In 2015 approximately 70% of Hawaii’s electricity was generated by petroleum, a practice both economically and environmentally profligate. That same year the state passed HB 623, codifying renewable electricity targets of 40% by 2030 and 100% by 2045 (The state also has plans to achieve carbon neutrality by 2045). The gulf between Hawaii’s present and its future aspirations looms like an unbridgeable abyss. Building this bridge, however, lies squarely in the domain of the state’s electric utilities. For Hawaiian Electric Companies, and other electric utilities in similar predicaments, forging a path to 100% renewables acts as both mission impossible and their bid for continued relevance in a sector undergoing rapid transformation. Cost-effectively engineering a renewables-only electrical grid is an urgent global priority, while questions of feasibility remain a point of fervid contention. For a proper reading of our decarbonization tea leaves, we can consult filings from the Hawaii’s Electric Companies planning process.
Electric utilities operate under state oversight, and as such they can be held to account for mandates coming out of state legislatures. In times of federal climate inaction, utilities are pioneering the low-carbon transition in parallel to rapid technological and economic shifts in the electricity sector. In Hawaii, this grid pioneering is especially necessary, as the state is home to the nation’s first and only 100% renewable electricity target. This momentum behind fuel-free renewables (and their zero marginal cost of production) is partly driven by the states extraordinarily high and volatile electricity prices, a consequence of long-standing dependence on foreign oil.
In Hawaii, vertically integrated utilities oversee the electricity value chain from resource procurement, through high-voltage transmission lines, and down an electric distribution system that reaches the end user (Roberts). As such, the entirety of the Hawaiian grid lies under the careful control of the Hawaiian Electric Companies. These Hawaiian Electric Companies encompasses three utilities: Hawaiian Electric and subsidiaries Maui Electric and Hawaiian Electric and Light. The companies are required to file short and long-term planning documents to the Public Utilities Commission, made publically available by law. In March of 2018, the Hawaiian Electric Companies integrated resource planning document was approved by regulators from the Public Utility Commission. This integrated grid planning document develops a new conceptual framework to guide future planning- with a stated goal “to identify and enable the optimal mix of distributed energy resources (such as customer-generated rooftop solar PV, Demand Response, and grid-scale resources) through a flexible moden grid platform that enables the convergence of energy, technology, and customer value”.
Integrated Grid Planning (IGP): Robust Stakeholder Engagement
One major pressure on the utility business model is increased participation of distributed energy resources (DERs) at the grids edge (Roberts). In recent past, Hawaii’s electricity flowed from 15 centralized power plants to end users. Now, both electricity and information flow bidirectionally between end users and grid operators through DERs. Some, like grid-interconnected rooftop panels, feed variable electricity flows onto aging distribution wires, thereby posing the risk to overwhelm the grid during hours of peak incident solar radiation. The popularity of DERs vastly increases need for participatory processes in planning. As such, the utility’s grid planning progress began with a robust public outreach and targeted stakeholder engagement.
Public involvement is especially critical in pursuit of energy justice in transition. Hawaii has the most expensive electricity in the nation, and an accelerated capital investment in clean power may increase near term prices . Furthermore, equity issues arise when a subset of the population, generally wealthier individuals and homeowners, are most able to invest energy technologies like batteries, solar panels, electric vehicles, and smart thermostats. While technologies can reduce energy bills for adopters, the costs of adapting the grid to increased DER penetration falls to a decreasing pool of customers.
Involvement processes found broad support for Hawaii’s clean energy goals. In response to stakeholder engagement, the utility reified its commitment to storm resiliency and emphasized the importance of affordability. With resiliency and affordability in mind, the utility should go further to maximize distributional gains and DER uptake going forward. The utility could issue rebates for low income customers within their service territory, setting aside community solar shares for low income customers, or appropriating funds for pro-bono retrofits /PV and storage installation on public housing.
Integrated Grid Planning: Market-Based Planning
In other states, such as New York, utilities are looking to derive a priori prices for compensating the value of distributed energy resources. Hawaii hopes to skip this step altogether. Instead the state is using an emerging practice “market- based procurement”, to source prices for cost analysis in the planning stage. This means that the utility hopes to identify a resource need, and then ask that suppliers (i.e. wind farm) and service providers (i.e. aggregated demand response) to offer their proposals during the planning phase. This market-based process intends to accelerate the planning process and reduce complexity for bidders and financiers. The poses a trade-off for more long-term planning , as there is an expiration date on these price imposed by fickle federal tax incentives and accelerating economic cost declines.
