hawaii state capitol december 31, 2008

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Hawaii State CapitolDecember 31, 2008

Hawai’i’s Energy Future – A Major Step Forward

2009 Legislative Recommendations

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Contents

Hawaii’s Energy Context – A Somber Reality

2006 Energy For Tomorrow: The Beginning of a New Path

Hawaii Clean Energy Initiative: A Foundation for Transformation

2009 Legislative Recommendations – A Major Step Forward

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Reducing Hawaii’s dependence on fossil fuels is a long-standing objective

Despite objective, little progress made – the needle has not moved

Over 36 years, petroleum consumption remains at about 89%

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Alaska North Slope oil, the basis for the design of our refineries, is no longer available

More than 96% of petroleum in Hawaii now comes from foreign sources

US – Alaska

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Hawaii is the most petroleum dependent state

Petroleum dependence for electricity – top six states

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Hawaii has the highest electricity prices in the U.S.

Hawaii and US Average Revenues per kWh 1990 - Nov 2006

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

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U.S. Average

20.87 CENTS/kWh126% Increase Since 1990

8.88 CENTS/kWh35% Increase Since 1990

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Residential price of electricity by island – 1st half ‘08

Source: monthly electric utility reports submitted to the Hawaii Public Utilities Commission

Average U.S. Residential Price: 11.3¢/KWH

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High energy costs multiply throughout the economy

The fuel surcharge affects the cost of over 80% of the goods sold in Hawaii

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Economic impact of dependence on expensive energy

Household fuels and utilities costsrose 36.4 percent, year-over-year, in the Honolulu CPI during 2Q’08

Mainland energy costs are 4% of a state’s Gross Domestic Product; in Hawaii, it approaches 11%, almost 3 times as much

Between 2007 and 2008, State Government consumption of electricity has decreased 1.17%, but expenditures have increased 19.55%

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Dependence on foreign oil = dependence on foreign political instability

October 16, 2007 -- $87.61/barrel

– “Weak dollar and international tensions (anxieties over northern Iraq, where there is potential for a Turkish strike on Kurdish separatists)”

– “Crude options expire tomorrow and the market was thought to be heading toward $90/bbl.”

– “The market, said OPEC, is ‘very well supplied.’”

January 2, 2008 -- $100/barrel

– “…a weakening dollar, the flow of money into commodities from faltering stocks and bonds, and Nigerian and Kenyan political unrest…and oncoming Winter storm, apprehension over tomorrow's DOE report”

July 11, 2008 -- $147.27/barrel

– “…market watchers pointed to concerns in regards to Nigerian production, the ongoing tensions with Iran and an impending strike of Petrobras workers. In addition, dollar weakness and an early exodus from equities into oil were also considered factors today.”

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Hawaii’s energy system was based on $20/barrel oil: those days are over

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1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Reference Case High Price Case

Historical Projection

Source: Energy Information Administration Report #DOE/EIA-0484 (June 2008)

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Source: International Energy Agency

To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.

Can Hawaii assume this will happen, and base our future on it?

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Hawaii has a wealth of renewables:estimated @ 150% of current installed capacity

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http://hawaii.gov/dbedt/info/energy/

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What has held back renewable penetration?

Barriers must be removed for Hawaii to realize energy independence and economic stability

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Problem: Four legacy drivers support the status quoand represent barriers to be overcome

Policy/Regulatory Framework• Utilities compensated for increased electricity sales; pass-through of fuel price increase is renewable disincentive

• IPPs need transparent “rules of the road,” certainty and predictability

• No clear policy support or incentives for significant new investment and technology upgrades in renewable generation, advanced transmission and distribution

• Need policy on net metering, interconnection, wheeling, and utility protocols for integrating variable generation which will impact transmission and distribution systems

Technology Development & Integration at System Level• Solutions needed for reliable integration of high levels of variable renewable generation with traditional baseload generation

and with existing grid

• Energy storage and “firming” technologies are probably part of the solution, but which technologies will be most effective and how much storage is needed to effectively manage the grid is under development

• Few incentives for advanced metering, dynamic rates, load management, demand response or distributed generation

Financing/Capital• Need a healthy and financially viable utility to make necessary investments

