Developers of utility-scale renewable energy projects will be able to more easily sell their electricity to Hawaiian Electric Co. and its subsidiaries under a streamlined regulatory structure approved by the state Public Utilities Commission.

Tuesday’s ruling expands the "feed-in tariff" program that was previously limited to developers of small- and medium-sized renewable energy projects. The expansion creates a third category size to cover larger projects generating up to 5 megawatts of electricity from wind and solar resources.

The PUC approved the feed-in tariff expansion "with modifications." PUC commissioners instructed HECO to incorporate the modifications and refile the document by Dec. 6.

Renewable energy companies previously had to negotiate with HECO to sell electricity to the utility. The process was difficult for smaller companies, effectively blocking them from the market and creating disincentives for larger companies to take part.

The three categories are known as Tier 1, Tier 2 and Tier 3, with the last category being the largest.

Under the PUC ruling, HECO will pay Tier 3 producers 19.7 cents per kilowatt-hour for electricity generated from solar photovoltaic panels and 12 cents per kilowatt-hour for wind-generated electricity. HECO customers stand to benefit from the pricing because the utility sells electricity generated by renewable energy developers and other independent power producers with no markup. The Tier 3 rates are significantly below the current residential rates HECO charges, which hit a record-high of 34.6 cents per kilowatt-hour on Oahu this month.

The PUC opened the feed-in tariff program to Tier 1 and Tier 2 projects in October 2010. Since then, 158 applications were filed for 36 megawatts of generating capacity on Oahu, Hawaii, Maui, Molokai and Lanai. One megawatt is equal to 1,000 kilowatts.

HECO runs the electric utility on Oahu. In Maui County, it operates as Maui Electric Co. and on Hawaii island as Hawaii Electric Light Co.

Officials at Honolulu-based Hoku Solar, which is developing several Tier 2 projects, welcomed the expansion of the program to include utility-scale developments.

The company said it is optimistic that the additional tier "will be helpful in moving more large-scale projects forward in Hawaii."

"Much depends on the final language, however, so we’ll all continue watching carefully over the coming weeks," said Jerrod Schreck, Hoku’s chief strategy officer.

"Hoku Solar is currently working on several multi-megawatt projects, some of which could be strong candidates for the Tier 3 procurement mechanism," he said.

However, Schreck and many other solar developers in Hawaii say they are concerned about language in the feed-in tariff rules that give HECO the ability to cut off the flow of electricity from a renewable energy project if they feel the instability of the power would adversely affect the grid. Investors may not feel comfortable backing a project with the uncertainty that the utility could "curtail" its take of electricity at any time, they say.

"This ruling has been a long time and we’re looking at it as the beginning of many good things to come," said Mark Duda, president of the Hawaii Solar Energy Association. "That said, there are elements of the program that are problematic for developers. Unless they can get that worked out, I’m not sure how far it will get," he said.

Marco Mangelsdorf, president of ProVision Solar Inc. in Hilo, said he was concerned the Tier 3 ruling would allow bigger players to dominate the market as the penetration of renewable energy overwhelms HECO’s ability to incorporate it into its grids.

"More and more circuits across the state are reaching high saturation, effectively closing down the option of going PV to a growing number of utility customers," he said. "This manic mania for megawatts feeding frenzy will now go into hyper-drive, further eliminating the ability for homeowners and small businesses to install modest solar electric systems.

"The bottom line is our relatively small island electric grids can only handle so much distributed generation and these mega-systems going in will close the door for thousands of Hawaii residents to become more energy independent."