Tesla Becomes Cheapest Source of Electricity in Hawaii A solar array and storage batteries on the island of Kauai is producing renewable energy for less per kilowatt hour than fossil fuel power stations.

Of all the U.S. states, the residents of Hawaii suffer the highest prices for electricity, which are typically more than double the average. The majority of electricity in Hawaii is generated from fossil-fuel power stations, but there's now a new and cheaper option available thanks to Tesla.

According to Bloomberg, Tesla through SolarCity created a solar system and battery storage facility on the Hawaiian island of Kauai. It consists of a 13 megawatt solar array and 52 megawatt-hours of batteries, which generate energy and store it during the day before distributing it at night. That facility is complimented by a 20-year contract with the Kauai Island Utility Cooperative, which sees electricity delivered at 13.9 cents per kilowatt hour.

To put that in perspective, the average price paid for residential electricity in Hawaii in December last year, according to the U.S. Energy Information Administration, was 27.68 cents per kilowatt hour. Diesel plants on the island manage to produce electricity at 15.48 cents per kilowatt hour by comparison.

Hawaii aims to rely completely on renewable energy sources by the year 2045. The fact Tesla's solution is cheaper than existing energy production and counts as a 100 percent renewable source, suggests it is likely to be expanded in the near future and copied in other locations where solar power makes sense and electricity costs are high.

Tesla acquired SolarCity last year in an all-stock transaction valued at $2.6 billion. More recently, Tesla removed "Motors" from its name to show that the company is not just about vehicles, it's about energy. And that certainly seems to be the case. As well as this project in Hawaii, Tesla is going to manufacture solar panels in upstate New York and plans to offer SolarCity Solar Roofs for homes.