Saturday, October 25, 2014

Lava, Hurricanes, Stranded utility costs and Sovereignty

Volcanic Steam rises on the Big Island

Hawai`i Public Utilities Commission examines tropical storms / hurricanes -- Iselle, Julio and Ana  -- and the Puna Lava Flow in two regulatory proceedings.

A discussion on geothermal power with be held at the University of Hawai`i, Manoa.

Should Hawaiian Electric Industries (HEI) shareholders be responsible for poor planning on the part of HECO, MECO and HELCO?

Or should ratepayers bail out the utility for infrastructure investments which have become obsolete due to the renewable energy and rooftop solar revolutions?

Should Hawaiians move towards a nation-within-a-nation model or stay with independence?

The Association of Hawaiian Civic Clubs will hold their 55th Annual Convention in a few days.  

The Office of Hawaiian Affairs (OHA) will hold its fifth and final Kāmau a Ea (“to keep on, continue, persevere, last, add a little more”) at the McKinley High School Auditorium. 

Friday, October 24, 2014

Energy Pictures

Public Utilities Commission: Decoupling Prehearing Conference (October 23, 2014)

From the left: Warren Bollmeier (HREA), Doug Codiga (Blue Planet), Jon Itomura (Consumer Advocate), Tom Gorak (PUC Chief Counsel and Prehearing Officer), Carl Freedman (PUC Consultant), Peter Kikuta (HECO Counsel), William Brilhante (County of Hawaii), Isaac Moriwake (HSEA) and Leslie Cole-Brooks (HSEA).  

PUC Staff behind Warren Bollmeier

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Cutting the link between Hawaiian Electric Company's sales and profits

By Henry Curtis

Synopsis: Decoupling (de-linking) means that a utility does not get more revenue by increasing the amount of electricity sold. 

As electricity sold increases, rates automatically fall. As electricity sold decreases rates automatically rise. Total revenue remains unaffected.

A discussion on decoupling can be long, dry and dull. It can be difficult to explain. It can be overly focused on accounting. 

In the current decoupling proceeding the Public Utilities Commission has identified four broad questions that Parties need to answer. These are broken down into 13 specific questions containing 52 sub-questions. Just the questions alone required more than 1500 words.

The focus here is to present decoupling in a way that it can be understand. This blog focuses on how we got to where we are today. It will lay the groundwork for the subsequent blogs that will deal with proposed new utility business models, regulatory reform and transparency.

During the Lingle Administration the Hawai`i Department of Business, Economic Development & Tourism (DBEDT) hired Rocky Mountain Institute (RMI) to write an energy report. “Policy Recommendations for Hawaii’s Energy Future” was released in March 2008.

Decoupling is a mechanism that breaks (or decouples) the dependence of a utility’s recovery of fixed investment costs on its energy sales to its customers. ...Performance incentives offer utilities financial incentives for the successful implementation of energy-efficiency programs.”

Rocky Mountain endorsed decoupling.

 “Hawaii’s electric utilities should advocate that the PUC consider implementing performance incentives in conjunction with a utility revenue decoupling mechanism. These two policies, along with the Public Benefits Charge currently in place, can further enable the aggressive implementation of energy efficiency.”

The Hawaii Clean Energy Initiative (HCEI) Energy Agreement was signed on October 20, 2008 by Hawaiian Electric Company (HECO) and the Consumer Advocate.

The transition to Hawaii's clean energy future can be facilitated by modifying utility ratemaking with a decoupling mechanism that fits the unique characteristics of Hawaii's service territory and cost structure, and removes the barriers for the utilities to pursue aggressive demand-response and load management programs, and customer-owned or third-party-owned renewable energy systems, and gives the utilities an opportunity to achieve fair rates of return.”

“The Commission may unilaterally discontinue the decoupling mechanism if it finds that the public interest requires such Action.”

Four days later the Public Utilities Commission opened a regulatory proceeding (Docket No. 2008-0274) to examine decoupling.

On May 11, 2009, the HECO Companies and the Consumer Advocate filed a Joint Final Statement of Position. 

Public Utilities Commission Decision (Round One)

On August 31, 2010 the Public Utilities Commission issued its Final Decision and Order largely adopting the HECO-Consumer Advocate Joint Statement.

The Hawaii Public Utilities Commission enacted two mechanisms.

The Revenue Balancing Account (RBA) tariff was designed to decouple or break the link between sales and revenues.

The Rate Adjustment Mechanism (RAM) was a formula driven mechanism intended to compensate the HECO Companies for changes in utility costs and infrastructure investment between rate cases and thereby reduces the frequency of rate cases.

