Kauai became a clean energy leader. Its secret? A publicly owned grid

LIHUE, Hawaii — It’s hard to find anywhere in the United States that has greened its electricity supply as quickly as verdant Kauai. And the people of Kauai achieved that on their own, through collective ownership of the electricity grid, not by hoping profit-maximizing utilities find a way to balance the urgency of human-caused climate change with quarterly dividends for shareholders.

Kauai used to have a Wall Street–owned, for-profit utility, much like roughly 70% of U.S. electricity customers. But the island’s grid infrastructure took a beating from Hurricane Iniki in 1992, and the utility, Citizens Utilities Company of Connecticut, eventually wanted to sell. Kauai residents raised financing and acquired the utility in 2002, turning it into a locally owned cooperative that pledged to lower rates, which were the highest in the state at the time.

When I visited the headquarters of Kauai Island Utility Cooperative last fall, spokesperson Beth Amaro called the local takeover of the utility ​“one of the most important things that ever happened on the island.” Chief of Operations Brad Rockwell homed in on the crux of the transformation: ​“The problem with investor-owned utilities is you have shareholders and you have ratepayers, and they’re not aligned. With us, it’s aligned.”

That alignment underpinned a consequential decision in 2008, when the fledgling KIUC board voted to get to 50% renewable electricity by 2023. Achieving that required investing in what was then a new, risky and pricy technology: large-scale solar power. After rolling out sizable solar plants in 2012 and 2014, KIUC embarked on another daring gambit: solar panels directly connected to lithium-ion batteries. Nobody had tried this combination at power-plant scale yet. The tiny island pioneered it with SolarCity, which became part of Tesla by the time the project wrapped up in 2017; solar-paired storage has since become the go-to approach for developers in solar-saturated markets across the U.S.

With those early moves, KIUC blasted through its initial goal like an irrepressible lava flow. Last year, ahead of its first deadline, KIUC generated 60% of its electricity from renewables, mostly solar plus some hydro and biomass. During large swaths of the daytime, solar provides nearly all the island’s electrical needs, something conventional utility-industry wisdom considered unthinkable not long ago. Not stopping there, the cooperative plans to produce 100% renewable electricity by 2033, 12 years before the state’s mandated deadline.

It’s an alluring prospect for the growing contingent of mainland climate advocates looking to wrest control from their local for-profit monopoly utilities. This year, New Yorkers passed legislation to beef up existing public power to confront climate change; Maine voters are headed to the polls to decide whether to take over their two deeply unpopular utilities.

Hawaii constitutes an unusually crisp comparison between for-profit and nonprofit utilities: all the islands besides Kauai get power from investor-owned, for-profit Hawaiian Electric and its subsidiaries. Hawaiian Electric serves 95% of Hawaii’s population to KIUC’s 5%, but they operate in similar climates, across similar terrain and within the same state policy regime.

The high-level outcomes differ starkly. In the last decade, Hawaiian Electric, with the much-vaunted resources and access to capital of a publicly traded company, raised its renewables rate to just 31.8% of generated electricity. KIUC basically doubled up on its bigger, deeper-pocketed neighbor.

Average retail electricity rates in Hawaiian Electric territory are higher today than they were a decade ago, per state data. Kauai’s rates have dropped from the highest in the state to the lowest, as KIUC shifted from costly imported fossil fuels to cheaper solar generation.

“The fact that Kauai now has some of the lowest electricity prices in the state reflects the priorities of the community of Kauai, and KIUC is right to be proud of its progress,” said Michael Colón, energy director at Hawaii-based nonprofit Ulupono Initiative. ​“The availability of affordable, reliable, clean electricity is a key factor in a thriving economy, and Kauai will benefit from continuing a downward trend on energy prices.”

It’s hard to see such undeniable quantitative success without wondering if those outcomes for customers and climate action could be replicated elsewhere, in places with different histories and geographies and populations. 

At the same time, KIUC’s journey to a fully clean energy system is only partway traveled, and its next steps pose the steepest challenge thus far. The cooperative is trying to keep the community on its side as it takes renewables to the next level by tapping into a sacred and precious resource: Kauai’s fresh water.

Early solar investment pays off

One morning last fall, I made my way to KIUC headquarters, on the outskirts of Kauai’s county seat, Lihue, to see what wildly successful grid decarbonization looks like. Amaro and Rockwell welcomed me to a second-floor office in a suburban-style office park. This wasn’t the headquarters of a utility that ferries its top executives around in private jets. 

Rockwell, who worked on the generators that propel U.S. Navy destroyers before transitioning to terrestrial power plants, pulled up the live feed of grid operations to show me how cleanly it was running.

“We’re for sure higher than 80% renewable right now,” he declared.

