GEMS \u2013 the state\u2019s Green Energy Market Securitization program \u2013 has a problem: It just can\u2019t figure out how to spend the $144 million or so it has in the bank. But it keeps trying.<\/p>\n
Although the law setting up this program was intended to help low-income utility customers and other economically disadvantaged sectors share in the benefits of renewable energy technology, the Hawai`i Green Infrastructure Authority (HGIA), which manages GEMS, attempted in July to expand the pool of potential beneficiaries with a proposal to fund energy-saving initiatives of large corporations, with a minimum loan amount of $1 million. Among the possible recipients are the very utilities whose customers are paying interest and principal on the GEMS bonds in the first place.<\/p>\n
The authority also proposed including energy storage systems (batteries, mostly) as a technology eligible for GEMS financing.<\/p>\n
In addition, the HGIA launched in July an \u201copen solicitation for financing arrangements.\u201d This invites \u201cclean energy industry participants to propose transactions involving partnership\u201d (sic) with the HGIA, particularly \u201ctransactions that utilize funds to further [HGIA\u2019s] high-impact, market-based strategy to deploy clean energy infrastructure financing that will expand access and affordability of clean energy.\u201d<\/p>\n
All this activity came just days in advance of the HGIA lodging with the Public Utilities Commission (PUC) its report for the calendar quarter ending June 30, 2016. As of that date, just 12 loans, having a face value of $385,453, had been issued, leaving a balance of $144,661,025.67 in the GEMS fund.<\/p>\n
Despite the HGIA\u2019s fervid efforts to push money out the door, the gatekeepers at the Public Utilities Commission have pushed back. In response to the two proposals made in late July to allow financing of energy storage systems and broaden the pool of loan recipients, the PUC has put the brakes on both, pending further justification.<\/p>\n
<\/p>\n
* * *<\/b><\/p>\n
Battery Loans Nixed<\/b><\/p>\n
On July 22, the HGIA notified the PUC of the proposed change to its consumer loan product, which would have added energy storage equipment to the list of eligible technologies.<\/p>\n
In explaining the need for this, the HGIA pointed out how last fall the PUC had eliminated net-energy metering as a consumer option, replacing it with a grid-supply option (fully subscribed on Maui and about 90 percent subscribed on the Big Island, as of last month), and a customer self-supply option (CSS). Under the latter, no energy may be exported to the utility grid, making the ability to store energy a critical part of any self-supply system.<\/p>\n
Given this, the HGIA noted, \u201cto create economic value for most ratepayers, PV installations under CSS require a device that stores excess electricity generated during the day, and then discharges the stored electricity in the evening.\u201d With financial institutions \u201ctraditionally slow to offer financing for new technologies,\u201d the HGIA stated, \u201cthere is an opportunity for the GEMS program to supply capital for this inevitable transition towards PV and energy storage.\u201d<\/p>\n
Anticipated demand-response programs (where the utility can commandeer an energy storage system to feed into the grid) and time-of-use rates would make energy storage even more of a boon, the HGIA argued. The demand-response programs would lessen \u201cthe burden on the utility to deliver immediate electricity during severe load spikes.\u201d The time-of-use rates would allow customers to effect savings by drawing on their stored energy during times when rates are highest. (Neither a demand-response nor a time-of-use program has been approved by the PUC. In July, the commission ordered the HECO utilities to implement a demand-response program by January 1, 2017. Rates based on time of use are being considered in a separate PUC docket on distributed energy. Hawaiian Electric filed its most recent proposal for a time-of-use program with the PUC last November. Since then, there has been little action on that particular issue, one of many under consideration in the same docket.)<\/p>\n
In effect, the HGIA argued, the energy-storage loans would be a win-win for all parties. They would help the utilities, the HGIA said, by encouraging customers \u201cto stay grid-connected\u2026. Without these incentives [time-of-use and demand response], customers may elect to entirely disengage from the grid to the detriment of all ratepayers. \u2026 Thus, through financing energy storage, HGIA enables the ratepayer continued access to renewable resources in a manner that is cost effective, expands the GEMS portfolio, furthers the state\u2019s 100 percent [renewable portfolio standards] goal, and aids underserved markets.\u201d<\/p>\n
\u2018Unlikely Benefit\u2019<\/i><\/b><\/p>\n