• Significant new public and private investments required to support the magnitude of system changes needed for a clean energy future: Open up Hawaii’s markets to private capital

• Costs have to be understood and rate structures designed to balance utilities' financial and consumers’ rate needs

System Planning• Hawaii’s energy system is built on the assumption of consistent supply of low-cost oil, central power plants, grids that could be

continually adjusted to meet load needs; utilities are structured to control transmission and distribution as well as generation

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Contents





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2006 Energy For TomorrowLandmark legislation changed the game, articulated a clear vision

“Empowering Hawaii’s Consumers”Increase in the dollar caps for tax credits

“Security through Technology”State Hydrogen ProgramEnergy Research

“Fuels through Farming”Alternative Fuel Standard – 20% by 2020

“Independence through Renewables”Renewable Portfolio Standard – 20% by 2020Public Benefits Fund for Demand Side Management

“Savings through Efficiency”Lead By Efficiency ProgramEnergy StarLEED SilverAlternative Fueled State VehiclesDept of Education Energy Efficiency Coordinator

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Contents





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The Hawaii Clean Energy Initiative was launched onJanuary 28, 2008 with the signing of a

Memorandum of Understanding between the State of Hawaii and the U.S. Department of Energy

“…the Department of Energy will help Hawaii lead America in utilizing clean, renewable energy technologies.”

Governor Lingle

“Hawaii’s success will serve as an integrated model and demonstration test bed for the United States and other island communities globally...”

Assistant Secretary Karsner

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Hawaii Clean Energy Initiative

National Partnership to Accelerate System Transformation

The goals are:

Achieve a 70% clean energy economy for Hawaii within a generation

Increase Hawaii’s security

Capture economic benefits of clean energy for all levels of society

Foster and demonstrate innovation

Build the workforce of the future

Serve as a model for the US and the world

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Hawaii urgently needs to transition to an economy powered by clean energy, instead of imported foreign oil

…but doing so will require a substantive transformation of regulatory, financial, and institutional systems

In 2004, Hawaii’s RPS included 6% renewables, which would increase only incrementally

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Range of scenarios under business as usual assumptions (i.e., attainment of RPS, RFS)

GAP

Fundamental systemic transformation is required

Range of scenarios under transformational assumptions (i.e., exploiting technical & economic potential)

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HCEI has assessed strategic changes needed to Hawaii’s policy, regulatory, financial, & technology structures

End use efficiency

Electric generation

Energy delivery

Transportation

IntegrationFinancing

Technology Development

Regulatory Framework

Technical Working Groups:

► Identify barriers

► Identify projects

► Recommend regulatory & legislative actions

► Build key partnerships

Integration group:

►Integrate strategies for policy & regulatory frameworks, financing, and technology development

►Lead partnerships

►Integrate regulatory & legislative recommendations

►Communicate

Policy

Institutional Change

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HCEI Partners and Participants

Industry, NGO, and Other RepresentativesIndustry, NGO, and Other Representatives

Hawaiian Electric Industries, HECO, MECO, HELCO

Kauai Island Utility Cooperative Hawaii Energy Policy Forum representatives County Economic Development Boards Environmental organizations Native Hawaiian community Kohala Center Hawaii Natural Energy Institute

representatives University and community college

representatives Private industry, e.g. General Electric, First

Wind, Castle and Cooke, Hawaiian Commercial & Sugar, Gay & Robinson, Pacific Biodiesel, Puna Geothermal, others

Renewable energy project developers Investors & financial representatives

Hawaiian Electric Industries, HECO, MECO, HELCO

Kauai Island Utility Cooperative Hawaii Energy Policy Forum representatives County Economic Development Boards Environmental organizations Native Hawaiian community Kohala Center Hawaii Natural Energy Institute

representatives University and community college

representatives Private industry, e.g. General Electric, First

Wind, Castle and Cooke, Hawaiian Commercial & Sugar, Gay & Robinson, Pacific Biodiesel, Puna Geothermal, others

Renewable energy project developers Investors & financial representatives

Governor Lingle US Congressional Delegation and staff Hawaii Legislature and staff County Mayors Selected County Council members Department of Business, Economic

Development and Tourism DOE representatives Hawaii DOD Representatives USDA Hawaii Public Utilities Commission representatives Consumer Advocate

