First it was a $375,000 luxury home installation on Läna'i.

Then came word that the $1 million photovoltaic installation on a Kona commercial building had been canceled.

The news was staggering to Rising Sun Solar of Maui, a Ha'iku-based company that is in one of the sweet spots of the state's emerging renewable energy industry.

"We were in bad financial shape for a couple of months because of these things falling apart," said Brad Albert, a partner in the firm that does installations of photovoltaic panels that help cut electricity costs.

What may have been more troublesome for Albert is that it wasn't the economy or cash-strapped clients who nixed the projects, but rather requirements by utilities that threw the projects into question.

The project owners had been told they were in high-saturation areas for distributed generation and needed to do interconnect research, or line studies that can run into the tens of thousands of dollars and take months to complete.

The requirements had to do with technical questions arising from installing such systems on homes and facilities also tied to electrical grids.

But on a broader level, Rising Sun and the prospective photovoltaic system owners had become victims of growing pains as the state rushes into sustainable energy projects. Photovoltaic installers and windfarm developers want to progress faster than utilities or the state Public Utilities Commission can move.

MOVE WITH CAUTION

In the case of distributed energy, Hawaiian Electric Co. and its sister utilities on Maui and the Big Island are cautiously allowing more PV onto their grids because it's unknown how much the circuits can accept without affecting the quality of power being delivered to other customers.

At issue is whether grids and systems can handle sudden fluctuations in power when a cloud passes over or the wind stops blowing.

"Too much variable renewable energy can impact not only the customer who owns the solar or wind unit, but every other customer on that circuit," said HECO spokesman Peter Rosegg.

"Too much variability may interrupt reliable service and even damage equipment due to voltage fluctuations and other power quality issues."

On Maui and the Big Island, installations in circuit areas where 10 percent or more of the peak energy use comes from renewables, the studies are being required on how such projects might be connected to the grid and whether additional equipment may be needed.

That's the case also in South Läna'i, where John Mumford, a partner in a Silicon Valley venture capital firm, thought he was doing the right thing for the island when he contracted Rising Sun to install a 42-kilowatt system.

Months into the project, after Mumford had spent $305,000 on ordering materials, equipment and grading the area where the landscaped, ground level system was to be installed, he learned of the distributed generation issue and that the interconnect resource study requirement and other issues would delay the project well into next year.

CANCELED PROJECT

Photovoltaic installers said the studies are done by independent engineers but don't have a deadline and can include recommendations for equipment that allows the utility to turn on and off systems during certain periods.

The uncertainty of the timing of the study caused the cancellation of Mumford's project.

"I feel like a victim," said Mumford, who says he lost about $100,000 on the project.

"I just assumed we were going to be able to build this thing."

In November, weeks after the debacle, Mumford received a two-paragraph form letter from Maui Electric Co., a division of Hawaiian Electric Co. It was from the utility's renewable energy sources manager and said people who are undertaking alternative energy projects should be sure to check with the electric company before diving in.

Rising Sun's Albert said he wasn't even aware of the studies being required on Läna'i, having previously installed a system in Mumford's neighborhood. Moreover, Mumford may have the distinction of being the first residential installation to be required to do a study.

As it is, high saturation areas where the studies are required exist in Kä'anapali, Lahaina, Pukalani and the area around the airport in Kahului on Maui. On the Big Island, Kona and other areas come in for the studies.

That represents just a small portion of the state, but the issue is one that's hindered installation of PV projects by Rising Sun and other companies on Maui and the Big Island. And it's expected to affect O'ahu as more distributed generation is installed.

The issue is an important one because no other state in the nation is as affected by rising oil prices as Hawai'i. The state gets roughly 77 percent of electricity from generators fired by electricity, and spikes in crude prices mean Hawai'i's already nation-leading electrical rates also jump.

EYEING OPTIONS

In all, about 90 percent of energy in the state is linked to petroleum. That's got the state dashing toward alternate energy given its rich renewable resources — solar, wind, wave and ocean thermal conversion are all on the table as Hawai'i works toward a goal of 70 percent renewable energy by the year 2030.

Part of those plans relies on growth in distributed generation. Traditionally electricity has been supplied on transmission lines that radiate out from a central generation facility.

But to take advantage of all of Hawai'i's resources, the model is being adjusted to maintain the central generation facility and allow windfarms, photovoltaic installations and other resources to be connected in different areas. Generating facilities are spread out, or distributed.

But there's a problem in doing so, in that HECO and others aren't sure how much variable power can be added to their grids.

"The system took 100-years plus to build up and just can't be converted overnight," Rosegg said.

"They were put in to do one thing and now we're going to ask them to do something else."

Currently the HECO utilities can ask for an interconnect study when distributed generation reaches a 10 percent threshold on a circuit. In the next several weeks it plans to submit a plan to the state Public Utilities Commission that raises the level to 15 percent.

Rosegg said that will go into effect once the PUC approves it.

Still, there are other issues solar companies say need to be resolved, including the utilities releasing more information about what prior studies have determined about various circuits and whether the current system of first-come-first-served is right.

Theoretically, large PV installations such as those at a Kailua, Kona, Costco and the Kona Commons shopping center may have sopped up much of the distributed generation capacity, leaving little room for residential or commercial installations on the circuit, Albert said.

SOLUTION NEEDED

Some solar companies also suspect the utilities could take more of the distributed generation onto their grids than they're currently talking about, said Erik Kvam of Zero Emissions Leasing, a solar leasing firm.

Kvam said he understands the utilities' position, but also has heard from the solar installation companies about their problems, including that undertaking an interconnect study doesn't guarantee a project will be approved. Moreover, the studies that can cost $16,000 to $40,000 can find that additional equipment is needed, adding to the cost of the project.

"There's legitimate concerns on both sides," Kvam said.

The solution to the problem may come in the form of the state government.

Ted Peck, who oversees state policy as energy administrator, said he'd love to see as much PV installed on rooftops as possible and realizes the solar industry has been frustrated. He said the answer may be in the state undertaking the interconnect studies.

"I think we need to take a systemwide approach rather than doing all these one-off studies," Peck said.

The feasibility of that remains to be seen. HECO said each project has to be looked at separately as to what the circuit can handle without impacting other customers.

But Peck, who noted Hawai'i now has the third-highest solar solar generation per capita in the country, said the state wants to be the clear leader when it comes to renewable energy.

That could entail the state doing a circuit-by-circuit study of distributed generation to get more PV installed.

"From a policy perspective, the state supports as high a penetration of distributed energy as possible," Peck said.

"I think it's worth us discussing it."