After two years in the works, Hawaii’s Integrated Grid Planning (IGP) proceeding, a first-of-its-kind effort to integrate distributed energy resources as part of utility Hawaiian Electric’s distribution grid, has run into a bit of controversy.
Last week, the three members of the Hawaii Public Utilities Commission sent utility Hawaiian Electric a sternly worded letter (PDF), saying that they were “concerned” about its near-term IGP plans. And at an IGP working group meeting soon afterward, stakeholders got the unusual spectacle of two of three PUC commissioners, including Chairman Jay Griffin, visiting to question HECO representatives in person about recent developments.
The PUC’s letter laid out two areas of concern. First, it wrote, HECO’s “IGP Soft Launch,” the pilot project to allow DERs to stand in for distribution grid investments, has been “significantly delayed.” In the meeting, HECO confirmed that it has in fact pushed the deadline for presenting its soft launch plans from May to September, and plans to have the final request for proposals ready by the first quarter of 2020, rather than by the end of 2019.
The PUC’s second, and more significant, concern is the possibility that HECO “may be prematurely excluding non-wires alternative (NWA) opportunities” from its plans. Specifically, HECO’s current soft launch proposal (PDF) calls for procuring only about 3.5 megawatts of front-of- and behind-the-meter storage, solar-plus-storage and aggregated demand response near the fast-growing west Oahu community of Kapolei, to be available by 2022 to avoid building a $2.8 million, 1-mile underground circuit and substation upgrade there.
But according to the PUC’s letter, this proposal fails to include the even greater potential for NWAs in the even faster-growing community of Ho’opili to the east. This mega-development by builder D.R. Horton, which broke ground in 2016 and started selling homes from its first phase this year, includes plans for 11,750 homes by 2025 — at least 30 percent of them affordable to low- to moderate-income Hawaiians — as well as up to 3 million square feet of commercial real estate and five schools.
That’s going to be a massive new load for HECO to serve, requiring multiple new substations and circuits over the coming years, at an estimated cost of tens of millions of dollars. But according to the PUC’s letter, HECO “appear[s] to be delaying consideration of NWAs for the Ho'opili development until 2025,” or at the very least, excluding them from its current soft launch plans.
According to Colton Ching, HECO’s senior vice president of planning and technology, the utility hasn’t made any final decisions on its grid build-out for Ho’opili, including what role that DERs will play. Instead, he said in an interview this week, HECO left it out of its soft launch primarily because “there are no existing customers. The homes are still being built. How do you subscribe homes to have PV and battery systems installed if the homes aren’t even built yet?”
This observation highlights one of the biggest challenges in a grid planning process like IGP: dealing with the chicken-or-egg problem of just how many solar panels, smart thermostats, grid-responsive water heaters, behind-the-meter batteries, and/or plug-in electric vehicles will eventually populate the grid edge that HECO is trying to design.
In the case of a greenfield development like Ho’opili, the same uncertainty that makes procuring DERs in lieu of traditional grid investment challenging can also represent an opportunity to bake DERs into the process before it starts.
In fact, that’s one of the core concepts behind the IGP when it was launched two years ago.
From grand vision to real-world details
In simple terms, IGP is HECO’s attempt at combining two separate realms of grid planning. The first is the systemwide generation and transmission-scale integrated resource plan process used by many large U.S. utilities. The second is more novel: integrating DERs into distribution grid planning and procurement, similar to efforts like California’s Distribution Resources Plan proceeding, or New York’s Reforming the Energy Vision initiative.
But Hawaii’s island grids lack the separation between transmission and distribution systems common on the mainland, and there is far more interdependence between the two, Ching said.
The IGP process is HECO’s attempt to merge the two. "To the best of our knowledge, no other utility has done something like this, covering generation, transmission, distribution and distributed energy resources, all on an integrated basis,” he added.
As for the DER-distribution grid integration efforts in other states, “on the mainland, we were seeing places like New York and California look at distributed resources and try to identify a standard value on the distribution system that you would give to a DER when performing a certain way,” Ching said. “But the challenge we saw for that approach, with our isolated, small grid system, is that there really is no one real value — and it changes tremendously by location.”
The soft launch is to be its first real-world test of this IGP vision, he said. “We felt that doing a procurement for that was the right approach. We want to say to solar developers, aggregators [and] technology providers, please give us a proposal to have DERs deployed here, sign up customers, in a specific way and size and time frame, so you can be a substitute for a distribution upgrade.”