Governor Lingle US Congressional Delegation and staff Hawaii Legislature and staff County Mayors Selected County Council members Department of Business, Economic

Development and Tourism DOE representatives Hawaii DOD Representatives USDA Hawaii Public Utilities Commission representatives Consumer Advocate

tor

Public Sector

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70% Clean Energy scenario analysis(Booz Allen Hamilton)

Hawaii greenhouse gas carbon tax/abatement analysis (McKinsey & Company)

Economic modeling of energy system

Inter-island cable: feasibility and cost/benefit studies

Technical and economic assessment of plug-in hybrid and electric vehicles

100% Renewable Lanai

Forest City Highly Efficient Communities

Marine Energy Center

Modeling electricity grids on all islands

Maui grid integration

Bioenergy Master Plan

Wind resource and storage testing

Regulatory framework development

HCEI analysis & project activities

World class studies and expertise leading to projects with a broad base of partners

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HCEI Scenarios: Can we achieve 70% clean energy?Really?

First cut at order of magnitude requirements and impacts

Evaluated sensitivity to several factors

No absolutes defined in this evaluation

Most work on electricity, some on transportation, little on jet fuel

Based on current commercially viable technologies; potential game changers like OTEC and algae to energy are not considered

All scenarios are presented without imported biofuels; all scenarios can hit the goals with imported biofuels

Follow-up economic and cost/benefit impacts, refinements in progress.

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8 scenarios tested the impact of energy efficiency levels,PHEV penetration, biofuels, and inter-island cabling

1 Kauai loaded by economics (limit CSP to 14 MW) 3 Kauai loaded by economics (limit CSP to 14 MW)

Hawaii loaded by economics (limit geo to 60 MW) Hawaii loaded by economics (limit geo to 60 MW)Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean) Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean)Oahu resources loaded by economics - no cable Oahu resources loaded by economics - no cableBiofuels for transportation (only ethanol) Biofuels fill in Oahu electricity to 70% (only biodiesel)Low PHEV High PHEV


Hawaii loaded by economics (limit geo to 60 MW) Hawaii loaded by economics (limit geo to 60 MW)Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean) Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean)Oahu resources loaded by economics - cable from Lanai, Molokai Oahu resources loaded by economics - cable from Lanai, MolokaiBiofuels for transportation (only ethanol) Biofuels fill in Oahu electricity to 70% (only biodiesel)Low PHEV High PHEV


Hawaii loaded by economics (limit geo to 60 MW) Hawaii loaded by economics (limit geo to 60 MW)Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean) Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean)Oahu resources loaded by economics - no cable Oahu resources loaded by economics - no cableBiofuels for transportation (only ethanol) Biofuels fill in Oahu electricity to 70% (only biodiesel)Low PHEV High PHEV


Hawaii loaded by economics (limit geo to 60 MW) Hawaii loaded by economics (limit geo to 60 MW)Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean) Maui loaded by economics (limit geo to 42 MW, deploy 3 MW ocean)Oahu resources loaded by economics - cable from Lanai, Molokai Oahu resources loaded by economics - cable from Lanai, Molokai

Biofuels for transportation (only ethanol)Biofuels fill in Oahu electricity to 70% (only biodiesel); remainder to transportation

Low PHEV High PHEV

Note: Grey boxes have an inter-island cable

Transportation: Maximize ethanol production and use all biofuels for transportation; low PHEV penetration

Transportation: Maximize biodiesel production and use biodiesel for electricity needs on Oahu; high PHEV penetration

Moderate Efficiency ("Maximum Achievable

Potential" from utility IRPs)

High Efficiency

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Summary of results for eight scenarios

Note: All electricity sector numbers are in total installed capacity needed; transportation sector includes only ground transportation.

