater, your Nest thermostat and your Tesla battery -- and we will sell you a [system] at $4.50 a watt," said Yoshimura. SolarCity begins taking orders today.

Yoshimura said, "The good news is that the utility and the industry have reached an agreement on revising the self-supply tariff, and we're going to be going jointly to the PUC to ask for amendment of the self-supply rules, to indicate what is possible as far as inadvertent export, how many times and how much power is exported." He added, "The goal, of course, is to limit the amount of inadvertent export."

Ravi Manghani, GTM Research's senior storage analyst, notes, "The self-supply tariff went into place only in October. It will take a few months for vendors and installers to set up the necessary infrastructure to start actively deploying."

Yoshimura points out, "There's a lot of interest in demand response and the utilities being able to benefit from [distributed generation]. While we take baby steps toward that future, this product is really an important stepping stone for SolarCity to participate in today's policies and [with the] rules put into play in Hawaii."

He concluded, "We're lucky to have legislators who are doing their best to push HECO into the future -- or at least into the present."