This was well before noon, so solar hadn’t even peaked yet. But Kapaia, the largest fossil plant at 27 megawatts, was ramping down after chugging through the night. The 30 megawatts of large stand-alone solar picked up, its output flickering as clouds drifted by. The two big solar-battery plants — Tesla’s 13 megawatts with 52 megawatt-hours of storage, and AES’ 20 megawatts with 100 megawatt-hours of storage — had begun funneling their sunny output straight into the batteries, to load up for the evening stretch.

“What we want, really, is not to have to commit other, less-efficient fossil units for our evening peak when we can use what’s stored in the batteries,” Rockwell explained.

That morning, like so many others, the island’s power plants danced together in a seemingly effortless infrastructural ballet. In fact, the elegant choreography I witnessed required years of preparation by KIUC, which had to surmount a number of supposedly impossible barriers. Sure, whole countries have run carbon-free thanks to widespread hydropower or nuclear assets, but nobody had attempted this with up-and-coming solar photovoltaics.

That journey into the unknown started with the board’s 2008 commitment to reach 50% renewables in 15 years. Board leaders were fed up with selling the most expensive power in the state and suffering exposure to volatile oil prices, Amaro recalled. Solar offered a way out since its fuel is free. But it had not yet hit its stride as a full-fledged grid resource. ​“That was way before solar was in the money,” Rockwell recalled. Indeed, levelized costs for solar generation in 2008 lingered above $500 per megawatt-hour (by 2022, they would fall below $50 per megawatt-hour).

Utilities elsewhere grasped at plenty of reasons to not even try. Just a small amount of solar production could throw off grid voltage, disrupting the vital heartbeat of the electrical wires. If that didn’t prove catastrophic, how would all those panels help in hours without sunlight? And even if Kauai somehow figured out a cost-effective way to store solar production, how could it cope with the loss of inertia, a valuable grid service traditionally produced by the heavy spinning masses of old-school fossil-powered generators?

Undeterred, KIUC got to building a series of first-of-a-kinds that knocked down the counterarguments one by one. KIUC leadership was willing to take risks, as long as the numbers made sense, said Jeff Mikulina, a longtime advocate for clean energy in Hawaii and former executive director of the Blue Planet Foundation.

​“They were paying the highest in the state — renewables looked far more competitive on Kauai than the other islands,” he told Canary Media.

KIUC awarded its first large-scale solar contract for SolarCity’s Koloa project in 2012, and chased it with the Anahola plant in 2014; each added 12 megawatts of capacity. Soon, rooftop and large-scale solar were flooding the grid in sunny hours, and KIUC started looking for ways to shift even more fossil fuel consumption to clean energy. It put out the call in 2014 for projects combining solar panels and batteries into one power plant. That had never been done at large scale, and the initial proposals didn’t pass muster. But the solicitation kicked off a collaborative back-and-forth with SolarCity, at the time the largest rooftop solar provider in the country.

The federal Investment Tax Credit played a crucial role in conventional solar development, but it had yet to be applied to solar-charged battery projects, too. The team at SolarCity designed a system such that solar tax equity investors could feel confident the tax credit would apply to the battery as well, said Bob Rudd, who worked on the project as a storage leader at SolarCity and later Tesla. Then they had to figure out how to optimize solar power sent directly to the grid (increasing project revenue) while also storing enough energy in batteries to meet KIUC’s stipulations for nighttime power.

The cooperative signed a contract in 2015 for the first large-scale solar-battery combo, to be supplied by Tesla and SolarCity. Up until then, no developer had packaged large-scale solar generation with batteries to deliver power in the evening. The contract promised to do this at a cheaper rate than KIUC’s existing fossil generation, and only slightly more than the previous, stand-alone solar projects. The project arrived in 2017, by which point SolarCity had become part of Tesla.

At the time, analysts wondered if Tesla could possibly make any money on the surprisingly low-cost contract. Rudd insists, ​“It was not a loss leader, but the strategic intent was also not purely profit motive at the time.” Breaking open the utility-scale solar-storage market would prove profitable, indeed.

“Kauai demonstrated not only what’s plausible, but what’s possible, with inverter-based resources” like solar and batteries, Rudd said. ​“That project got a lot of awareness and attention when announced, and it prompted a lot of other developers and utilities and folks to start asking these sorts of questions. […] Somebody had to do it first, and it started to fall in line from there.”

More recently, KIUC has tested ways to maintain grid inertia without burning fossil fuel at legacy plants. It turns out using smart inverters, and converting old power plants to operate as something called a ​“synchronous condenser,” can do the job just as well at the times when solar provides nearly all the power on the island. Kauai’s synchronous condenser wasn’t working at the time of my visit, so I couldn’t see this mysterious contraption in action, but it’s up and running now, Amaro confirmed. The co-op also won federal funding in October to convert another fossil-fueled generator to run as a synchronous condenser, further bolstering grid reliability when it’s running on close to 100% renewables.