Example observation: While Scenarios 2 and 6 show similar results, they employ different means. Scenario 2 uses less energy efficiency and requires much more solar capacity; also its ratio of non-dispatchable to dispatchable electricity is 7.4. Scenario 6 relies more on energy efficiency (and is likely to cost less) and has a non-dispatchable to dispatchable ratio of 5.8

1 2 3 4 5 6 7 8Efficiency 220 220 220 220 495 495 495 495Biomass - direct firing 93 93 120 120 56 56 83 83Wind 276 1076 276 1076 223 1023 260 1060Geothermal 102 102 102 102 102 102 102 102Hydro 36 36 40 40 24 24 24 24Solar (residential roofs) 182 182 205 205 166 67 179 179Solar (commercial roofs) 633 633 712 712 578 232 622 622Solar (utility scale) 29 29 29 29 22 22 29 29MSW 77 77 79 79 77 77 77 77Ocean energy 53 53 53 53 53 3 53 53

Dispatchable 271 271 301 301 235 235 261 261Non-dispatchable 1209 2009 1316 2116 1065 1370 1167 1967

Electricity Sector Clean Energy % 46% 65% 46% 63% 58% 70% 57% 70%Oil reduction (million bbls in 2030) 10.0 14.0 11.5 15.5 12.5 15.1 14.0 17.3CO2 avoided (million tons in 2030) 5.1 7.2 5.9 7.9 6.4 7.7 7.2 8.8

Transportation Sector Clean Energy % 30% 30% 57% 57% 30% 30% 57% 63%Oil reduction (million bbls in 2030) 4.7 4.7 9.0 9.0 4.7 4.7 9.0 9.9CO2 avoided (million tons in 2030) 2.0 2.0 3.8 3.8 2.0 2.0 3.8 4.2

2030 End-state for Each Scenario (installed capacity)

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Scenario 8 ElectricityHawaii could reach 70% clean energy in the electricity sector and

reduce oil imports by 20 MM bbl/year by 2030

Summary of 2030 Electricity Results

Clean energy achieved 70%

Oil reduction (million bbl/yr) 17.3

CO2 avoided (million ton/yr) 8.8

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We now know what it will take to reach 70% clean energy in 2030

2020 2030

4365 GWh

4365 GWh

5820 GWh

30% Energy efficiency

40% Renewable energy

30% Maximum fossil fuel

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Note: This just reflects the 2030 targets; still need to determine/set interim targets

Hawaii Electricity Portfolio

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Scenario 8 TransportationHigh PHEV penetration, local biodiesel and ethanol production

Summary of 2030 Transportation Results

Clean energy achieved 63%

Oil reduction (million bbl/yr) 9.9

CO2 avoided (million ton/yr) 4.2

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Scenario 8Invest $16 billion, achieve $46.1 billion savings

@ oil costs $100/barrel

Avg. Crude Oil Price (2008-2030) per

Barrel Investment Cost PV of Investment Cost Savings from Oil DisplacedPV of Savings from Oil

Displaced

$40 $ 16.0 $ 7.7 $ 18.5 $ 7.6

$50 $ 16.0 $ 7.7 $ 23.1 $ 9.6

$60 $ 16.0 $ 7.7 $ 27.7 $ 11.5

$70 $ 16.0 $ 7.7 $ 32.3 $ 13.4

$80 $ 16.0 $ 7.7 $ 36.9 $ 15.3

$90 $ 16.0 $ 7.7 $ 41.5 $ 17.2

$100 $ 16.0 $ 7.7 $ 46.1 $ 19.1

$110 $ 16.0 $ 7.7 $ 50.1 $ 21.0

$120 $ 16.0 $ 7.7 $ 55.4 $ 23.0

$130 $ 16.0 $ 7.7 $ 60.0 $ 24.9

$140 $ 16.0 $ 7.7 $ 64.6 $ 26.8

Figures in billion 2008 dollars (except per barrel cost)

PV figures based on discount rate of 7%

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Scenario 8: The probability of a negative NPV is less than 20%

Approx. 18% probability of a negative NPV result

Simulation based on 1,000 runs

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Private capital is available for Hawaii’s energy future

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GOALS – State/HECO Voluntary Agreement

RPS (Renewable Portfolio Standard)– This package will increase the existing RPS

to 25% by 2020 and 40% by 2030

– It will also limit the amount of biofuels that will count toward the utility obligation; until 2015, the utility can only meet 30% of its obligation by simply substituting biofuels for oil in its existing power plants

