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Kapolei Energy Storage Project: HECO and PUC conflict and why Oahu homeowners are better with solar

Updated: Sep 10, 2021

What the Kapolei Energy Storage Project means for Oahu homeowners and why solar and home batteries are the best solution
Kapolei Energy Storage Project: HECO and PUC Conflict. How it impacts Hawaiian homeowners?

Introduction to the Kapolei Energy Storage:

Over the past few years, Hawaiin Electric (HECO) has been attempting to develop and gain approval for the Kapolei Energy Storage project. The Kapolei Energy Storage is a 185-MW lithium-ion battery project with 565 megawatt-hours. Hawaiin Electric claims the project is intended to provide grid services, grid stability, and reduced gas emissions on the island of Oahu.

In April of 2021, the Hawaii Public Utilities Commission approved the project but outlined nine requirements that must be met for the project transition to take place.

On May 10th, 2021, HECO filed a motion objecting to the PUC requirements and asking them to reexamine the ruling. Just four days later, the PUC responded.

A lot of information has come out about the project, and it can be a little overwhelming to keep tabs on the development of the Kapolei Energy Storage project. Let's look at how we got to this point and what it could mean to homeowner's electrical costs on Oahu.

What is the Kapolei Energy Storage project?

What HECO says the Kapolei Energy Storage Project will do for Oahu
Kapolei Energy Storage Project Hawaiian Electric Value Propositon

It may surprise many that the beautiful islands of Hawaii receive most of their electric utility power from coal and fossil fuel. This reliance on carbon-emitting electricity production has had negative environmental implications on the state and has also contributed to why Hawaii has the most expensive electricity costs in the nation.

Before 2019 Hawaiin Electric started a Request For Proposal to develop a large-scale battery energy storage to help close the AES Hawaii Power Plant. The AES Hawaii Power Plant is a coal-fired electrical power plant located near Kalaeloa, on the South-West side of Oahu. The AES Power Plant was found to be one of the largest polluters in the state of Hawaii. HECO has stated they intend to close the plant by September of 2022.

Plus Power, a San Francisco-based developer of utility-scale battery storage projects, was selected in May of 2020 by HECO to develop the energy storage project in Kapolei on the island of Oahu.

According to Plus Power, the Kapolei Energy Storage would be the largest battery-based energy storage facility in the state and would help with Hawaii's goal to transition to 100 percent renewable energy by 2045.

What are the details of the Kapolei Energy Storage project?

The size of the Kapolei Energy Storage project is one of the things that makes it unique. At 185 megawatts of power and 565 megawatt-hours of battery energy storage, it would be by far the largest battery storage project on Oahu.

The project has a projected lifespan of 20 years, with the original battery system projected to function for 15 years.

The location for the project in Kapolei was selected for a few reasons. It is located near critical HECO infrastructure, improving the efficiency of the project. The location for the project had been utilized for lite industrial usage, so it has been determined that the site will not impact any culturally significant features. Plus Power also stated that it would not impact Oahu residents' views because the project location is in a depression.

According to Power Plus, the project has also been extensively modeled to limit the likelihood it would be damaged in a natural disaster or tsunami.

What did the PUC April ruling say about the Kapolei Energy Storage project?

What the PUC requested HECO do to complete the Kapolei Energy Storage Project
PUC Stipulations on HECO's Kapolei Energy Storage Project

At the end of April, the Public Utilities Commission approved the Kapolei Energy Storage project with stipulations. The PUC is in charge of reviewing all utility-related projects to ensure that they consider the needs and well-being of utility ratepayers.

The PUC provided HECO with nine stipulations on the project. Of the nine, HECO deemed four to be "highly problematic." According to HECO, these four stipulations would make it challenging for them to decommission the AES coal plant on schedule.

The four stipulations that HECO disagreed with:

PUC Stipulation 1: HECO would be required to forego up to $1.7 million of incentives related to performance-based rewards connected to renewable energy projects.

PUC Stipulation 2: HECO would be required to loosen up restrictions on the grid constraints that have restrained the ability to add community and rooftop solar projects.

PUC Stipulation 3: Hawaiin Electric would be responsible for the financial cost of retiring six fossil-fuel facilities at Waiau and Kahe between 2023 and 2028 and would not be allowed to pass along the financial costs to customers.

PUC Stipulation 5: HECO would be responsible for establishing a percentage of the energy that would charge the battery project, and if that percentage could not be met, a "prudence review" of the cost of the fossil fuel for powering batteries.

What did Hawaiian Electric do in response to the PUC stipulations?

In response to the stipulations, HECO filed a motion that asked the PUC to consider the financial and operational implications that would occur if they were required to meet these stipulations.

According to Hawaiin Electric, these stipulations are "highly problematic and should be reconsidered, modified, or removed in full, or the project's feasibility could be jeopardized.

After receiving the request, the PUC responded that it would be reviewing the initial motion.

The PUC or Hawaiian Electric can declare the Kapolei project's Energy Storage Power Purchase Agreement — first submitted for consideration eight months ago — null and void.

It was not just HECO that responded firmly about the PUC response. The developer, Plus Power, argued that the PUC ruling would "have a chilling effect" on battery-based energy projects and could hamper future renewable energy projects.

What happened after HECO's response to the PUC stipulations?

