PUC dismisses power purchase agreement between Honua Ola, Hawaiian Electric

  • KELLY

  • LEE

The state Public Utilities Commission on Thursday dismissed an amended power purchase agreement between Hawaiian Electric Co. and Honua Ola, formerly known as Hu Honua.

The dismissal of the energy contract — which is part of PUC’s denial of a waiver from the competitive bidding process requested by HECO (formerly HELCO) for Honua Ola — is without prejudice. That means Honua Ola, a 21.5-megawatt power plant under construction at the former Hilo Coast Processing Co. sugar mill site in Pepeekeo, is free to compete in future requests for proposals for renewable energy projects.

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The amended power purchase contract was originally approved without a hearing in 2017 by the PUC. It was sent back to the regulatory panel after an appeal by the environmental group Life of the Land resulted in a 5-0 decision by the state Supreme Court vacating the PUC’s decision and order in May 2019.

At that time, Chief Justice Mark Recktenwald wrote in the 66-page opinion that the “PUC erred by failing to explicitly consider the reduction of (greenhouse gas emissions) in approving the amended power purchase agreement, as required by statute … .”

In Thursday’s decision, the PUC nixed the agreement using another metric — cost.

The document notes two solar-plus-storage projects already approved on the Big Island, AES Waikoloa Solar and Hale Kuawehi Solar, have a photovoltaic system capable of producing 30 megawatts with a battery storage capability of 120 megawatts.

According to the PUC, those projects are “priced at significantly lower costs to customers.”

The document states AES Waikoloa and Hale Kuawehi will produce power at a price between 8 cents and 9 cents a kilowatt hour, “less than half of the Hu Honua project’s … price estimate” of 22.1 cents per kilowatt hour.

“These considerations are not insignificant, given the impact this could have on ratepayers,” the commission wrote, and added the solar projects “are estimated to result in decreases to customer bills throughout the length” of the purchase agreement, “whereas the (Honua Ola) project is estimated to result in an increase in customer bills until near the end” of the contract.

“This is especially relevant now, in light of the economic challenges resulting from the government measures in response to the COVID-19 pandemic,” the decision states. “As Hawaii’s ratepayers struggle to recover financially, it is more important than ever to ensure that customer bills are supporting projects that offer the best value, particularly in situations like this where the projects are similar in size.”

“Energy pricing is energy pricing,” said Warren Lee, president of Honua Ola, on Thursday after the decision was issued. “But what I think they didn’t say fully is that we are firm power, 24/7. (Solar power) is not 24/7. So it’s apples and oranges, or Fuji apples and Washington apples.”

The PUC’s decision is but one in a long string of setbacks for the bioenergy project, which plans on burning locally grown wood to produce electricity.

Prior hurdles include opposition from nearby residents, HECO terminating the original power purchase agreement, lawsuits by construction contractors over payments, a series of lawsuits by a Hilo bed-and-breakfast owner, a $25,000 fine for what the state Department of Health called an intentional wastewater discharge into the ocean, and a December letter from the Department of Transportation saying the project needs an updated assessment about its impact on vehicular traffic.

Lee, who said last year that more than $200 million was spent on the project and called it “almost complete,” described the current situation as “crazy.” He said his takeaway is “that the PUC doesn’t want to talk about it.”

“But we’re looking at the order that they issued, and we’ll see what we do from there,” he said.

The PUC noted in its decision that Life of the Land’s challenge was based on greenhouse gas emissions, but said Thursday’s decision renders moot consideration of that issue. The document, however, contained commentary about the matter.

The commission notes Honua Ola’s assertion that the project achieves carbon neutrality by its growing of trees to replace those used to produce energy is supported by statutes governing the DOH’s greenhouse gas reduction plans, as well as a 2018 policy statement by the federal Environmental Protection Agency.

According to the document, the PUC “shares the Consumer Advocate’s concern that such treatment ‘obscures the actual (greenhouse gas) emission intensity associated with burning biomass feedstock.’” It went on to say that the Consumer Advocate provided material indicating “there is an ongoing policy discussion at the federal level as to whether sources of biogenic carbon emissions should continue or be considered carbon neutral.”

In perhaps a harbinger of future energy-related policymaking, the decision noted, “Accordingly, it may be prudent to keep the impact of biogenic CO2 emissions in mind, as this issue continues to develop over time.”

Jim Kelly, vice president of corporate relations for Hawaiian Electric, said, “A lot has changed since this project was first proposed 12 years ago, and the renewable energy landscape and economics are dramatically different.”

He said the utility will “continue to advocate for a diverse portfolio approach to ensure reliability and affordability as we transition off fossil fuels.”

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“While we believed (Honua Ola) could be an important element in the mix of resources on Hawaii Island, we understand and respect the commission’s decision,” Kelly said. “Even without (Honua Ola), proposed and existing renewable energy projects — wind, geothermal, grid-scale and rooftop solar, hydroelectricity, energy storage — will enable Hawaii Island to use renewable resources to generate nearly all of its electricity by the end of this decade.”

Email John Burnett at jburnett@hawaiitribune-herald.com.

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