– The PUC will set financial penalties for utility non-compliance

RPS (Renewable Portfolio Standard)– This package will increase the existing RPS

to 25% by 2020 and 40% by 2030

– It will also limit the amount of biofuels that will count toward the utility obligation; until 2015, the utility can only meet 30% of its obligation by simply substituting biofuels for oil in its existing power plants

– The PUC will set financial penalties for utility non-compliance

Energy Scenario Planning– To replace Integrated Resource Planning

(IRP)

Energy Scenario Planning– To replace Integrated Resource Planning

(IRP)

To reach the RPS, the electricity system requires planning with clean energy as the priority

To reach the RPS, the electricity system requires planning with clean energy as the priority

An RPS is critical because it sets a long term binding target for the utility; penalties make it more than a goal

An RPS is critical because it sets a long term binding target for the utility; penalties make it more than a goal

30%

30%

40%

Why is it important?Why is it important?Why is it important?Why is it important?

efficiencyrenewable

fossil

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ASSETS – State/HECO Voluntary Agreement Adding RE to the grid

– Addresses the core of implementation by identifying wind, ocean, biomass & other projects that the utility pledges to connect to the grid

– Net metering: eliminates systemwide cap

– PV host program: utility can install solar on rooftops while preserving market competition

Adding RE to the grid– Addresses the core of implementation by

identifying wind, ocean, biomass & other projects that the utility pledges to connect to the grid

– Net metering: eliminates systemwide cap

– PV host program: utility can install solar on rooftops while preserving market competition

Power plant retirements– The utility commits to retiring a number

of oil-fired generating units to transition away from fossil fuels

Power plant retirements– The utility commits to retiring a number

of oil-fired generating units to transition away from fossil fuels

Any goal needs an implementation plan; this provision lays out the first steps to get to the 70% goal

Any goal needs an implementation plan; this provision lays out the first steps to get to the 70% goal

To reduce the use of oil, the utility must retire fossil-fired plantsTo reduce the use of oil, the utility must retire fossil-fired plants

Why is it important?Why is it important? Why is it important?Why is it important?

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PRICING – State/HECO Voluntary Agreement

Feed-in Tariff

Feed-in Tariff (FiT)

– Very successful in Europe

– Standard prices for Power Purchase Agreements

– Rather than the utility negotiating each contract, the PUC will set prices for each technology, i.e. wind, solar, ocean, geothermal

Feed-in Tariff (FiT)– Very successful in Europe

– Standard prices for Power Purchase Agreements

– Rather than the utility negotiating each contract, the PUC will set prices for each technology, i.e. wind, solar, ocean, geothermal

A feed-in tariff provides certainty to developers and fair prices to consumers

A feed-in tariff provides certainty to developers and fair prices to consumers

Decoupling– Decoupling weakens the utility bias for selling its

own power before IPP power

– It also decouples the utility’s revenue from the number of kilowatt-hours sold

Decoupling– Decoupling weakens the utility bias for selling its

own power before IPP power

– It also decouples the utility’s revenue from the number of kilowatt-hours sold

Rate pricing– Time of use rates: let consumers benefit from

using electricity at off-peak times

– Clean energy infrastructure surcharge: to help fund grid upgrades

– ECAC: For now, the utility will be allowed to keep passing on fuel costs via Energy Cost Adjustment Clause to maintain a financially sound utility

Rate pricing– Time of use rates: let consumers benefit from

using electricity at off-peak times

– Clean energy infrastructure surcharge: to help fund grid upgrades

– ECAC: For now, the utility will be allowed to keep passing on fuel costs via Energy Cost Adjustment Clause to maintain a financially sound utility

Decoupling ensures that the utility stays financially sound while kWh demand is driven down by energy efficiency

Decoupling ensures that the utility stays financially sound while kWh demand is driven down by energy efficiency

Restructuring rates will align rates and consumer price signals with clean energy goals

Restructuring rates will align rates and consumer price signals with clean energy goals

Why is it important?Why is it important?



