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Mike Ito would just as soon forget 2014. The marketing director for Honolulu’s Alternate Energy rode the huge boom in Hawaii’s rooftop solar installations as customers cashed in on the state’s 35 percent tax credit. But then the electric utility, Hawaii Electric Company (HECO), pulled the plug on many of his customers, refusing to authorize installation. As a result, he had to personally fire 30 solar installers and “let down their families.”

Call it the grid wars. Ito and his company are among the most severe casualties of the growing conflict between the rooftop solar industry and the big electric utilities, which have enjoyed monopolies for a hundred years. “We’re in a war with these companies,” says Will Craven, director of public affairs for SolarCity, one of the largest solar rooftop installers in the country. It’s not just that the big utilities are losing customers, income and their monopoly. They’re also forced to share the same resource that ties everyone together — the electrical grid. And it’s a food fight over how to pay for and manage it.

The rise of rooftop solar might have started as one of those feel-good, save-the-planet initiatives, but between federal and state tax incentives, and a plunge in the cost of photovoltaic panels, the industry has grown quickly and become serious business. While Hawaii is an extreme case — 12 percent of customers in Oahu have solar rooftop installations — it increasingly looks like the future.

So what’s the issue? Households still need to connect to the electrical grid, even if they produce more power than they can use. Excess power feeds into the grid during a sunny day, but as the sun falls, households need to draw power back from the utilities. It’s called net metering, and the rules for who pays for what are being fought over in all 50 states.

While the rise of distributed energy, such as rooftop solar, creates challenges, the potential solutions are also tantalizing.

In Oklahoma, for example, customers forfeit any excess electricity sent to the grid. In Hawaii, so far, electricity coming and going is credited at the same price, although HECO has proposed selling it back to customers at a much higher rate than it buys it from them, says HECO spokesperson Darren Pai, explaining that customers aren’t paying for the cost of managing the grid. Some states fix a monthly charge for connecting. Solar advocates question whether those costs exist, or whether rooftop solar could even reduce costs — for example, because they generate power so close to the users. David Owens, vice president of the Edison Electric Institute, a utility trade group, says the costs are real and rooftop solar users need to pay a fair share.

And don’t forget the duck curve. The demand curve for utility electricity bears an uncanny resemblance to the tail, back and neck of a duck as solar supply grows. It slips down the tail as the sun rises on a hot day, slides low and flat across the back during the sunny afternoon, and then, as the sun sets, up the neck it goes, as everyone suddenly wants power from the utility. That forces an expensive and technically difficult ramp-up from central generators. The duck has already quacked loudly in Hawaii, and is beginning to invade some local grids in California.

While the rise of distributed energy, such as rooftop solar, creates challenges, the potential solutions are also tantalizing. Smart inverters — equipment that regulates the flow of power between solar generators and the grid — combined with smart energy controls in homes could shave demand during peak times, perhaps enough to save having to construct a new power plant costing half a billion dollars or more. Or how about home storage batteries? Too expensive for now, but as electric vehicles gain popularity, they could be turned into smart storage systems, charging up when power is cheap and discharging electricity back into the grid when needed. In one collaboration, SolarCity and HECO worked with the National Renewable Energy Laboratory to test inverters, leading HECO to conclude it could safely double the amount of solar allowed.

All solutions suggest an end to the utility monopoly. The power companies face rising costs, in part because of environmental regulations, while sometimes losing their best customers to solar. Still, “you can’t just have the utilities go bankrupt,” says Sanjay Wagle, adviser at the energy investment group Broadscale, because they provide critical stability of supply. At the same time, he adds, “it’s not in their DNA to be innovative.” There are plenty of ideas about how to fix it, to change the incentives facing utilities, and they’ll be fought out in 50 different ways in each of the states. Indeed, the regulatory environment, Owens says, has become much more politicized. Owens also credits the electric companies with important innovations, such as introduction of smart meters and renewables.

In the meantime, Ito has learned some important lessons. He’s still bitter about HECO, suspecting that they are trying to stifle competition. Pai denies that, saying that HECO recognizes rooftop solar as a key part of Hawaii’s energy future. Still, Ito has learned the value of diversifying into high-tech cooling systems, electrical contracting and electric-vehicle charging stations. And Alternate Energy has picked up quite a bit of business from bankrupt fly-by-night installers who left behind rooftop messes. “Maybe in that sense it’s a good thing,” says Ito. “Some of them had no idea what they were doing.”

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