Traditional, utilities and regulators guesstimate their anticipated costs and kilowatt-hours of electricity that will be sold in the upcoming cycle. Then a rate per kilowatt-hour is established that will allow the utility to recover its costs and have the opportunity to make a reasonable profit.

After receiving regulatory approval the utility often adjusts its plan to increase its profits. The utility gains if customers increase the amount of electricity they buy. The increase can occur due to weather conditions or intentional utility actions.

Decoupling supposedly breaks that process by separating revenue from sales. A change in sales results in an automatic adjustment in rates such that the total revenue collected remains the same.

The Public Utilities Commission asserted that the traditional “rate design works better for utilities when sales gradually increase from year to year,” since increases in revenue may compensate the utility for expansion, price inflation and profits

However stagnant or falling revenue may impact the ability of the utility to cover its costs and therefore lead the utility to file rate cases more often. Rate cases are complex time-consuming events that can sometimes overlap with previous rate cases.

The Commission asserted, “Conservation, energy efficiency, and customer-sited renewable generation will contribute to falling utility sales and, in turn, revenues, which may then result in negative financial impacts to utilities. Proponents of decoupling argue that de-linking (i.e., "decoupling") utility sales from utility revenues eliminates the disincentive to support and promote conservation, energy efficiency, and renewable generation that utilities face under traditional ratemaking.”

The HECO Companies proclaimed that “sales decoupling encourages utility support for energy efficiency measures and distributed renewable energy generation,” and that decoupling will help to maintain "a financially sound utility” that can "serve as a credit worthy off-taker of the planned renewable energy projects."

DBEDT proposed that the decoupling mechanism be approved subject to “some measurable target performance goals” which would determine if decoupling was succeeding.

The Commission declined “to adopt performance metrics at this time.”

The Commission felt that HECO would do the right thing.

The August 31, 2010 order was signed by Commission Chair Carlito Caliboso and Commissioner John Cole.

Public Utilities Commission Dissent

Commissioner Leslie Kondo filed a written dissent.

As an aside, with the transition from the Lingle Administration to the Abercrombie Administration, Kondo became the Executive Director of the Hawai’i Ethics Commission.

Commissioner Leslie Kondo dissent proved to be an omen that many believed portended the future.

“I disagree that it is reasonable or in the public interest to shift essentially all of the HECO Companies' business and economic risks to their customers.”

“That transformational change to the current regulatory framework will guarantee the HECO Companies increased revenues and profits, will guarantee higher customer bills, and will essentially make the HECO Companies recession-proof.”

“In short, the HECO Companies will get additional money from customers, with no obligation to perform differently than the status quo.”

“First, in my view, the issue is whether decoupling is in the public interest, not whether decoupling promotes the state's energy policy. The two issues are not the same.”

 “The Energy Agreement, while providing important policy direction and memorializing the utilities' commitments, is not state law, and the majority cannot simply assume that the policies reflected in the Energy Agreement are in the public interest.”

“Second, the relationship between decoupling and more renewable energy is, at best, tangential.”

“Contrary to the majority's apparent expectation, without performance measures or other metrics tied to renewable energy penetration, a decoupling mechanism does nothing to encourage more renewable energy development; the HECO Companies simply will get additional money from customers, with no obligation to perform differently than the status quo.”

“Conversely, the HECO Companies do not require decoupling to integrate more renewable energy.

If the majority is truly attempting to address the ‘financial penalty’ caused by energy efficiency, it is not in the public interest to address that concern with such an imprecise and unfocused mechanism that likely will cause hardship to many customers.”

“Lastly, conspicuously missing from the majority's ‘analysis’ is a consideration of the impact that decoupling will have on customers.

“Clearly, as a result of the majority's decision, customer bills will go up.”

“It appears likely that low income, fixed income and elderly customers will feel the greatest impact from decoupling and that those customers have the least ability to reduce their electricity use."

“The economic downturn has caused businesses to take extraordinary measures to address reduced earnings; however, the record is silent as to any meaningful measures that the HECO Companies have pursued or are pursuing to improve their earnings."

“In my view, before the commission approves a financial ‘bailout’ in the form of decoupling, the HECO Companies first must demonstrate meaningful efforts and initiatives undertaken to improve their earnings. In other words, the HECO Companies, just like every other business, must tighten their own belts, uncomfortable as it may be, and reduce costs.”

“Unfortunately, with their revenue requirement guaranteed under decoupling, and increasing annually, the HECO Companies have little incentive to cut expenses and to find ways to increase their earnings.”

“Instead, the majority is telling customers to pay more so that the HECO Companies can enjoy higher earnings and greater return for their shareholders. I simply don't find that course of action to be justified by the record, especially in the context of the current down economy.”

