Hawaii Passes the Point of No Return on Distributed Generation

Source: Greentech Media

When Hawaiian Electric Company submitted its integrated resource plan on April 29, it was the last straw for regulators.

Shortly after HECO’s inadequate plan was released, the Public Utilities Commission issued four regulatory orders and a white paper outlining how HECO should evolve.

“Throughout the country, there’s a keen awareness that energy systems are changing,” said PUC chair Hermina Morita at a press conference announcing the orders. “In Hawaii, this is not an abstract concept. With a high penetration of renewables on our electric system, high energy costs, changing customer expectations and evolving technologies, we are at the bleeding edge of this energy transformation.”

The PUC was backed up by Governor Neil Abercrombie, who appeared at the press conference with regulators. “Today we are going to turn the corner on the energy transformation. There’s no turning back. This is the most significant day for Hawaii and its energy future that we have ever had. The time for talk has ended; the time for action is upon us. The energy Rubicon has been crossed.”

The first of the four orders rejected HECO’s integrated resource plan and launched a set of proceedings on determining the components of a strategy. The commission didn’t spare the rod, citing a “fundamentally flawed” analytical approach, “inappropriate and inadequate modeling tools,” failure “to address many principal planning issues explicitly articulated and required by Commission,” lack of context, and “excessively ambiguous” action plans.

At the same time, the PUC opened new dockets to explore all the elements of the plan, including proceedings on demand response, distributed generation, and inter-island cables. A compliance roadmap for the renewable portfolio standard is being prepared by General Electric under contract with Hawaii Natural Energy Institute to assess technical feasibility and costs. Hawaiian law requires utilities to meet get 70 percent of their supply from clean energy by 2030, with 40 percent from renewable energy and 30 percent from energy efficiency.

The PUC white paper, Commission’s Inclinations on the Future of Hawaii’s Electric Utilities (PDF), was issued because HECO “failed to articulate a sustainable business model” in the past year after the PUC requested a new course of action.

“Some mainland utilities have begun to articulate a vision for the ‘electric utility of the future,’” the paper states. Without a vision from HECO, “it is difficult to ascertain whether HECO’s increasing capital investments are strategic investments or just a series of unrelated capital projects to expand utility rate base and increase profits.”

Instead, the white paper lays out a vision for ratemaking, customer engagement and regulatory needs to embrace a distributed energy system.

“Hawaii has already entered a new paradigm where the best path to lower electricity costs includes an aggressive pursuit of new clean energy sources. [...] Utilities need to move with urgency to modernize the generation system on each island grid, as delays are lost savings opportunities,” wrote the PUC.

Three other regulatory orders were released at the same time.

The first calls for HECO to file a Distributed Generation Interconnection Plan (DGIP) within 120 days, to implement a distribution circuit monitoring program, and establish a more transparent interconnection queue.

HECO must also submit a Power Supply Improvement Plan to “expeditiously retire older, less-efficient fossil generation, reduce must-run generation, increase generation flexibility, and adopt new technologies such as demand response and energy storage for ancillary services and institute operational practice changes.”

That was supported by the Reliability Standards Working Group, a group of stakeholders facilitated by consultant Alison Silverstein who have been meeting to work out ways to integrate utility-scale and distributed renewables. The group’s recommendations were appended to the order, with many measures adopted by the commission.

In the order, the PUC acknowledged that “DG interconnection technical challenges are real,” especially when net metering customers export their excess solar energy onto the grid in a way that may not match demand.

The working group called it “unrealistic” that the rapid growth of PV “can be sustained in the same technical, economic and policy manner in which it occurred, particularly when electric energy usage is declining, distribution circuit penetration levels are increasing, system-level challenges are emerging and grid fixed costs are increasingly being shifted to non-solar PV customers.”

The second order gave guidance on demand response (DR), and required the HECO companies to develop a consolidated portfolio. HECO must also research how DR can be used to help in renewables integration and investigate third-party delivery of demand reduction services.

“There are a lot of good pilots on demand response,” said Commissioner Lorraine Akiba in an interview with Greentech Media. “But we need to implement them in an integrated, system-wide way.”

In the order, the PUC outlines “a growing role for non-utility energy service providers that can intermediate the relationship between the utility and the customer” by aggregating distributed resources into virtual power plants.

The final order was directed at Maui Electric Company (MECO), one of the HECO companies. MECO had been curtailing 28 percent of the output from three wind farms in deference to its own, more expensive, oil-fired generation. This was wasting almost 16 gigawatt-hours of power a year — a number expected to rise to more than 54 gigawatt-hours. Pushed by the commission, MECO cut curtailment to 8 percent, and expects to get it as low as 2 percent.

This was not good enough for the PUC, however. “In general, what is lacking is the vision of MECO as ‘a utility of the future,’” the order reads. “There are many pilot projects, studies and plans…[but] no specific corporate strategy designed to ultimately achieve that vision.”

Even if Hawaiian power providers aren’t ready to embrace distributed generation, regulators clearly are.

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