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GRID – State/HECO Voluntary AgreementUndersea Cable

– HECO commits to working with private developers and the state to buy power from a big wind project from Maui County, and integrating that power onto Oahu’s grid via an inter-island cable

Undersea Cable– HECO commits to working with private

developers and the state to buy power from a big wind project from Maui County, and integrating that power onto Oahu’s grid via an inter-island cable

A cable is a game-changer for Oahu, which has the highest demand of any island but limited RE opportunities

A cable is a game-changer for Oahu, which has the highest demand of any island but limited RE opportunities

Grid Management– The utility will be responsible for demand

response, storage, and other system upgrades to help incorporate and manage renewable energy on the grid

– The utility will do a big build-out of advanced metering infrastructure, which they can put into their rate base

Grid Management– The utility will be responsible for demand

response, storage, and other system upgrades to help incorporate and manage renewable energy on the grid

– The utility will do a big build-out of advanced metering infrastructure, which they can put into their rate base

New grid systems & technologies help create a 21st century grid ready for high levels of renewables

New grid systems & technologies help create a 21st century grid ready for high levels of renewables



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Contents





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HCEI Goal Expected results 2009 package

Efficiency 30% 9%-17%

Electric Generation 40% ~35%

70% ~30%

Electricity

Transportation (ground)

The 2009 legislative package is one step toward the 70% clean energy goal, and it sends the message that Hawaii is serious about being a leader

PREMISE: The primary barriers to reaching 70% clean energy are not technical or financial; they are policy-driven: change incentives and behavior by changing established framework of rules

This legislative package is one step in the process of changing the rules—to do so it’s important to view the package whole, as a comprehensive approach to energy policy, and in the context of other HCEI initiatives

How far does the 2009 legislative package go toward HCEI efficiency, generation and transportation? Indicatively:

Future Steps:

– Efficiency: In the next years, the State will need to be aggressive on 1) public buildings, 2) a sizable energy efficiency program for commercial buildings, 3) zero net energy building code by 2015. Promotion and implementation of efficiency programs—e.g., on-bill financing—will be critical to realize goals

– Electric Generation: The PUC will be shouldering responsibility for setting rules for feed-in tariffs, electricity decoupling, etc. PUC’s timely implementation will be extremely important

– Transportation: The 2009 package is designed to catalyze a market—e.g., create infrastructure for Alternative Fuel Vehicles—so the legislative package starts the process to deliver the transformation needed to hit 70%. In 2010, we will propose policies to ensure adequate supplies of biofuels, critical to using AFVs; also we will analyze clean energy options for aviation/marine transportation

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HCEI Goal: 70% clean energy

Business as usual

70%

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Contents

Electricity Generation and Delivery

Efficiency

Transportation

• Renewable Portfolio Standard (p. 4-11)

• Net Energy Metering (p. 11-13)

• Renewable Energy Zones and Facilitation (p. 14-22)

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Renewable Portfolio Standard

Adjusts RPS Goals by statute to reflect HECO Voluntary Agreement:

2010 = 10% (no change)

2015 = 15% (excludes energy efficiency (EE) and displacement technology)

2020 = 25% (increase from current 20%, excludes EE and displacement technology)

2030 = 40%

Note: Although EE and displacement technology excluded from RPS beginning 2015; both will count towards Energy Efficiency Portfolio Standard

No new additional fossil-based-only generation to be permitted

2 MW and below exempted (for DG stand-by, etc.)

PUC to evaluate RPS goal every 5 years beginning 2013

Amend §269-95(4) to clarify that the PUC’s authority to revise the RPS goal; need not be based on the HNEI studies referred to in §269-95(3)

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Net Energy Metering (NEM)

Allow PUC to remove limits on NEM for electric utilities as determined by the PUC

Amend sections of NEM statutes to give the PUC the authority to move net energy metered customers under time-of-use rates and feed-in tariffs – transition to smart grid regime

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Renewable Energy Zones (REZ) and Project Facilitation

Amend §196-4 to expand the powers and duties of the Energy Resources Coordinator (DBEDT) to include the following:

Designate high-renewable resource areas as Renewable Energy Zones

Develop incentives to encourage development of resources within the REZ

Assist/identify the required transmission infrastructure related to the REZ

Assist in accessing special purpose revenue bonds to finance critical transmission infrastructure projects

Amend §209E-2 to include all renewable energy resources as “qualified business” in an Enterprise Zone

Include the permitting of transmission projects in the renewable energy permitting facilitator’s duties (Act 208)

Expand qualified renewable energy projects eligible for the renewable energy facility siting process to include facilities of 5-200 MW capacity, and biofuel facilities >1Mgal/year; ERC discretion to apply process

Deems a permit approved if process exceeds 18 months.