“Decoupling and the RAM are two completely separate mechanisms, intended to address very different issues.”

“Unlike the majority, I am not persuaded that the traditional regulatory model, which provides a strong, positive incentive for management to effectively control operational expenses and other costs in order to maximize earnings, is broken.”

Manybelieve that Commissioner Leslie Kondo’s apprehension came true. HECO’s revenue rose. Customers' bills went up. Risk was transferred from the utility to ratepayers. Profits rose. Payments to HEI’s top executives rose.

Public Utilities Commission Re-examined Decoupling (Round Two)

On May 31, 2014 the Public Utilities Commission issued Order No. 31289 which opened up a regulatory proceeding (Docket No. 2013-0141) to reexamine decoupling.

Should the RAM and RBA be amended or terminated? What performance metrics and performance incentives should be considered? What incentives are needed to change the HECO Companies strategic plans? What is the nature and form of performance incentives? What is the fair allocation of risks and associated costs? Should the ratemaking procedure be changed?

Blue Planet proposed the adoption of Incentive-Based Regulation (IBR) based on the Iowa model. IBR would seek to incentivize the utilization of clean energy in Hawaii.

Hawaii Solar Energy Association (HSEA) proposed Performance-Based Regulation Plus (PBR+) based on an Environmental Defense Fund model. HSEA also discussed the United Kingdom "Revenue set to deliver strong Incentives, Innovation and Outputs" (RIIO) framework.

The County of Hawai’i proposed the elimination of decoupling.

The Hawaiian Electric Companies respectfully submit that “decoupling is serving its intended purpose and should be retained at this time.” Targeted incentives and other rate redesign can better align utility performance with customers' interests and public policy. 

An incentive-based regulatory ("IBR") framework should be implemented in 2017 for some programs. Current activities should not be part of the IBR.

The Consumer Advocate advocated for incrementalism. “The Consumer Advocate does not recommend Commission action on any of the broadly conceptual IBR recommendation.” 

The “alternative regulatory frameworks” are “purely conceptual …with undefined adaptations to be developed for application in Hawaii.” Only the Consumer Advocate and HECO “have presented fully specified and immediately-actionable modifications.”

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Thursday, October 23, 2014

The battle for the future of Hawaiian Electric Company (HECO)

By Henry Curtis

Synopsis: Rooftop Solar is the leading edge of a disruptive technological wave threatening the HECO foundation. A critical struggle for the future of the utility is being waged in a complex and shrouded regulatory proceeding on decoupling. 

How should HECO re-design their business model? What role will regulators play? Will consumers win? The outcome will foreshadow future policy shifts.

Part 2: The battle for the future of Hawaiian Electric Company (HECO)

Part 3: Decoupling Hawaiian Electric Company's sales and profits

Part 4: HECO wants a stranded cost recovery mechanism

Paty 5: The Consumer Advocate favors incrementalism

Part 6: Blue Planet Foundation proposes Incentive-Based Regulation

Part 7: Hawaii Solar Energy Association proposes Performance Based Ratemaking

Last year the Hawaiian Electric Companies (HECO, MECO and HELCO) filed their Integrated Resource Planning (IRP) Reports with the Public Utilities Commission. This spring the Commission rejected the Reports. 

To replace the IRP Reports, the HECO Companies have filed an alphabet soup of Reports and Roadmaps with the Public Utilities Commission. These included the PSIP, DGIP, EIS, IDRPP and SGR&BC.

Plan, Report or Roadmap
Distributed Generation Interconnection Plan
Power Supply Improvement Plans
Smart Grid Roadmap & Business Case
Enterprise Information Systems Roadmap

Perhaps the hardest proceeding for the average lay person to understand is the decoupling docket. But that is where the action is now occurring. Few energy stakeholders expected the first skirmish to occur here.

The parties  -- including HECO -- have proposed various alternative future utility business models. Can a new business model enable the utility to survive? Will it be good for the ratepayers?

The Hawai`i energy landscape has changed dramatically over the past 15 years. 

Who in 1999 could have looked into their crystal ball and zeroed in on any of the new jigsaw pieces or guessed what the current picture would look like?

The new jigsaw pieces!

The Internet
PUC’s Data Management System
Hawaii Energy (energy efficiency utility)
Shale Oil
Energy Excelerator
Net Energy Metering (NEM)
Rooftop Solar
Renewable Portfolio Standards (RPS)
Lithium Batteries
Hawaii Clean Energy Initiative (HECI)
Tesla Giga Factory
Liquefied Natural Gas (LNG)
Micro Grids

HECO’s Power Supply Improvement Plan (PSIP) asserts that the next 16 years will be easier to predict.  