Under the operating terms for GEMS set out when the PUC first approved the program in September 2014, whenever the Hawai`i Green Infrastructure Authority proposes or changes a loan product, it files a \u201cprogram notification\u201d with the commission and other parties to the docket, including the state Division of Consumer Advocacy.<\/p>\n
For the next 15 business days, the other parties may submit comments. At the end of that period, if the PUC does not rule otherwise, the program change can take place.<\/p>\n
The consumer advocate, Jeffrey Ono, stated in his comments that he was not swayed by the efforts of the HGIA to find a benefit in the proposed change to allow financing of energy storage products with GEMS loans, finding that the HGIA\u2019s arguments fell far short of providing the required market analysis: \u201cThe lack of quantitative analysis related to the market assessment and cost\/benefit requirements fails to provide the commission a reasonable basis to allow the proposed program modification.\u201d<\/p>\n
In fact, the consumer advocate went on to say, \u201cthe proposed program modification is highly unlikely to benefit underserved customers and may adversely impact both participants and non-participants. As a result, until it can be demonstrated that the proposed modification is in the public interest, including appropriate measures consistent with assisting the underserved markets, the consumer advocate cannot support the proposed modification.\u201d<\/p>\n
On August 12, the PUC agreed with the consumer advocate that the analysis was deficient. In an order issued that day, it informed the HGIA that the proposed loan program for energy storage was being suspended \u201cpending HGIA\u2019s response to the comments and concerns filed by the Division of Consumer Advocacy.\u201d<\/p>\n
<\/p>\n
* * *<\/b><\/p>\n
The Expanded World<\/b><\/p>\n
Of Commercial Loans<\/b><\/p>\n
More than a year ago, in July 2015, the PUC received notice from HGIA of its commercial loan product for energy efficiency projects. Eligible recipients were \u201cnonprofit organizations and small businesses\u201d served by Hawaiian Electric \u2013 small, but not so small as to fail to qualify for a GEMS loan in the minimum amount of $1 million.<\/p>\n
A year later, with zero small business and nonprofit loans having been issued and the agency selected to manage these loans having quit, the HGIA proposed to expand the eligibility list of to include the universe of everything other than natural persons: every nonprofit organization, business, government agency, and municipality would now, assuming PUC approval, be able to apply for a GEMS energy efficiency loan, so long as the recipient was tethered to a HECO grid and was qualified to take on a loan of at least $1 million.<\/p>\n
In justifying the change, the HGIA seems to abandon any pretext that GEMS is to help the economically disadvantaged. It points out that the previous commercial energy efficiency guidelines \u2013 limited to nonprofits and small businesses, as defined by the federal Small Business Administration \u2013 \u201cdoes not sufficiently capture Hawai`i\u2019s commercial energy market.\u201d A study done by a consultant for the Department of Business, Economic Development, and Tourism back in 2014, before the GEMS program was approved by the PUC, found that the commercial sector accounted for 52 percent of statewide electricity consumption.<\/p>\n
By opening up eligibility to all commercial enterprises, the HGIA states, the GEMS commercial energy efficiency loan product \u201ccan significantly reduce the amount of electricity purchased in Hawai`i. The authority therefore redefines \u2018eligible participants\u2019 \u2026 to include any nonprofit, small business, or other commercial enterprise.\u201d<\/p>\n
But \u201ccommercial enterprise\u201d to HGIA means much more than it might to the average layperson. HGIA has expanded the definition to include all government agencies and municipalities (presumably, counties) served by Hawaiian Electric utilities.<\/p>\n
Just how attractive a GEMS loan will be to large corporations or \u201cmunicipalities\u201d and government agencies is questionable. The HGIA states, without elaboration, that \u201crenewable energy infrastructure and efficiency improvements by government agencies are limited.\u201d<\/p>\n
\u201cGEMS therefore has significant potential to serve this market with its commercial EE loan product,\u201d the HGIA claims. \u201cFor example, municipalities service all the water\/wastewater and street lighting in the state, and therefore are responsible for a large portion of the state\u2019s electric load.\u201d (In fact, there are many private water and wastewater utilities in Hawai`i.)<\/p>\n
Opening up the energy efficiency loans to \u201cmunicipalities,\u201d HGIA says, \u201ccan further the state\u2019s 100 percent RPS [renewable portfolio standard] goal\u201d while decreasing their operating costs. Even though low-interest bonds are usually available for \u00a0government-sponsored capital projects, the authority goes on to say, \u201cthere is a limit to the amount of financing that municipalities can utilize without damaging their credit rating. Municipalities therefore find value in utilizing alternate funding strategies to keep debt capacity in reserve and preserve their credit rating. An energy services agreement [ESA] \u2026 funded in part by GEMS is \u2018off-credit\u2019 and will not impact a municipality\u2019s credit rating or debt capacity.\u201d<\/p>\n
