Hawaii’s rooftop solar industry, already struggling with a recent reduction in an incentive program, could come to a standstill next year.

Last month, with little fanfare, the state Public Utilities Commission announced it will cap new residential and commercial solar projects at 25 megawatts or about 4,500 new systems on Oahu. It’s likely the cap will be met by the middle of next year, if not sooner. Once it is met, no additional rooftop solar systems will be approved for connection to the grid.

The PUC decided to halt new rooftop solar installations to prevent damage to the grid and allow other renewable energy sources — such as wind and geothermal — to catch up with residential solar.

The cap puts in jeopardy an industry that has grown to 115 companies with 2,200 employees, according to the Solar Energy Industry Association’s count as of September.

“It will be gone in 2016,” said Chris DeBone, managing partner at Hawaii Energy Connection, who expects the cap to be met by May or June.

PUC Chairman Randy Iwase said the cap was necessary because Hawaii needs a variety of renewable energy resources to achieve its goal of 100 percent renewable electric power by 2045, and that problems with HECO’s old grid leave little space for all resources to connect.

“I can tell you there is an issue with the grid,” Iwase said. “If we had not done what we did or what we are doing … the grid would be saturated shortly. We would have to shut everything down if we put all of our eggs in the PV (photovoltaic) basket.”

Iwase said it could take about a year and a half for the cap to be reached but that eventually, rooftop solar “will be halted.”

Hawaiian Electric Co. has connected 51,000 rooftop solar systems, or 272 megawatts, to its Oahu grid. So far this year, HECO has approved more than 9,700 solar system applications, or about 58 megawatts worth of power, for Oahu.

Representatives from the solar industry said the cap leaves room for 4,000 to 5,000 additional systems. The number would be lower if commercial systems are included.

Roy Skaggs, project developer at Alternate Energy Inc., said the limit will be met by summer. “It’s not long,” he said.

Drew Bradley, director of business development at REC Solar, said it would be met within months.

“From the time it was announced to the time it is fully subscribed, it is not more than three to six months, if that,” Bradley said.

Colin Yost, principal at RevoluSun, said he could see the solar industry hitting the limit as soon as March.

The PUC said one major concern is the future of HECO’s large fossil fuel-powered plants, which are less efficient when turning off and on to adjust to fluctuating renewables on the grid.

Solar advocates say the development of cheap, safe and efficient battery systems will go a long way to solving the problems caused by high levels of solar power on the grid.

DeBone, of Hawaii Energy Connection, said Hawaii needs to find a way to shift the excess energy created by photovoltaic to the evenings to balance out the work required of the older fossil fuel-powered plants.

“Putting more solar in during the day isn’t fixing that problem,” he said.

Richard Wallsgrove, program director at Blue Planet Foundation, said there are technical problems with the grid but that faster energy storage deployment would help solve them.

“The technical problems exist but the solutions exist,” Wallsgrove said. “Every time we add a renewable energy resource to the grid, we have a technical issue to solve. As much as I think it is easier for us to say there is cap on this because of a technical problem, we have to solve it at its core. It is really technical planning and economic issues. There was a technical problem three years ago when we didn’t have enough renewable energy on the grid and the peak (electric use) was at noon.”

Wallsgrove said there is space available for solar to connect beyond the cap. “There is definitely more room on the grid than that,” he said.

The 25-megawatt cap on solar was part of the PUC’s Oct. 12 order that roughly cut in half the credit rooftop solar owners get for power sent into the grid, and raised the minimum monthly bill for solar customers to $25.

The cap applies to applications for exporting systems that were submitted on or after Oct. 14.

After the cap is reached, HECO customers will still be able to add solar to their house but will not be able to send power to the grid. They will be able to take power from the grid when needed. Customers looking to install solar will either need to curtail the excess energy their systems produce or get a battery to prevent their excess solar energy from being sent to the grid.

“Once grid supply is gone or the cap has been met, then energy storage or energy management is going to be a necessity, not an option,” DeBone said.

Yost, of RevoluSun, said the order was made with bad timing because batteries are too expensive for the average person, noting there is no state tax incentive for batteries and that a 30 percent federal tax credit will sunset at the end of 2016.

“There are a number of problems of doing it the way they did,” Yost said. “One of them is there is no state credit for battery storage. You try to push this market into existence with a very short timetable without the incentives that existed for PV. They are just pushing very hard and very fast.”

Iwase said the “initial” cap will be revisited in a year and a half.

“Nothing is set in stone,” Iwase said. “We realize there has to be modernization of the grid to accommodate PVs and other things. We are hoping, anticipating that we will be prepared to face a Phase 2 decision at that time.”

Iwase said the PUC is also pushing the utility to modernize the grid. The PUC ordered HECO to improve the utility’s “Power Supply Improvement Plan” earlier this month. The plan includes a timeline for retiring fossil fuel plants, using new technology such as energy storage and adding a diverse portfolio of low-cost renewables.

“Everything has to evolve,” Iwase said. “We have to evolve on the grid. We have to evolve on the kinds of programs and initiatives if we are going to achieve 100 percent renewable.”

Iwase said rooftop solar is not the only option, but just one component of the state’s 100 percent renewable plan.

“Is it important? Yes, it is,” he said. “So is battery storage residential, battery storage utility grade and time of use (different electric rates for different times of day).”

Iwase said he wanted to see more community solar, community wind farms, utility-scale battery storage, hydrogen fuel cells and geothermal development.

“All of that has to be combined,” he said.