HECO’s 2030 data set included the hourly demand curves, network losses, technology readiness, fuel price forecasts, inflation rates and the cost of capital.

HECO entered data into the computer model to determine what path to take. Or perhaps they selected a path and then chose the inputs that would get them there.

HECO’s Power Supply Improvement Plan states, “The Companies considered numerous assumptions and forecasts critical to the analyses, and utilized comprehensive computer production models to analyze alternatives. As with any planning process of this magnitude, these forecasts and assumptions mayor may not be borne out.

But, uncertainty about the future cannot paralyze our planning. Therefore, the Companies made supportable assumptions in order to develop the plans. The Preferred Plans are flexible and can be adjusted based on changing conditions.

The Disruptive Wave

Does Disruptive Competition Mean a Death Spiral for Electric Utilities? (Energy Law Journal, 2014) By Elisabeth Graffy, PhD, Professor of Practice & Co-Director of Energy Policy, Law and Governance, Arizona State University; and Steven Kihm, CFA, the Director of Market Research and Policy, Energy Center of Wisconsin.

“We propose that disruptive competition signifies a synergistic wave of innovations occurring in several sectors at once—technology research and development, policy development, social and cultural preferences, scientific investigation, and business.

Disruptive competition facing electric utilities involves the entry of new ideas and actors in all of these sectors, calling into question basic assumptions in ways that can fundamentally transform market structure.

This synergistic wave, not technology alone, is what utilities experience as a threat and risk to their established business model. 

The surge in distributed solar PV installations is best understood as the leading edge of this wave, which should be expected to bring more new ideas, actors, and technological breakthroughs.”

Rooftop Solar is the first of several highly disruptive technologies hitting the utilities. 

Others include microgrids, low-cost energy storage and cell phone apps to control home energy use.

Imagine a cell phone app that tracks your real-time home or office energy use. Imagine being  able to alter energy levels from your phone. You could turn on or off any major load. You could program your house system to turn on your coffee machine ten minutes before your wake-up alarm goes off. Wasted vampire energy will disappear. Energy demand would drop precipitously.

The question should not be what will HECO’s load patterns look like in 2030 but how will customers’ be protected during the next few years. 

How can HECO, a public utility, serve that public interest? Or will someone else step in and nibble away at the HECO empire?

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Wednesday, October 22, 2014

Beyond the microgrid is the nanogrid

By Henry Curtis

Microgrids are usually thought of as collections of buildings that have some generation capacity and can exist at least temporarily while discounted from the utility grid. That is, they are islandable.

Microgrids come in a variety of flavors. The Pearl Harbor model envisions the microgrid as backup to the utility grid. The Parker Ranch model envisions the utility grid as backup to the microgrid.

Most microgrids in operation today rely on fossil fuel and are thus sometimes referred to as vintage microgrids.

 Microgrid News notes the confusion in terminology.

“Microgrids are a global phenomenon. Yet, a clear definition of what is and what is not a microgrid is still open to debate. The only government agency to define a microgrid is the U.S. Department of Energy (DOE), which identifies a microgrid as:

‘A group of interconnected loads and distributed energy resources (DER) within clearly defined electrical boundaries that act as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected and island-mode.’

Navigant Research has broadened this widely accepted definition of a microgrid to include remote systems in its analysis. Remote microgrids are networks that are not typically interconnected with any utility grid or may interconnect with a highly unreliable grid; therefore, they operate in island mode for a majority of the time. It was these remote, off-grid systems that were first called microgrids decades ago.”

Microgrids are most commonly found at military installations, schools, hospitals, fire stations and other critical infrastructure facilities.

Beyond the smart grid is the smart building.

Some commercial facilities utilize a Building Automation System (BAS); a computerized network of electronic devices which monitor and control lighting (especially emergency lighting), air conditioning, heating and other mechanical systems.

Some buildings have their own energy generators ranging from rooftop solar to basement combined heat and power systems. Some have batteries.

A Forbes Magazine article highlighted the growth in building-based nanogrids.  

“‘In many ways, nanogrids appear to be an even more radical rewiring and rethinking of the world’s energy future than microgrids,’ writes principal Navigant Research analyst Peter Asmus

‘Nanogrids mimic the innovation that is rising up from the bottom of the pyramid and capturing the imagination of growing numbers of technology vendors and investment capital, particularly in the smart building and smart transportation spaces.’”

One issue facing HECO, MECO and HELCO is whether to build a utility-scale global Smart Grid and then allow, control and micromanage the development of microgrids and nanogrids within that architecture, or to watch the development of microgrids and nanogrids and then determine a transmission overlay that can provide support for these systems.

The former approach is all about HECO’s past: control, control, control. The latter approach is all about transforming the generation and transmission utility into an energy service provider.

