In 2009, Hawaii set an ambitious goal of reaching 40 percent renewable energy by 2030. Policymakers also set a goal of becoming 30 percent more efficient in the same time frame. This was a reach at the time, because over 95 percent of Hawaii’s electricity then came from diesel-fired power plants.
Astoundingly, five years later, that 40 percent goal now looks far less ambitious due to two major intersecting trends: a tremendous reduction in the cost of renewable energy like solar power and wind power, and a pronounced and sustained increase in the cost of diesel.
However, Hawaii’s one private-sector utility, Hawaii Electric Industries, Inc. (HEI), has been less than cooperative. The Hawaii PUC, with the support of Governor Neil Abercrombie, issued four very significant orders in late April that directed HEI to do far more.
Gov. Abercrombie, in announcing the new PUC orders, stated that “central to this administration and my philosophy in office [is] the transformation of energy.” He added that “there is no turning back” on this transformation of Hawaii’s energy system. This was a remarkable display of resolve by the governor and his commissioners. The speechifying is worth watching.
In light of this goal of transformation, it seems that the Hawaii PUC and Gov. Abercrombie should set a new target, with real teeth, rather than simply waiting for the utilities to come up with their own targets, as the current orders require. There's still sixteen years between now and 2030, so if any new goal that is created turns out to be unrealistic, there is plenty of time to make adjustments. The risk, it seems, given recent history, is on the side of not being ambitious enough.
I’ve been urging various policymakers and companies to create not only a higher state-wide renewable energy standard (RES), but also a Big Island-specific goal of becoming 100 percent renewable by 2030. The Big Island is the second largest grid in Hawaii, and it is also the biggest island (hence the name). In fact, the Big Island is twice as big as all the other islands combined. So there is plenty of space available for solar, wind, biomass, geothermal and even hydroelectric facilities.
I own a small home on the Big Island near Hilo, and I live there part time, so I have some interest in seeing the Big Island take the lead on energy. There is nothing in our way except a lack of imagination. The tools are available, and all that is needed is vision on the part of our political and policy leaders. The governor and the Hawaii PUC have made huge strides in the right direction with the set of recent orders. I urge the PUC and the governor to take one additional large step and work to pass legislation for a higher renewable standard for 2030, which includes a 100 percent RES for the Big Island. This consideration is part of the new process ordered by the PUC, but I urge the PUC and the governor to be proactive in calling for a specific number for a new RES, rather than letting the utilities specify their own number first.
How would Hawaii best achieve these new goals?
The most reliable tool for achieving higher RES targets is the feed-in tariff. Feed-in tariffs around the world have unleashed the renewable energy markets and produced large amounts of new power generation rapidly and often cost-effectively. The very first feed-in tariff in the world was right here in the U.S., and it was part of the Public Utilities Regulatory Policy Act (PURPA). This law required utilities to offer standard contracts for renewable energy projects of up to 80 megawatts at set rates. The price offered was the “avoided cost” of equivalent fossil-fuel power generation. By requiring payments at the avoided cost and no higher, the original American feed-in tariff was, by definition, cost-effective. This means that ratepayers never paid a cent higher than the projected cost of power from fossil fuel resources.
The avoided cost in Hawaii is well over 20 cents per kilowatt-hour, providing a massive incentive to bring renewable energy projects on-line that can provide power at less than this cost. And this cost is going up -- way up -- in the future, due to continuously rising diesel costs.
Hawaii already has a feed-in tariff in place, but it’s quite modest and has been beset by problems since its inception. Very few projects have successfully come on-line under this program. The feed-in tariff could and should be expanded, and its current problems fixed. A proceeding is under way now to do just this, but by most accounts any expansion being considered at this time is unlikely to be very substantial.
A recent major report commissioned by the Hawaii PUC found that feed-in tariffs are highly cost-effective already, even with the cost-based pricing included in the existing feed-in tariff. The report concluded that “all the FIT rates represent a net value to the system” except for one rate provided for concentrating solar power systems. In other words, all rates for solar PV, even for smaller systems, and for wind and biomass, present a net value to ratepayers.
Good FIT policies are designed to “degress” (decrease) regularly, incentivizing projects to come on-line quickly and saving ratepayers money as the rates paid for FIT projects decline on a planned schedule. Hawaii’s expanded FIT should include regular and transparent degression schedules.
The same PUC report found that diesel generation electricity costs are only going up. For Oahu, avoided costs are projected to rise to 40 cents per kilowatt-hour by 2030. On the Big Island, costs are projected to go to rise to “only” 31 cents per kilowatt-hour by 2030. Solar and wind power contracts can provide long-term, clean and reliable power today at well under 20 cents per kilowatt-hour, demonstrating the possible savings for ratepayers by going big on renewables. Moreover, by entering into long-term FIT contracts, Hawaii’s ratepayers are protected against rate increases as well as fuel price volatility from fossil-fuel-fired power plants.
The HPUC, governor’s office and utilities have already agreed that feed-in tariffs make sense, officially stating their joint support for feed-in tariffs in the historic 2008 Hawaii Clean Energy Agreement.
In sum, Hawaii could and should enact a larger and more robust feed-in tariff to achieve the transformation of its power system that policymakers are seeking. A new feed-in tariff should also include transparent and streamlined interconnection rules for wholesale generation, because obtaining a sales contract is only half the battle. If FIT projects can’t easily interconnect to the grid, they may not ever be built.
Hawaii is already leading the way as a living laboratory for high penetration of renewables. But Hawaii can do even more due to its tremendous wealth of renewable energy resources -- all while saving ratepayers a lot of money.