In Parallel to IGP: Grid Modernization
Grid modernization is the process of updating a post-war transmission and distribution system to meet the needs of a distributed energy future. Hawaiian Electric has developed a grid mod initiative, with the first phase approved by the PUC. First order, the utility is adopting smart grid technologies. These technologies will help the utility gain more “situational awareness” and “distribution automation and control”. This can allow for real-time monitoring of supply and demand on the distribution system, while automated controls manage this load. HECO’s grid mod approach can be summarized as looking to adopt the “right pieces at the right time at the right cost”.
The utilities first step is exploring a rollout of advanced meters, meter data management, and an advanced telecommunications system. These technologies enable the utility see into household demand and power characteristics in real time, facilitate the communication between device and control system, and store this data for future use in analytics and forecasting. The second phase involves an advanced distribution automation system. These automated controls take input from the advanced sensing technology, and perform operations that balance supply and demand, manage voltage/frequency, and triage in the event of an outage.
Hawaii’s clean energy transition has proceeded at a forceful pace, delivering capitativating plot developments. Recent buzz on the procurement side includes six massive contracts for solar and storage, adding 262 megawatts of solar and 1048 megawatt-hours of storage onto the grid. Some of these bids have come in at record low prices, including at 8 cents per kwH (in contrast: oil goes at 15).
The utility is also focused on courting challenges, like maintaining a stable grid that interfaces with 80,000 privately owned rooftop solar systems. The utility plans to spend $86.3 million dollars on first steps, like advanced inverter technology and voltage management efforts to maintain system stability and promote uptake of distributed PV systems. Additionally, the utility is implementing a strategic rollout of advanced smart meters for customers, prioritizing those who opt into demand response programs and time of use rates.
Performance-Based Ratemaking
Not all innovation is utility-side, as the Governor’s office has recently signed SB 2939 to fundamentally alter the utility’s profit motive. Governor Ige has signed a first in the nation “performance-based ratemaking”. This is meant to counteract biases towards utility scale projects inherent to the old business model. Going forward, utility profits will be tied to customer-focused performance metrics developed by the Public Utilities Commission. Examples of performance indicators include: customer satisfaction, integration of renewable energy resources, customer access to utility data, and interconnection of customer-sited solar and batteries.
The Rhodium Group
A state-nonprofit partnership has commissioned the Rhodium Group, an independent research and advising firm, to report on steps that can take the state off of oil entirely by 2050. This group also developed policy recommendations to achieve that goal, with the guiding principle of realizing Hawaii’s pledge to reach carbon neutrality by 2045. This paper can act as a reference to gauge the sufficiency of the utility’s plans.
The group considered four scenarios, of varying oil price and renewable energy cost projections, and then created economic optimization models for electricity procurement. The researchers then compared this to a Business as Usual scenario, wherein renewables procurement matches the pace set out in HB 623 (40% by 2030 and 100% by 2045). The report found that, no matter the price scenario, it is cheaper for Hawaii to act faster than its renewable energy targets. By 2030, Hawaii’s most cost-effective pathway would source 58% – 84% of its electricity from sources like solar and wind. Additional benefits include thousands of additional good-paying jobs on the island. While moving faster in the interim is economically advantageous, there is a ceiling to cheap renewable deployment. The report finds that, even under the best-case scenario, costs balloon after renewable penetration reaches a certain threshold (in the best case scenario: 96% penetration). This is because it is uneconomic to size a renewable fleet for the few hours of the year where demand is at its highest. Since this paper has been published, the Hawaiian Electric Companies have modified their internal interim RPS to 52% by 2030.
Importantly, Rhodium urges that consistent electrical grid planning strategy must aggressively plan for the electrification of transportation. While Hawaii’s oil usage has declined 21% over the last decade, demand in transportation has remained flat overall. If the state wants to remain within its Paris commitments (translating to an 83% reduction in emissions by 2050), transportation transformation is paramount. The electrification of transportation will also support electricity affordability, as increased electrification spreads the capital cost of infrastrastructure upgrades across increased electricity sales. Other policy recommendations for transitioning the state off oil include:
- Open access utility data , to facilitate innovation and enable efficient markets
- Zero Emission Vehicle (ZEV) mandates
- Open grid access, and allow for customer installed DERs to receive full compensation for their grid benefits
- Price the full cost of parking and driving
- Refit cities with complete streets and transit oriented development, supporting multi-modal transportation and reducing vehicle miles traveled
Conclusion
Hawaii demonstrates the impact that political will, in the form of legislative mandates, can have on utilities operating under a century-old framework. Thus far, Hawaii’s electricity transformation has seen declining costs for customers and record-low bids for solar and storage farms. The state’s utilities are building the clean energy playbook, securing interim RPS targets, all while staring down an highly uncertain and endangered future. Whether the state can pull off a transition of this magnitude is far from certain, still this paradise regained redemption arc offers a microcosmic look at our decarbonization stakes, challenges, and opportunities.