The risk in either approach will occur in two to ten years. Microgrids and nanogrids may be able to supply electricity at rates far below the utility rate and will therefore spin off and permanently disconnect from the utility grid.

Related to the cost risk is the reliability risk. Medium sized microgrid systems are more resilient; they can better withstand and adjust to disturbances.

If one thing goes wrong with a macrogrid, a cascading blackout can ripple across the system.

The U.S. and Brazil have been impacted by large blackouts affecting a 100 million customers while India was impacted by a mega blackout in 2012 when 600 million customers were without power.

Electric architecture companies – Siemens, ABB, GE, IBM, Navigant, Aclara and Schneider – will survive and prosper regardless of whether the focus is on nanogrids, microgrids, macrogrids, or grid interfaces.

The issue facing HECO is how to survive in turbulent times when there is no clear path ahead, when technology is rapidly changing and when the public is clamoring about high costs and the inability to interconnect to the grid.

One approach is to rip out all of the old, inefficient oil and diesel driven generators and to replace them with fast reacting, modern, smaller gas driven generators to be powered by liquefied natural gas (LNG).

An alternative is to bypass the LNG Bridge and head directly into renewable energy resources and energy storage.

Hawai`i is the leading edge of the disruptive electricity storm sweeping across the U.S. 

Maui is on the leading edge of Hawai`i. On Maui wind and solar can supply all of the power at certain times of the day. 

The traditional cost structure, reliability requirements, grid architecture and utility business models are all in play.

Ron Binz is the former chairman of the Colorado Public Utilities Commission and, more famously, President Obama’s failed nominee to lead the Federal Energy Regulatory Commission.

Binz spoke at the Maui Energy Conference last spring and is a consultant to the Blue Planet Foundation in the Decoupling Docket.

Binz noted that electric utilities are famously slow-moving, risk-averse organizations. He credits Steven Chu, U.S. Secretary of Energy (2009-13), as the origin of a joke that Binz now tells audiences.

There’s these three utility executives, and they’re wringing their hands over their future. They decide they’d better end it all. So, they decide to jump in front of a fast moving object. They jump in front of a glacier — that’s their estimate of what a fast moving object is. The glacier killed them.

Today the electric utility business is at a crossroads. The future business model is highly uncertain. Disruptive technology is the name of the game. 

Hawaii is like a boat caught in the middle of a ferocious storm. The emphasis is on surviving the next few years. 

What lies beyond the next set of waves is unknown.

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Tuesday, October 21, 2014

Public attitudes about renewable energy in Hawai‘i

By Henry Curtis

The University of Hawai‘i Center on the Family released a report on “Public attitudes about renewable energy in Hawai‘i.”  

The authors Barbara D. DeBaryshe and Ivette Rodriguez Stern commissioned SMS to conduct a poll.

The Report assesses overall feelings towards renewable energy.

Then it breaks down the support by examining specific attitudes towards the different types of renewable energy.

Not surprisingly solar is the most popular. But how does it rank compared to wind, hydro, geothermal, biomass, and nuclear?

What are the reasons that people support renewable energy? 

The leading answer supported by a quarter of those serveyed is the cost.

The Report compares the responses to national and international polls as well as comments submitted for the Hawaii Clean Energy Initiative (HCEI) Environmental Impact Statement process.

The Report offers a good glimpse into public opinion. Further polling is needed to understand in greater detail how the public views renewable energy and what shapes their opinions.

One part of the report could be misinterpreted.

Hawai‘i is well situated to take advantage of RE. It is estimated that our state could generate significant portions of current electricity needs from offshore wind power (22%), rooftop photovoltaic panels (49%), and geothermal power (71%). In fact, the potential capacity combined across multiple RE sources exceeds current levels of electricity use.”

Offshore wind has a unique Hawaii interpretation. It refers to wind turbines built on one island that will produce electricity for consumption on another island via a future undersea cable. More specifically it refers to a particular Maui project accompanied with a future Maui County-Oahu cable. 

If wind turbines were built everywhere Maui County they could supply more than 25% of the electricity consumed within the State. Furthermore, the Waikoloa-Kohala area of the Big Island has more land-based wind resources that all other land areas in Hawaii combined.

The other misleading reference is to geothermal. The original source is from a U.S. Geological Survey (USGS) study conducted in 2008 that examined only one site in Hawaii (Puna) and estimated that the “undiscovered potential” was four times greater than the known resource. No cable was contemplated.

In Hawaii, we apply only those calibrated logistic regression models for magmatic geothermal systems and estimate the mean undiscovered potential at 2435 MWe, with 95% and 5% confidence intervals of 822 MWe and 5438 MWe.” 

