by HEC Team | Mar 23, 2014 | 2014, News
In L. Hunter Lovins’ vision of the not-too-distant future, power generation and distribution will be radically different from what we are accustomed to today.
Lovins says the era of distributed generation is here and that central station power has no future. “An energy-rich island like Maui can become a global leader in the energy future by implementing energy efficiency, solar energy, wind, biofuels and appropriately sited geothermal,” she said.
“The utility industry of the past has very successfully extracted community wealth and shipped it abroad to buy oil, coal and other imports,” Lovins continues. “The utility of the future will be managed to generate wealth for the people of the islands. Best case, it would likely be community owned, as the utility on Eigg, in Scotland, is, but at a minimum it will be managed to keep Maui’s wealth on Maui, generating energy from local sources and paying its executives a fair local wage.
Lovins, president of the Colorado-based Natural Capitalism Solutions, is among the forward-looking speakers scheduled to address energy policy leaders at the March 26-28 conference, “Electric Utilities: The Future Is Not What It Used To Be,” at the Maui Arts & Cultural Center in Kahului.
Her nonprofit educates senior decision-makers in making the business case for a “Regenerative Economy,” and helps companies, communities and countries profit from implementing more sustainable business practices. Working in energy policy since 1972, Lovins is an international consultant, professor, speaker and author on ways to use resources more efficiently.
She cites the German utility RWE as a model of what the future holds. She said RWE has become a distributor of “diverse, distributed renewable power, meeting customer needs first through efficiency and then through aggregating a mix of renewable power generated by others. They will enable customers to gain the energy services that they want: cold beer and hot showers, not electricity produced by their power stations.”
One of the biggest paradigm shifts would affect traditional utilities, she said. “The utility industry has for too long hidden behind its regulated monopoly status, protecting its preferred answers: central power station and incumbent power structures.”
Maui is well positioned for the coming energy future, she said.
“Every region has its own best mix of renewable energy, unique customer needs,” she said. “Maui is blessed with a rich energy mix of sun, wind, growing things and volcanic energy. Where I teach in Seattle, we have a different mix. But everywhere so far studied around the inhabited world, there is ample renewable energy, if used cost-effectively (and) efficiently to meeting growing demands with efficiency and renewables. This is the only energy mix that makes sense in a world in a climate crisis, is the only affordable future, and is the future that Maui should grab with both hands, as has the island of Eigg in Scotland, or Samso in Denmark.”
by HEC Team | Mar 23, 2014 | 2014, News
Julia Hamm
While traditional electric utilities might see the rapid development of solar power alternatives as a problem to confront, Solar Electric Power Association President and Chief Executive Officer Julia Hamm sees a collaborative, win-win future for both to thrive.
“Some observers believe that the logical reaction of utilities to solar is to see it as a threat that will demand amassing their considerable power to stop,” she said. But “we at the Solar Electric Power Association see the future playing out differently. There might be some utilities digging in their heels, but we see a growing number who recognize that accommodating more distributed, customer-based generation presents new business opportunities,” Hamm said.
“Solar is the bellwether of a more customer-focused energy business in which electric utilities can be a significant and successful player,” she said.
Hamm is among the keynote speakers confirmed for the March 26-28 conference, “Electric Utilities: The Future Is Not What It Used To Be,” at the Maui Arts & Cultural Center in Kahului. Other speakers include Binz, former chief of the Colorado Public Utilities Commission; and Constance Lau, president and chief executive officer of Hawaiian Electric Industries. March 28 will include optional field tours.
The conference is a much-anticipated opportunity for policy and business leaders to explore the electric power generation transition from fossil fuels to renewable energy.
Hamm, who holds a bachelor of science degree in business management and marketing from Cornell University, said the utility industry is in a time of transition, “and utilities are actively questioning long-held assumptions and seeking answers.” It’s not an easy time for those in the traditional power generation industry, she said.
“Utilities are accustomed to resources they can count on and generation that they can manage around the clock,” she said. “At the same time, they are beginning to look to solar to help meet the peak demand and cut back on expensive peak generation. Right now questions may outnumber answers about how this transition will play out. I hope this conference will help further explore these questions and push towards some win-win solutions.”
In Hawaii, solar photovoltaic installations totaled 17,609 with more than 129 megawatts of capacity added to Hawaiian Electric, Maui Electric and Hawaii Electric Light Co. grids in 2013, according to HECO. That was 39 percent more than was added in 2012, the utility said.
Maui alone has 5,000 photovoltaic systems on an island of 150,000 people.
“The explosive growth of solar over the past few years caught many in the electric utility industry by surprise,” Hamm said. “The sheer amount of solar is impressive, though the 10-plus gigawatts of solar installed in the U.S. today is still less than 1 percent of U.S. electricity production. What’s grabbing the attention of utilities is the potentially cascading impact of solar in decentralizing the generation of electric power delivered to the customer.”
