Hawaiian Electric argues for approval of power purchase deal for 20-MW solar project

Hawaiian Electric told the Hawaii Public Utilities Commission on April 24 that the commission needs to overlook an April 10 recommendation from the state Division of Consumer Advocacy that the commission not approve a contract for a 20-MW solar project.

The division’s recommendation is in the form of a Statement of Position (SOP) filed in a proceeding that began in April of last year.

“In its SOP, the Consumer Advocate has recommended that the Commission deny Hawaiian Electric’s Application (the ‘Application’) in the subject docket for approval of that certain Amended and Restated Power Purchase Agreement for Renewable As-Available Energy dated February 13, 2015 (the ‘Amended and Restated PPA’), by and between Hawaiian Electric and Lanikuhana Solar, LLC (‘Lanikuhana’) related to Lanikuhana’s proposed 20 megawatt (‘MW’) photovoltaic (‘PV’) project to be located in Mililani, on the island of O’ahu (the ‘Project’),” said the utility.

“In support of its recommendation, the Consumer Advocate argued that: (1) the waiver of the Competitive Bidding Framework that was initially granted by the Commission for the Project should be found invalid because the characteristics of the Project have significantly changed since the waiver was granted; and (2) the proposed pricing for the Project does not justify the waiver of the Project from the Competitive Bidding Framework. More specifically, the Consumer Advocate has argued that: (a) the Project is not cost-effective; (b) it is uncertain whether the Project will result in a lower cost supply of electricity to Hawaiian Electric’s ratepayers; and (c) it does not appear that the Project is in the public interest as it appears to have the largest adverse impact on customer bills from both a near- and long-term perspective.

“Hawaiian Electric respectfully disagrees with the Consumer Advocate’s SOP. The current waiver from the Competitive Bidding Framework for the Project is still justified. However, if the Commission is inclined to declare the current waiver invalid, a new waiver is requested and as further described below, is justified under the current circumstances. Finally, as explained below, the Lanikuhana Amended and Restated PPA’s pricing is reasonable and should be approved. At the time Lanikuhana’s pricing was agreed to and memorialized in the original PPA, the pricing was well below on-peak avoided costs and well below recently approved utility-scale PV projects on O’ahu. As shown in the discussion below, Lanikuhana’s pricing remains below the current three year average monthly on-peak avoided costs.

“In addition, the long term fixed price of this Project brings stability and acts as a hedge against future fossil fuel price volatility. … Hawaiian Electric believes that the Project’s overall qualitative and quantitative contribution to the State’s sustainable energy goals is of equal importance and, given the apparent likelihood that Renewable Portfolio Standards (‘RPS’) goals may be increased, the Project’s positive contribution towards RPS compliance must be accorded great importance.

“The Lanikuhana Project was originally proposed by Castle & Cooke as a cluster of four 5-MW PV facilities (the ‘MSSP Projects’), each to be developed by a different energy provider under separate power purchase agreements with the Company, but capable of achieving economies of scale due to the sharing of certain common expenses and facilities. The Company found merit in the Castle & Cooke proposal as a mechanism to procure lower-cost renewable energy for Hawaiian Electric’s customers. Accordingly, in Docket No. 2010-0079, the Company filed a Petition for a Declaratory Order to determine whether the MSSP Projects were exempt from the competitive bidding process. In its Decision and Order filed in that docket on December 23, 2010, the Commission declared that the proposed cluster was not exempt from the Competitive Bidding Framework, but granted ‘a waiver from the competitive bidding process for the [MSSP Projects],’ subject to the satisfaction of several conditions.”

The utility said that it entered into term sheets with the developers of each of the four MSSP Projects, but the situation later changed and the proposed contract was worked out for the combined 20-MW project. That initial version of the contract was filed with the commission in April 2014.

This project will share interconnection facilities with the project covered by the Lanikuhana II PPA, the utility noted. Both projects will be constructed together to reduce engineering, procurement and construction (EPC) costs, and to allow the more efficient utilization of the new high-fixed-cost interconnection infrastructure to be installed in the area at Lanikuhana’s expense. This ensures the lowest total pricing for what can be thought of as essentially a 34.7-MW (gross AC capacity) solar project.

In December 2014, Hawaiian Electric filed for approval of the Lanikuhana II PPA, covering a 14.7-MW project. Said the utility in an April 15 filing in that pending case about a recent deal that changed the ownership for Lanikuhana Solar, which had been owned by First Wind: “The Consumer Advocate stated in its SOP that the PPA should be revised to reflect the recent acquisition of First Wind by SunEdison, Inc. and TerraForm Power, Inc., and to remove references to Hawaiian Electric’s Kahe PV project. Hawaiian Electric has discussed these recommendations with the SunEdison, Inc. (‘SUNE’) and the parlies do not have any issues with them. Accordingly, the parties are willing to amend the PPA to reflect the recent acquisition of First Wind by SUNE and to remove references to Hawaiian Electric’s Kahe PV project if required by the Commission.” 

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.