Survey Methodology

The random phone survey included land lines and cell phones. 

“The respondent had to be at least 18 years of age, a Hawaii resident, and a household member if the number was a land line. The sample was designed to be representative at the county level, but we did not have the resources to be representative of each island.  

We did over sample on the Hamakua coast, with the original intention of comparing that region to the rest of the big island on other items not related to renewable energy.”

“The final sample included 1,214 adults, with 171 to 702 respondents per county (largest number on the Big Island). The final sampling errors at the county level were larger than is typically desired, but the state-wide sampling error was only 2.9 points. 

In the energy report, we focused on state-wide figures as they were quite reliable. The comparisons we did at the county level were done with weighted data that took the larger sampling error into account.”

List of Survey Questions

A total of 16 questions were asked. After the initial questions the order was varied. Most of the questions had standardized answers (yes, no, not sure, don’t know, refused). A few were open-ended.

Would you say you support or oppose developing more renewable energy sources for the State of Hawaii?

Do you strongly support it, or just support it?

Do you strongly oppose it, or just oppose it?

Why do you say that?

What are the biggest problems with renewable energy for Hawaii?

What are the most important benefits of renewable energy for Hawaii?

What is the most important issue to you when considering how you feel about renewable energy?

What about wind power or windmills?  Do you think that would be good for Hawaii?

What about photovoltaic energy or solar panels?  Do you think they would be good for Hawaii?

What about municipal solid waste combustion, burning garbage, to produce electricity?  Do you think that would be good for Hawaii?

What about hydroelectric power or water power?  Do you think that would be good for Hawaii?

What about biomass power or burning plant matter to make electricity?  Do you think that would be good for Hawaii?

What about geothermal energy, using volcanic heat to make electricity?  Do you think that would be good for Hawaii?

What about burning coal to make electricity?  Do you think that would be good for Hawaii?

What about burning oil to make electricity?  Do you think that would be good for Hawaii?

What about using nuclear power to make electricity?  Do you think that would be good for Hawaii?

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Monday, October 20, 2014

We Demand Change But Won’t Tolerate Sunshine or Dissent

By Henry Curtis

A number of energy plans have been proposed for Hawai`i. Will any given plan allow for community input? Will suggestions be listened to? Will the community be thanked and ignored? Will options and alternatives be considered? These are important questions.

 “Abercrombie is not getting enough credit for the progress that has been made, and it’s on the strength of that effort — and the promise of further advances — that the Honolulu Star-Advertiser endorses him for the Democratic nomination to a second term.” (July 27, 2014

The Governor through his appointments of the DBEDT Director and the State Energy Office administrator, has guided Hawai`i energy policies down a particular path.

On Sunday the Honolulu Star Advertiser ran an editorial “Core changes needed at HEI.”

The state Department of Business, Economic Development and Tourism concluded that the Hawaiian Electric Industries (HEI) Power Supply Improvement Plans fail to show ‘the strategic focus needed to advance the state's energy policies.’ …As the state DBEDT observed, this seems to be the strategic planning of a company more interested in covering its bases.”

The Governor’s Energy Plan appears on the DBEDT Energy Office web site:

The State has established five guiding directives to help ensure whether particular actions or proposals are consistent with the State's energy policy:

(1) developing a diversified energy portfolio that maximizes renewable generation;

(2) building interconnected, modernized grids;

(3) effectively balancing technical, economic, environmental, and cultural considerations;

(4) being a "trail blazer" with regard to energy innovation; and

(5) supporting market-led investments and pricing structures that align with the State's energy policy and economic goals.”

Point four includes the phrase "balancing technical, economic, environmental, and cultural considerations" is outside of DBEDT's kuleana.

"It shall be the objective of the department of business, economic development, and tourism to make broad policy determinations with respect to economic development in the State." (HRS §201-2)

"Specific research and promotional functions of the department.  Without prejudice to its general functions and duties, the department of business, economic development, and tourism shall have specific functions in the following areas: (1)  Industrial development. ...Land development. ...Credit development. ...Promotion." (HRS §201-3)  

The Star Advertiser asserted that one problem with the HECO Plan is that it is not in alignment with Governor’s Plan  --- which will remain official state policy for the next eight weeks.

There are many paths towards the future. Some are fuzzy while others are more distinct. Some are flexible and others are rigid. Each has promises and risks. Each plan have a variety of impacts: some known, some unknown and some known to insiders but intentionally hidden. Each path creates a different set of winners and losers.

HECO’s 2013 Integrated Resource Planning (IRP) Report, HECO's 2014 Power Supply Improvement Plans (PSIPs) and HECO's 2014 Distributed Generation Interconnection Plan leave a great deal to be desired.