Hamm said collaboration is the key to future success. “There are bumps in every road, and many would say that the growing influx of distributed solar is leading the electric utility sector into a particularly bumpy stretch, particularly in places like Hawaii where solar is cost competitive today to retail electricity rates,” she said.
“But collaboration between utilities, regulators, solar providers and customers will lead to the development of new regulatory compacts, rate structures, business models and partnerships that benefit all. Solar success will mean that the electric utility industry is more technologically dynamic and more customer responsive than at any time in history.”
by HEC Team | Jan 23, 2014 | 2014, News
Hawaiian Electric Co. Vice President Colton Ching
Riding an unprecedented wave of growth in solar and wind generation, Hawaii serves as both a renewable energy laboratory and as a forerunner of how U.S. utilities may evolve in the future, said Hawaiian Electric Co. Vice President Colton Ching.
Hawaiian Electric Companies is the Title Sponsor of the upcoming conference “Electric Utilities: The Future Is Not What It Used To Be.” Expected to draw leading power and utility experts from around the country, the conference will be held March 26-28, 2014, at the Maui Arts & Cultural Center.
Ching said Hawaii is “ground zero” for cutting edge renewable energy development, and as a result its utilities are coping with the growing pains of the transition from near-sole reliance on traditional fossil-fuel generation plants to an “energy portfolio” that includes both steady and intermittent forms of power generation, he said.
Hawaii power utilities are not interconnected among the islands (although an undersea interisland power cable has been proposed, it’s years away from development), so they operate in isolation, relying heavily on costly imported fossil fuels that lead to energy rates two to three times the national average.
Hawaii utilities operate in a different environment from Mainland counterparts, with different operations and costs, Ching said. Mainland utilities may not see the same issues or can avoid them because they can rely on cheaper coal, liquefied natural gas, hydroelectric or nuclear power generation.
Nevertheless, the island utilities’ experience operational and technical challenges first with integrating renewable energy will be a precursor for the future of Mainland power companies, he said.
“We believe we will see the kinds of challenges and issues . . . before Mainland utilities do,” he said. And, “because Hawaii will see these issues first, I think Hawaii is the perfect place to have these discussions about what the utility needs to do to integrate high levels of renewable energy (and) high levels of distributed generation.”
And, “why a conference like this here is so very valuable,” he said, that even though Mainland utility operators don’t face the same issues as those in the islands, “there are a lot of smart people out there in the industry, and they can bring to the table very good technical ideas, very good regulatory ideas, very good customer ideas that we can benefit from.”
What will make the Maui conference “very powerful” will be in making the “electric industry a little more aware of what the future may hold for them,” Ching said.
He asked however that conference attendees come willing to listen and exchange ideas.
“We need everyone to come with an open mind,” he said. “Everyone put your biases and beliefs aside and have a very frank and open dialogue about what a utility will be like in the future.
“We need to let go of paradigms,” he said, and participants need to ask the questions: “What is the future going to be like? What are tomorrow’s customers going to want from us? We can only be certain it won’t be the same as today.”
Weighing out pros and cons of utility models
One of the upcoming conference’s topics will be to look at various utility operating models – such as investor-owned, municipal and cooperative utilities – and weighing their strengths and weaknesses, advantages and disadvantages.
Ching said the utility’s operating model is important, but it’s a “fairly small factor” in terms of how a utility operates in efficiently and economically delivering power to its customers.
One feature of an investor-owned utility that separates it from other models is its ability to issue stocks to raise money to fund investment in the utility’s infrastructure and then return dividends to its investors, he said.
Additional equity in the utility leads to its ability to borrow even more money to fund infrastructure development, Ching said.
“That electric utility’s infrastructure needs to be built for the long term,” he said. “You need to have an environment that allows for that investment over a long period of time.”
The advantage of a municipality owning a utility is that the local government can issue bonds with attractive tax incentives for investors and then pay back loans at “very, very low” interest rates, he said. There also are other low-interest loans available from, for example, the rural utility service.
Municipal utilities don’t have as much access to capital as an investor-owned utility, but when they borrow money by floating bonds it comes with a low interest rate, he said.
With an electric cooperative, such as the ownership structure on Kauai, the customers are the owners of the utility, Ching said. The utility’s profits are returned to customers at the end of the year.
Rate-making regulations influence consumer charges
One feature of Hawaii’s current utility regulatory process is that the state’s Public Utilities Commission sets power rates. And, in the past few years, the PUC has moved away from the traditional model of utilities making more money when they sell more electricity, Ching said.
Now, under a new regulatory model called “decoupling,” Hawaii utilities no longer base their revenue fully on their volume of electric sales, he said.