Kauai has long been an outlier among the island chain. King Kamehameha never managed to conquer it by force after he sailed his army from Hawaii Island to Maui and Oahu. Centuries later, Hawaiian Electric went on a buying spree of the independent island utilities, but it never snapped up Kauai. Now the oldest island’s maverick streak manifests in cleaner, cheaper energy than produced by more cautious neighbor Hawaiian Electric. 

There was no guarantee that KIUC would come out ahead. As a cooperative, it did have the benefit of access to low-cost financing through the U.S. Department of Agriculture’s Rural Utilities Service, Colón noted. On the other hand, he said, KIUC doesn’t have a parent company with a hefty balance sheet to help finance projects — it’s structurally required to be scrappy.

But Hawaiian Electric’s much bigger balance sheet, and population of paying customers, didn’t result in that company outpacing the much smaller cooperative in relative clean energy adoption. Hawaiian Electric didn’t even hook up its first large-scale solar-battery project on Oahu until 2022, five years after Kauai hit that milestone. When Oahu’s last coal plant shut down in September 2022, Hawaiian Electric was still waiting for a host of clean energy projects that weren’t built yet. The late start on renewables construction meant that the coal plant shuttered without enough new clean energy to fill the gap, pushing prices upward once again.

“It’s important to note that each island and each grid is unique, with a varied customer base and mix of resources, geography and land availability,” Hawaiian Electric spokesperson Darren Pai told Canary Media in an email. ​“The size and complexity of each island grid is also a major factor. Kauai’s peak demand is roughly the equivalent of peak demand in Waikiki, which is just one of many neighborhoods on Oahu.”

Pai further noted that Hawaiian Electric must secure approval from the Public Utilities Commission before putting out the official call for proposed renewable energy projects; that approval process has taken from six to 21 months. KIUC, in contrast, can operate on its own timeline.

Oahu’s grid is far more complex than Kauai’s. But the consequences of slower renewables uptake became clear when Russia’s invasion of Ukraine rocketed oil prices into the stratosphere — and sent Hawaii scrambling for suppliers that aren’t Russia.

Meanwhile, Kauai’s high percentage of renewable generation buffered customers from exorbitant price hikes. Its rates have returned to where they were pre-Ukraine invasion. By contrast, every island served by Hawaiian Electric suffered price hikes of 50% or more in the months after the Ukraine invasion. Retail prices on populous Oahu still sit 49% higher than they were in January 2021, according to state data.

“Unfortunately, Hawaiian Electric customers will remain vulnerable to global fossil fuel prices until the utility can achieve greater integration of renewables across its service territory,” Colón noted.

A similar dynamic played out across the mainland, as utilities that resisted solar investment got hit by higher-than-expected fossil gas prices, which they typically are allowed to automatically pass on to their customers. When those customers are also the utility owners, as is the case for cooperatives, executives have a powerful incentive not to risk too much fuel-price exposure.

Local utility ownership doesn’t guarantee clean energy success

Local utility ownership worked well for Kauai’s goals, but would those outcomes hold true elsewhere in the U.S.?

For perspective on that, I called up David Pomerantz, who regularly calls out utility excesses and corruption as executive director of the watchdog group Energy and Policy Institute. To my surprise, he did not take the opportunity to slam investor-owned utilities as being structurally unsuited to rapid decarbonization (though he did say it’s ​“pretty unequivocal” that public power customers pay lower rates than customers of for-profit utilities, on average).

“This ownership structure question is important, but not determinative, to how the utility behaves,” Pomerantz said. ​“What’s more important and more determinative is political accountability.”

If cooperatives and public utilities were better suited to addressing the urgent threat of climate change, you should be able to look across the public power sector — co-ops, municipals, federal power providers — and see more tangible progress than among for-profit utilities. But that’s not the case.

​“There are leaders and laggards in both sectors, and very, very few actors in either rising to the challenge of rapid and equitable decarbonization,” Pomerantz said. ​“We should fix them all.” 

Simply answering to local community control isn’t a panacea; leadership and accountability play a huge role in a utility’s success on climate action, he concluded. Accountability, in this case, implies an engaged customer base that cares about clean energy and wants utility leaders to pursue it. Far too many utilities, whether cooperative or municipal, have such low participation in their elections that it’s hard to say the leaders really answer to their communities. KIUC, for its part, reported a 17% turnout in its latest election, in which the incumbent board members all won reelection. 

On its own, that rate doesn’t sound particularly impressive. But advocacy group Institute for Local Self Reliance, in a 2016 report, found that a shocking 70% of cooperative utilities see less than 10% turnout in their elections, and it highlighted KIUC as a leader in the category.

Water struggle on the horizon

As KIUC pushes toward 100% renewable energy, it faces the toughest test of its community-first credo: Its renewable energy goals are clashing with other forms of sustainability.

