Last month, Neil “Dutch” Kuyper, president and CEO of Parker Ranch, laid out his arguments why residents in the northwestern corner of Hawai`i island might want to defect from Hawai`i Electric Light Company’s grid.
Simply put, a new energy portfolio that includes wind, liquefied natural gas, and pumped storage hydroelectric power would be worth hundreds of millions of dollars more than HELCO’s assets in the Waimea-Kohala area, he said.
According to analyses that Siemens and Booz Allen Hamilton have conducted for the ranch, the net present value of the new portfolio would be $600 million to $700 million, while HELCO’s stranded assets in the area would be worth only $150 million to $200 million, Kuyper said during a panel at the Asia Pacific Clean Energy Summit.
With high electricity costs reportedly devouring much of the ranch’s profit margin, it formed Paniolo Power, LLC, in early 2014 to explore ways to reduce electricity rates, taking a hard look at renewables.
“Renewables make increasing sense as oil prices rise,” he said, adding that a 2013 Hawai`i Clean Energy Initiative analysis suggests that with prices in the $125-135 range, renewables have the potential to provide $12 billion in benefits.
By comparison, the assets of Hawaiian Electric Company, Maui Electric Company, and HELCO, total less than $4 billion, he noted. What’s more, he said, HELCO’s annual revenues over the last few years have ranged between $420 million and $480 million.
“It’s stunning how much wealth and income gets extracted … because we have the highest rates,” he said. HELCO’s electricity rates are some of the highest in the nation.
So, he asked, is there a deal to be made with the utility now that the risk of irrelevance is rising? Given Hawai`i island’s high rates, “it appears to be the most logical place for large-scale customer defection,” he said.
Paniolo Power is considering various options, including establishing a micro-grid for the Waimea-Kohala area, which Kuyper said would be as large as that of the island of Kaua`i, but with half the population. The company is also looking at developing a “realistic and compelling alternative portfolio” to replace oil-fired generation, and/or an undersea cable to O`ahu “to levelize rates,” he said.
Paniolo Power has filed a motion to intervene in the Public Utility Commission’s docket on the Hawaiian Electric Companies’ Power Supply Improvement Plans. One question the company hopes to explore is whether utility-scale renewables on Maui and Hawai`i island can be cost-effective enough, given increases in distributed generation and liquefied natural gas use on O`ahu, to justify the cost of a cable, Kuyper said.
Last month, Paniolo Power issued a request for qualifications for a pumped storage hydroelectric system on Parker Ranch lands. The company is looking at a range of potential hydro-energy storage solutions, from 10 megawatts (MW) to as high as 200 MW, according to an August press release.
“The elevation change of 7,000 feet on Parker Ranch is a strategic asset,” Kuyper said in the release. “If an undersea cable is possible for Maui, perhaps it’s possible for Hawai`i island in the long run. And if that is the case, Parker Ranch could enable a large-scale storage solution as part of an integrated statewide grid.”
Should Paniolo Power choose to become a full-blown utility, the Kaua`i Island Utility Cooperative could be a model. During the panel discussion, KIUC CEO David Bissell said that because the company is a co-op, it can acquire funding for renewable energy projects cheaper than any independent power producer.
“It’s a no-brainer for the utility to do it,” Bissell said.
“The cheaper cost of capital [available to co-ops] has an enormous, enormous advantage … that gets passed through to ratepayers. A co-op is a very intriguing model,” Kuyper said.
Kaua`i Model
If he had to cite one advantage a co-op has over the Hawaiian Electric utilities, Bissell said, it would be that he doesn’t have to worry about growing profits for shareholders. And without that pressure, KIUC has been able to aggressively pursue renewable energy and conservation projects.
More than 90 percent of its members have smart meters to help manage electricity usage. In addition, the utility has partnered with Green Energy Team, LLC, which will provide 7 megawatts of biofuel-generated electricity amounting to 13 percent of the island’s load. It recently signed a 20-year agreement with Gay & Robinson, which will develop a hydroelectric plant that will meet another 5 percent of the load. And it’s also invested in some major renewable projects of its own: a 12 megawatt solar array in Koloa, expected to go online next month, and another 12 MW array on Department of Hawaiian Home Lands in Anahola. After 25 years, the DHHL has the option to take over the Anahola project, he said.
KIUC plans to generate at least 50 percent of its electricity with renewables by 2023, he said.
“We’ll be at 40 percent early next year,” he said.
To help integrate large amounts of electricity from intermittent sources, KIUC is pursuing a pumped storage project on DHHL, Department of Land and Natural Resources, and Agribusiness Development Corporation lands in West Kaua`i. (See our story on page 11.)
“We’re confident we can use PV to pump water cheaper than using fossil fuels,” he said, adding that the company is also looking at battery storage (too expensive right now) and PV, LNG and/or biogas.
With these projects, KIUC hopes to lower the average member bill by 10 percent, maintain reliability, and be a leader in energy storage technology, he said.
Volume 25, Number 4 October 2014
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