But for all of their weakness, the HECO plans are significantly stronger than Governor’s plan.

The current 2014 HECO plan and the DBEDT plan were both developed in dark rooms without community input. Both plans promote a particular vision. Both plans are based on a combination of facts, and sets of reasonable assumptions and questionable assumptions.

Both plans rely on confidential documents that are not reviewable by the public.

But the HECO Plans are superior for several reasons. The HECO’s plans were more fully developed.   The HECO’s IRP Report was developed over a year-long period. The Final Report was filed with the Public Utilities Commission in June 2013. 

To analyze the HECO Companies IRP process, the Public Utilities Commission established a five-island advisory group with dozens of members. They met for day-long meetings on more than a dozen occasions.  The advisory group analyzed the HECO, MECO and HELCO IRP filings and processes. They asked questions and got answers.

The Public Utilities Commission invited the public to comment on HECO’s current 2014 Power Supply Improvement Plans and HECO's 2014 Distributed Generation Interconnection Plan. Hundreds of comments have flooded in. The comments are still arriving.

HECO’s plans are highly visible and have been and are being subjected to intense analysis. The underlying data, assumptions and models have been attacked and defended; some proposals have been modified.

By contrast, DBEDT has not presented their convoluted plans to the Public Utilities Commission for review nor encouraged public scrutiny.

The DBEDT Plan is justified by self-serving confidential reports that have highly questionable assumptions that defy logic.  

The DBEDT Plan covers many issues, one of them being inter-island connectivity. DBEDT asserts that Neighbor Islands should power O`ahu. 

DBEDT opines that the Maui-Oahu cable, unlike every other undersea cable in the world, will absolutely never fail. This bizarre statement has led to the manufacturing of false analysis. 

DBEDT has been unwilling to engage in a meaningful and honest discussion on the true cost, reliability and environmental impacts of inter-island connectivity.

The DBEDT attack against HECO, supported by the Star Advertiser editorial board, is an attack against HECO's Plans, not because the HECO plans are weak, which they are, but because they are different from the DBEDT Plans, which happen to be weaker. 

DBEDT will undergo fundamental change in eight weeks. The new Governor will establish his own policies for moving forward and will appoint new DBEDT leadership to focus on that new strategy.

DBEDT should not become the Public Energy Development Corporation (PEDC). 

Energy policy development requires open discussion, true analysis and consensus. 

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Hawai`i Ethics Commission

Sunday, October 19, 2014

The County of Hawai`i sees a bright innovative energy future

By Henry Curtis

Four days after the Hawaii Clean Energy Initiative (HCEI) Energy Agreement was signed on October 20, 2008, the Public Utilities Commission opened a regulatory proceeding to examine decoupling.

Traditional, utilities and regulators guesstimate the anticipated costs and kilowatt-hours of electricity that will be sold in the upcoming cycle. Then a rate per kilowatt-hour is established that will allow the utility to recover its costs and have the opportunity to make a reasonable profit.

After receiving regulatory approval the utility adjusts its plan to increase its profits. The utility gains if customers increase the amount of electricity they buy. The increase can occur due to weather conditions or intentional utility actions.

Decoupling supposedly breaks that process by separating revenue from sales. A change in sales results in an automatic adjustment in rates such that the total revenue collected remains the same.

Thus the utility may encourage widespread use of rooftop solar and energy efficiency, knowing that the resulting decrease in sales will not affect their revenue stream.

Thus decoupling eliminates the disincentive to fight renewables and efficiencies, but it does not incentivize the desire to promote the use of renewables and efficiencies.

In May 2013 the Public Utilities Commission decided to open a docket to reexamine the decoupling mechanisms for HECO, MECO and HELCO.

The Public Utilities Commission admitted four intervenors into Docket 2013-0141: the County of Hawaii (COH), Hawaii Solar Energy Association (HSEA), Blue Planet Foundation, and the Hawaii Renewable Energy Alliance (HREA).

The proceeding are complex and the filings lengthy. 

On July 2, 2014 HECO filed responses to various discovery questions. The filing included a total of 28 documents varying from 350 pages to over 600 pages each.

An Evidentiary Hearing will be held. 

A Pre-Hearing Conference has been scheduled for October 23 at 9:30 a.m. in the Commission Hearing Room located in the basement at 465 King Street.

The PUC building is the makai eva corner of Punchbowl and King, the other three corners are the Public Library, City Hall and Kawaiaha'o Church.

The Evidentiary Hearing will be held on October 28 and 29 and possibly extend to October 30. For the most part the hearings are open to the public although attendance by outsiders is rare.

Discussions on alternative utility business models are actively being discussed in many venues including within the decoupling docket.