The utility already gets extremely high rates of renewable power during sunny hours, and its batteries shift clean power into the evening peak hours. To further cut out fossil fuels, KIUC needs a type of storage that can stay cost-effective over many more hours than lithium-ion batteries can manage. It wants to use water, the oldest and most prolific grid-storage medium in the world.

After working together effectively on the Lawai solar-storage project, KIUC selected Virginia-based independent power producer AES to build an ambitious network of hydropower improvements on the west side of Kauai. The effort, first publicized in 2021, would refurbish century-old irrigation ditches built to funnel the precious liquid to powerful plantation holdings, which have long since given up on agriculture. Using solar power to pump water from low-elevation reservoirs up the mountainside stores energy, which can be let down through hydro generators to power the grid through the night.

But part of AES’ ultimate design would divert some water through a hydropower generator, from whence it would flow out to sea through the Mana Plain, where toxic outflows to the ocean are already a problem. That concerned a group of Native Hawaiian community advocates, who see the plan as a threat to the island’s precious water resource and to its river and coastal environments.

Environmental law firm Earthjustice filed a lawsuit on their behalf in February, challenging the state permitting authority for approving the project without requiring an environmental impact statement. Environmental law requires that kind of study for projects that “‘may’ have a significant impact on the environment”; Earthjustice argues that reworking half an island’s water resources quite plainly rises to that threshold. But evidently, the outgoing chair of the Department of Land and Natural Resources sidestepped board review and personally approved the Kauai project during the winter holidays of late 2022 before leaving office.

However the lawsuit ends up, KIUC and AES won’t hit their original timeline. When KIUC first announced the project in January 2021, Rockwell told me regulatory approvals could take a year and a half, and construction would take at least two years. Nearly three years have passed, and now ​“many activities have been suspended (e.g., permit applications) because of the lawsuit, so it’s difficult to predict a target date for completion,” Amaro said in an email. There’s no telling how long the lawsuit will take to resolve.

Mikulina, who helped pass Hawaii’s 100% renewable energy target, said he hopes there’s a way to resolve the dispute, because ​“it’s that last little piece” to get up to really high renewable rates. But he acknowledged that ​“there’s a long, painful history of plantation-era water use, and we certainly don’t want that perpetuated in the future.”

The tensions didn’t come out of nowhere. Kawai Warren, a leader of one of the plaintiff community groups, took me on an off-road tour of the areas in question last fall to show me what’s at stake. We met on the coast, by a statue marking where Captain Cook first landed on Kauai, and drove up the precipitous slope of the volcanic island. To our right, the land sheared away thousands of feet down into the Grand Canyon of the Pacific. To our left, a crumbly red landscape slanted more gradually to the ocean. After crawling up and down 4x4 trails and proceeding apace on foot, Warren pointed out the source of the dispute: what looked like a natural mountain stream that ran smack into an aging cement barricade. Barely a trickle continued through the original rocky streambed; the rest of the water coursed through a series of ditches and tunnels for miles through the upland forest until it arrived at the old plantation lands on the coastal plain.

That status quo leaves plenty to be desired. But for Warren, it wouldn’t be acceptable to lock in a new arrangement that diverted water from the already-depleted Waimea River and flushed it out to sea.

“The canoe is my island, and my island is my canoe,” he told me at one point. ​“Once you’ve exhausted all the resources in your canoe, everybody’s going to die.” 

It sounds like a metaphor, but Warren lived that reality when he sailed from Easter Island to Tahiti on the Hokulea, the recreation of a traditional Polynesian canoe that first journeyed in the 1970s, operating solely on traditional navigational prowess. In weekslong Polynesian voyages, centuries ago and today, carefully maintaining limited water supplies spelled the difference between life and death. In that sense, Kauai, floating thousands of miles from any mainland, isn’t so different from a canoe.

KIUC and AES could possibly try to push through without resolving the core dispute, but it would involve onerous legal wrangling and generate bad blood with the very community that’s supposed to benefit from the hydro improvements. Alternatively, AES could forgo the once-through hydro components and stick to closed-loop water storage. Amaro confirmed it would be possible to do so. But that change would cut off water that’s supposed to be earmarked for Native Hawaiian farming in the area; it would also reduce the amount of clean, on-demand generation the project can provide.

“Conflicts on islands are particularly acute,” Mikulina said. ​“We have to be really honest and explicit with the trade-offs we’re making, because we’ve already agreed that there’s no going back” to fossil fuel dependence.

This unresolved tension is rooted in Kauai-specific history and geography. But many utilities will face similar dilemmas when they have to figure out how to close the final gap to a carbon-free grid, and the options require trade-offs in the local landscape. Power companies already struggle to maintain community buy-in for run-of-the-mill solar and battery projects today. When a power company is rooted in its community and answers to them, though, it has to resolve its disputes before it can move on.