HECO chose Kapolei as its soft launch test site for several reasons, he said. First, “the needs for distribution were significantly less,” about one-fifth to one-tenth the eventual size of Ho’opili, “which we thought offered a better opportunity for non-wires alternatives. We want to learn from this without spending too much money, or perhaps not meeting the need.”
But beyond that, the fact that most of Ho’opili hasn’t been built yet — and that much of the design of the remaining development is still in flux — makes it hard to put together an analysis of how NWAs could play a role, he said. Right now, the earliest phases of Ho’opili are being served by the same Kapolei substation targeted for HECO’s soft launch, he said, adding, "If we don’t build a substation to serve those remaining phases, these homes would be without electric service.”
HECO will “look for opportunities for NWAs to minimize the size and cost of the substations we will have to build at Ho’opili. That’s part of the conversation we had last week,” Ching said. But this will involve additional discussions about “minimizing and optimizing the cost of the grid-connected community.”
DER providers and environmental groups involved in the IGP proceeding have also expressed concerns that failing to open the Ho’opili planning process to NWAs early on could lock in traditional utility infrastructure.
In that light, the commission’s letter “is trying to signal as hard as they can: Do not come to us with a substation request if you haven’t considered an NWA first,” Robert Harris, director of public policy at Sunrun and vice president of IGP participant Hawaii PV Coalition, said in an interview this week.
PUC, stakeholders challenge HECO to expand its effort
One of the biggest challenges is the fact that D.R. Horton has its own imperatives to deal with at Ho’opili — primarily, delivering affordable homes while making a profit.
“These homes are targeted toward the first-time homebuyer. They’re very price-sensitive. So the developer is very reluctant to do anything that would impact the price,” Ching said. “Conceptually, they’re open to things. But they don’t have a lot of capacity within their pricing to put in an energy storage system, to put in a solar system.”
But as Harris noted, D.R. Horton is also in the midst of reviewing its energy infrastructure plans for Ho’opili. First, it’s adjusting to recent court decisions around the state’s requirement that all new homes use solar water heating. Because the law allows some exemptions, many of the development’s first round of homes were built with tankless propane-fired water heaters instead.
But a February court decision has temporarily halted the granting of new exemptions. That means that D.R. Horton is now facing the need to put solar water heaters in its remaining homes — or perhaps to consider the option of PV-powered electric water heating to meet the requirement, he said.
Beyond that, groups involved in the IGP process are concerned that HECO has taken too passive an approach to its DER forecast for Ho’opili. Kylie Wager Cruz, senior associate attorney for environmental group Earthjustice, wrote in an email this week that “various stakeholders have also expressed concerns about HECO’s projections for load growth at Ho‘opili and their failure to, at the front end, account for DERs, including PV systems and efficiency measures.”
As Harris noted, Hawaii has seen a significant decline in residential rooftop solar since it ended solar net metering in 2015 and replaced it with more complex Smart Export and Customer Grid Supply Plus tariffs. This has led to a relatively low forecast for the PV and accompanying energy storage systems expected to be installed in Ho’opili.
“It’s assuming that DERs simply happen, versus looking at where they can leverage their capabilities where the grid needs it the most,” he said. But the whole intent of the IGP was to shift from this “one-way” type of forecast to a “two-way” process in which "you would look at your various needs circuit by circuit, and say, 'Can we solve this through DER adoption, on this circuit-by-circuit basis?'”
At last week’s meeting, PUC Chairman Jay Griffin expressed similar views, noting that HECO has historically overestimated load growth and underestimated DER potential in new developments like Ho‘opili. Failing to consider NWAs for the new development represents a lost learning opportunity, given that HECO will face similar large-scale housing developments in years to come, he said.
Ho’opili also offers HECO, D.R. Horton and third-party DER providers an opportunity to explore mechanisms beyond megawatt-scale procurements like those proposed for Kapolei, Harris noted. For example, in California, Sunrun and other groups have proposed various DER tariffs that could reward customers for generating, consuming, storing and discharging energy at different times of the day, in order to drive investment in the combination of DERs required to meet local energy, capacity and reliability needs.
HECO is certainly under pressure to consider a range of alternatives for Ho'opili. In its letter last week, the PUC noted that it has already warned the utility to consider NWAs for all new distribution grid upgrades, after reluctantly approving a traditional substation to serve a new transit center in Ka'aahi (PDF), in the same fast-growing area that houses Ho'opili.
In that May order, the PUC wrote that it "may dismiss future applications" from the utility "if HECO continues to disregard standing commission directives to analyze the locational benefits of customer-sited distributed energy resources," as well as potentially "consider[ing] further action as authorized by law."