The move to decoupling has come in the context of Hawaii’s commitment to renewable energy development and the state’s goal of getting 40 percent of its energy generated from renewable resources by 2030.
Decoupling removes the incentive for Hawaii utilities to discourage energy conservation, solar and wind development or anything that would reduce its power sales, he said.
The form of rate-making regulation that the PUC employs is “key to this topic,” he said.
But it leads to the question of what is fair to charge consumers, such as those with rooftop photovoltaic systems who generate power during the day but at night still rely on electricity from the island utility’s traditional fossil-fueled power plants.
The rapid rise of Hawaii consumers turning to solar power systems is setting the state for island utilities “to be a different business,” Ching said.
In the future, instead of utilities being residents’ and businesses’ sole source of power generation, the utilities’ goal may evolve into being a battery source for consumers, a back-up source of power or to provide ancillary services, he said.
Utilities would “no longer just be providing kilowatt hours of energy,” he said. And, the appropriate payment for consumers would be “based on what kinds of services they’re drawing from or asking of the utility.”
In the future, a payment based strictly on kilowatt hours “is probably not going to work,” he said. “And if it’s going to change, it’s going to change in Hawaii first.
Already, “what happening . . . we’re starting to see the current way of charging for customers on the grid is that for some customers (those with PV) it’s working really good. They’re getting a great deal,” Ching said. “For other customers, it’s not so great.”
He said he anticipates that as time passes the system for paying for electric services will “move further and further away from working for everyone.”
In some places on the Mainland, utilities have adopted “green pricing programs,” offering consumers the option to pay more for electricity to support renewable alternatives, such as wind and solar, Ching said.
But he said that has happened in areas with “very low electric rates,” such as 10 cents per kilowatt hour, because they derive their power from low-cost sources such as natural gas, coal or nuclear power. Hawaii consumers pay well in excess of 30 cents per kilowatt hour.
If a “green pricing” program were offered in Hawaii, all consumers would rush to take advantage of it because solar and wind energy alternatives are less costly than traditional power generated in fossil-fueled-burning plants, he said. And that’s why green pricing wouldn’t work in Hawaii.
Federal regulations affect traditional power plant operations
Aside from the challenges of adapting to a mix of renewable and traditional forms of power generation, Hawaii utilities also need to cope with changes in environmental regulations from the U.S. Environmental Protection Agency, he said.
Now, federal regulators are requiring older power generation plants, which earlier had been grandfathered to allow dirtier air or water emissions, to come into compliance with new, stricter rules aimed at cleaner emissions, Ching said.
The new regulations are being applied to these older plants, requiring them to be compliant with new regulations, he said. The plants are going to need to reduce certain types of emissions, and “these regulations are affecting the outlook, economics and operations of existing facilities.”
For example, the older Kahului power plant has been grandfathered to permit the use of cheaper fuel than what’s used at the newer Maalaea power plant, he said. The use of less expensive fuel has made the Kahului plant, even though its less efficient, also less costly to operate.
Utilities across the nation are being affected by the new EPA regulations, he said. “Maui Electric is just one of them.”
“Each utility has to decide, in the best interest of its customers, whether it’s economical to use older generators and make additional investment for them to be complaint,” he said.
Undersea cable could be challenging, but worth exploring
Regarding the proposed undersea cable between Maui and Oahu, Ching said that while it’s a technically challenging project, it’s still a “pretty straightforward endeavor” that can be done.
What challenges the project’s feasibility is whether Hawaii residents are willing to accept the “unavoidable environmental, social and cultural impacts,” he said. “We can build it. We can operate it. It can be done. But is it something the various communities can support?” Ching said Hawaii’s exploration of the option of building an undersea cable is “the right thing to ask ourselves . . . even if the answer is no.”
“We should be asking ourselves this question every once in a while,” he said.
Ching said he expects the subject of the proposed undersea cable to surface during the conference because it would like stem from discussion about renewable energy development and how the amount of available alternative energies, solar and wind, predominantly located on Neighbor Islands can be used throughout the state.
Ching said he envisions an energy future for Hawaii in which utilities will rely on a diverse portfolio of energy resources.
“It will have a mix of renewables of different types, such as solar, wind, geothermal, biomass, waste-to-energy, ocean,” he said. “These resources will be of different sizes – from rooftop solar systems that can take advantage of being located where electricity is consumed to larger centrally located systems that can take advantage of economies of scale and from building dedicated facilities for integration and interoperability with the grid.”
Colton Ching is HECO’s vice president for energy delivery and has 23 years of experience in the electric utility industry, working in engineering, planning and operations at Hawaiian Electric. Ching holds a bachelor’s of science degree in mechanical engineering from the University of Hawaii at Manoa. Hawaiian Electric is the parent company of Maui Electric and Hawaii Electric Light Cos.