In broadening the scope of GEMS loan eligibility, HGIA also is entering territory that has in the past been served by the Hawai`i Energy program, funded by ratepayers through the public benefits fund. In a footnote, the HGIA acknowledges that \u201cthe underlying goal of the PBF is to procure electric energy savings from efficiency programs\u2026. The Hawai`i Energy program maintains incentive portfolios for both residential and customer classes\u2026. [G]overnment agencies that are commercial utility customers fall under the PBF commercial customer class and are eligible to take advantage of the Hawai`i Energy commercial incentive programs.\u201d<\/p>\n
But while there is recognition of the overlap with Hawai`i Energy, the HGIA proposal states only that the authority \u201cwill coordinate with Hawai`i Energy and the Public Benefits Fund administrator to ensure that resources are allocated efficiently in pursuit of commercial EE projects.\u201d<\/p>\n
\u2018A Decision to Ignore\u2026\u2019<\/i><\/b><\/p>\n
A certain weariness can be read in the tone of the consumer advocate\u2019s comments on the HGIA\u2019s proposal to expand the commercial loan product. Noting that the HGIA recognized in its proposal the need to provide market assessments and cost-benefit analyses for any non-photovoltaic energy technology, the consumer advocate writes, \u201cThere is little discussion \u2026 regarding market assessment and no discussion regarding why an expansion of the eligible participant base is reasonable and consistent with the primary intent of the GEMS program. In fact, unlike other program notifications, HGIA did not even provide a separate section that discusses its market assessment.\u201d<\/p>\n
\u201cHGIA should provide a quantitative analysis of its market assessment to support the assertion that the proposed program modification is reasonable and consistent with the GEMS objectives of assisting the underserved,\u201d the consumer advocate goes on to say.<\/p>\n
Regarding the missing cost-benefit analysis, the consumer advocate acknowledges that \u201cthere are energy efficiency measures that can be cost-effective and provide positive net present value to program participants.\u201d However, the HGIA proposal has \u201cno analysis \u2026 that illustrates the bill impact of the use of GEMS financing for the proposed products and measures for the additional proposed customers.\u201d<\/p>\n
The consumer advocate also faults the HGIA for its vagueness with respect to the Public Benefits Fund. Although the HGIA says it will coordinate with the PBF administrator, the consumer advocate notes, the HGIA \u201cprovides no details regarding how GEMS financed projects will be distinct from Hawai`i Energy\u2019s projects, including whether there is any overlap in targeted customers, or how HGIA plans to work with Hawai`i Energy to ensure that there are no duplicative costs, efforts, or programs.\u201d<\/p>\n
The comments conclude: \u201cAt this time, the consumer advocate is concerned with the proposed modification \u2026 which does not appear to be consistent with the intent of the primary objective of GEMS funding and could actually diminish the funds available for interested underserved customers\u2026.\u201d<\/p>\n
Once again, the PUC concurred with the consumer advocate. In an order issued on August 15, it suspended the HGIA\u2019s proposed expansion of its commercial energy efficiency loan base until the HGIA responds \u201cto the comments and concerns filed by the Division of Consumer Advocacy.\u201d<\/p>\n
Environment Hawai`i <\/i>asked Tara Young, HGIA\u2019s executive director, when the revised program notifications for the consumer loan product and the commercial energy efficiency loan product might be resubmitted to the PUC. Young had not responded by press time.<\/p>\n
— Patricia Tummons<\/i><\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
GEMS – the state’s Green Energy Market Securitization program – has a problem: It just can’t figure out how to spend the $144 million or so it has in the bank. But it keeps trying. Although the law setting up … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":8815,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[408],"tags":[7],"class_list":["post-9231","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-september-2016","tag-patricia-tummons"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/9231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9231"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/9231\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/media\/8815"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}