Blue Planet proposed the adoption of Incentive-Based Regulation (IBR) which seeks to incentivize the utilization of clean energy in Hawaii.

Blue Planet hired Ronald Binz as a consultant.

Binz served as Colorado’s advocate for energy consumers, sat on Colorado’s Utilities Commission from 2007 to 2011, was nominated by President Obama to serve on the Federal Energy Regulatory Commission, He had to withdraw his nomination due to his anti-coal efforts.

Binz is now affiliated with a Colorado renewable energy institute headed by former Democratic Gov. Bill Ritter.

Last March Binz spoke at the Maui Energy Conference and it was clear that the Hawai`i Commissioners hold him in high regard.

The Hawaii Solar Energy Association hired EarthJustice and consultant Diane Munns.

In January Munns joined the Environmental Defense Fund as senior director of the group’s Smart Power Collaboration.

Munns had been MidAmerican Energy Co.’s vice president of regulatory relations and energy efficiency since 2008. She served the Iowa Utilities Board for more than two decades, first as the agency’s general counsel and later as a chairwoman and member.

In regulatory proceedings it is important to be strong on issues but not to attack people. Diversity of issues is key, as it leads to better decision making. Thinking outside of the box should be encouraged.

In filings made on September 15, 2014, the County of Hawai`i, the Hawaii Solar Energy Association and the Blue Planet Foundation all presented different business models for a utility of the future.

The County of Hawai`i noted that “the island of Hawai'i already exceeded the 2030 RPS objectives for renewable energy penetration at the time the HCEI was adopted, in 2008. Decoupling was not necessary and was completely irrelevant to achieve high levels of renewable energy on the island of Hawai'i.”

Furthermore, “Market forces that fundamentally disrupt the traditional regulated utility model are here to stay in the state of Hawai'i. …These market dynamics cannot be stopped.”

The County of Hawai’i proposed the elimination of decoupling.

“In a perverse sense, one could argue that decoupling leads to greater energy efficiency, since decoupling leads to higher so-called "death spiral" prices, which in turn force increasingly desperate customers to seek efficiency measures, or necessarily cut back to minimize their utility bill pain.”

“Decoupling contributes to deleterious dynamics that threaten a tidal wave catastrophe for utilities that do not adapt—a tidal wave that will likely swamp the credit rating concerns expressed by the utilities in trying to justify decoupling as a benefit in financial markets.“

“There should be absolute clarity that there is no value in backward looking exercises to preserve prior policies and business models that are increasingly unviable, including …decoupling."

"Energy alternatives already exist that deliver more favorable benefits and economics to the HECO companies' customers, as evidenced by the explosive growth in partial grid defections (aided by technology options and subsidized by net-energy-metering policies) and increasingly complete withdrawal from the grid, whether individually or through community-planned micro-grids (one example being Parker Ranch-Paniolo Power on the island of Hawai'i).”

The County of Hawai`i listed several examples of Big Island innovation.

Blue Planet Foundation Founder Henk Rogers installed an 85 kW photovoltaic array at his Pu'u Wa'awa'a Ranch. His ranch currently requires 30 kW to operate, so excess electricity is being used to generate hydrogen for use in hydrogen fuel cell vehicles.

In the same spirit, COH installed a 250 kW photovoltaic array at its new West Hawai'i Civic Center, although 150 kW load was the total daily peak demand. The excess energy is being absorbed by a lithium-ion battery for use at night and a future electric car fleet.

Richard Ha, president of Hamakua Springs Country Farms will produce electricity from a 74-kW hydroelectric generator that uses water from a flume that was part of a former sugar mill. Half of the energy produced will power the farm, the rest could be converted to hydrogen fuel.

Edmund C. Olson is installing a 400 kW hydroelectric generator in Pahala to provide power for the nearby Ka'u Coffee Mill and macadamia nut husking operation. Excess energy can be used for other commercial and residential uses and for fuel.

 “Inappropriate pricing schemes attempt to recover fixed costs through volume sales, obfuscate pricing transparency and accuracy, hinder innovation, prevent consumer choice, limit utility profitability, and create problems that decoupling attempts to address but are better solved through proper pricing.”

The County of Hawai’i proposed the elimination of other “price-distorting policies” such as Net Energy Metering, “avoided cost contracts, improperly priced feed-in-tariffs, and ineffectual energy efficiency programs.”

The future will have microgrids and nanogrids (smart buildings).

The County of Hawai’i asserts that rather than limit energy production through conservation -- excess renewable energy should be encouraged -- as this will drive innovation, economic expansion, job creation and provide for renewable fuel to power the conversion of transportation to a renewable sustainable future.

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