Just days after the HECO filed its motion, the PUC modified its initial response. When explaining why adjusted it's the initial response, the PUC explained: "its decision and the conditions were not intended to be punitive or derogatory to Hawaiian Electric."

The PUC responded to HECO's response point by point. For stipulations No. 1 and 2, the PUC agreed with HECO's request to address them in a separate docket.

For stipulations No 3 and 5, the PUC agreed to remove specific dates and thresholds from the stipulations. Instead of specific dates, the PUC said it would automatically and annually conduct a "prudence review" for the project's first decade.

According to the PUC, these adjustments to the stipulations were meant to help ensure that the project would move forward and protect electricity consumers on Oahu. PUC Chair James Griffin explained in an email to Utility Dive, "This battery project is projected to cost Oahu customers over $500 million through the twenty-year contract term. The modified conditions of approval will ensure the benefits promised by Hawaiian Electric are received by customers and will maximize customer value from this significant investment in the near term while closing the AES coal plant, as well as over the remainder of the contract term".

What do the Kapolei Energy Storage project and the recent updates mean for Oahu homeowners?

The transition from fossil fuel to battery storage has been positioned as an environmental and financial win for ratepayers on Oahu. The truth appears to be a little more complicated. Concerns have come up about how the project will impact electricity costs, grid reliability, and the environmental impact of the transition from coal to battery storage.

Part of HECO's plan to move to the Kapolei Energy Storage project involved utilizing a "bridge fuel" to power the Kapolei Project as the coal plant closes and renewable energy projects come online.

Some experts are concerned that the higher cost of fossil fuel compared to coal will increase HECO rates for consumers. One expert calculated that the cost of HECO producing electricity with fossil fuels could be three times higher than the electricity currently being produced with coal. This is a staggering number, especially when the ratepayers of Hawai already pay the highest electricity rates in the nation. The increased costs could come into play in 2022, adding a financial burden on the citizens of Hawaii, who are just starting to see some recovery from the COVID 19 crisis.

Concerns have also been raised about how the transition to the project and the project itself will impact power outages and grid stability. The Kapolei Energy Storage project was presented as a step to a more stable grid, but concerns about the stability of the fossil fuel generation and consistency of some of HECO's projected renewable energy projects has led some to question if the project will help reduce blackouts for the people of Oahu.

Fossil fuels have been shown to have even worse environmental implications when compared to coal. James Griffin, chair of the Hawaii PUC, stated on HECO's plan, "Your plan to me amounts to a shift from one fossil fuel to another. We're going from cigarettes to crack".

What can homeowners in Oahu do to reduce concerns about rising HECO rates, grid instability, and the environmental implication of transitioning to the Kapolei Energy Storage project?

How homeowners on Oahu can save by switching to solar and solar batteries
Why homeowners in Hawaii should go solar!

Homeowners in Hawaii have had to deal with the highest utility rates in the nation for various reasons. Even though HECO has argued that Kapolei Energy Storage will reduce electricity rates, HECO's historical rate increases indicate that ratepayers on Oahu can expect their cost of electricity to continue to go up in the years to come.

For homeowners looking to take back control of their electricity rates and protect themselves against power outages, adding solar and affordable home batteries is the best course of action.

Solar has been proven to increase a home's value while also reducing the cost of electricity. Many people assume that solar is expensive, but with a solar $0 down lease, prepaid power purchase agreement, finance, and cash, solar can be affordable to any homeowner.

Batteries don't have to be massive to make sense for homeowners. Regardless of if a homeowner wants to add the Tesla Powerwall 2 or the LG Chem RESU 10H, batteries can increase solar savings and provide battery backup in an emergency for homeowners on Oahu.

As a result of our work with Sunrun, we can provide the Sunrun Brightbox and Kukui Hele Pō grid service agreement. The Kukui Hele Po program provides customers on Oahu with a $300 gift card, additional discounts on their HECO bill, and a donation to Aha Pūnana Leo to help fund Hawaiian language schools. In exchange, HECO can pull small amounts of power from a homeowner's battery to help strengthen and stabilize the grid. It essentially serves the same purpose as the Kapolei Energy Storage project but has the added benefit of allowing homeowners to reduce energy costs and get home battery backup without paying anything out of pocket!

Conclusion: Final thoughts on Kapolei Energy Storage:

When the Kapolei Energy Storage project was developed, it had a particular objective to help HECO phase out the AES coal plant. During its development, the Kapolei Energy Storage project has faced stops and starts, in addition to concerns about the claims being made by HECO.

At the moment, it appears that the project will be moving forwards. Hopefully, Kapolei Energy Storage will do away with the need for HECO to burn coal on Oahu and help address the island's issues with power outages. We will not know for sure how effective it will be at accomplishing its stated goals until it is up and running.

What we do know is that residential solar and energy storage can help Oahu homeowners save on electricity costs, protect themselves against power outages, and protect the environment. Adding solar and a home battery is an easy process that does not require any money upfront. You don't need to wait for HECO to complete the Kapolei Energy Storage when adding solar and a battery to your home accomplishes the same goals while helping you save more on your electricity costs!

If you are interested in taking control of your HECO bill and adding battery backup to your home, schedule a free solar consultation with Alchemy Solar today!

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