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Contents


Efficiency

Transportation

• Energy Efficiency Portfolio Standard & Analysis (p. 23-26)

• Building Codes (p. 26-29)

• Public Buildings (p. 31-34)

• On-bill Financing for Energy Efficiency and Renewable Energy (p. 34-37)

• Tax Credits for Net Zero Energy Homes (p. 37-41)

• Renewable Energy and Energy Efficiency Tax Credit Provisions (p. 42-51)

• Consumer Information (p. 41-42)

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Background

Energy Efficiency (EE) critically important to achieving HCEI’s 70% clean energy goal

Probably the most complicated and difficult component

Hundreds of thousands of individual behavior make-up inefficient energy use

Multitude of actors

Inefficient energy practices embedded in status quo

Vested and conflicting interests

Approach:

Establish target and framework

Policies phased-in over multiple years

Educate, educate, educate/lead-by-example/technical assistance/monitor & adjust

Balance being aggressive and appropriately ahead of the curve

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Energy Efficiency Portfolio Standard

– State sets EEPS with goal to offset forecasted load from 2009 to 2030

– HCEI goal of 4300GWh savings by 2030; PUC sets interim & per-island targets

– Requires annual report from Third Party Administrator (TPA)

– Renewable substitution, e.g. solar water and sea-water air conditioning, count as efficiency measures in EEPS, not generation in RPS

Energy Efficiency Portfolio Analysis ($500K from PUC Special Fund)

– Energy efficiency (EE) assessments to understand current energy use patterns (homes, businesses, other) and identify cost-effective, high-savings EE measures

– PUC able to direct utilities to provide data as required for efficiency analysis

– Assessment of all cost-effective, high-savings EE measures completed by 12/31/2010

– Until EE plan is available, PUC/DBEDT/PBA work with stakeholders to identify preliminary set of cost effective, high savings EE measures for PBA to implement

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Building Codes

– Amend initial code adoption timeframe for county adoption of code…one year, not two years

– State Building Code Committee (SBCC) shall adapt and adopt latest International Energy Conservation Code (ECC) updates within 6 months of adoption by International Code Council; each county shall adapt and adopt the updates within 6 months of SBCC adoption or SBCC update shall become county code if not adopted within 6 months.

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Building Codes ($600,000 PUC Special Fund )

– PBFA shall

• conduct measurement and verification of buildings/home constructed under the code to assess performance;

• conduct surveys to determine actual costs to build following the building code;

• work with stakeholders to identify cost effective measures;

• make recommendations to the building code;

• create commissioning guidelines;

• assess implementing residential/commercial net zero energy building code;

• annually report analyses and surveys.

– Building permit application must designate commissioning agent; counties authorized to set fines if defciencies identified by commissioning agent not remedied within 60 days.

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Public Buildings

– State agencies shall benchmark existing public buildings to determine energy efficiency improvements needed.

– Target performance for major renovations/retrofits of existing public buildings will be 30% above building code.

– Public buildings shall be retrocommissioned/recommissioned every 5 years.

– Retrofits: achieve efficiency savings that can be recouped within 20 years.

– Agencies may use energy performance contracts and may keep at least 50% of the savings .

On-bill Financing for Energy Efficiency and Renewable Energy

– By 12/31/2009, PUC institute Pay As You Save (PAYS) program for residential and small commercial customers; administered by PBA; PUC may conduct evaluation of program effectiveness.

– Expand to include installation of photovoltaic systems and solar water heating, change out of primary refrigerators to higher efficiency models; cost-shared energy audits for customers.

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Tax Credit for Net Zero Energy Homes

– Tax credit $5K max per home; amount of credit based on total sq-footage; max for multi residential is $2K per unit with individual meters; commercial buildings are eligible for up to $50K.

– Builders to new/retrofit homes with smaller square footage receive higher tax credit; tax credit decreases as home increases in size.

– ERC reviews the program and recommends amendments.

– Tax credit effective 1/1/2010 to 12/31/2015.(Estimated impact: $900,000 for 1/1/2010 to 12/31/2015 -- DBEDT est. 150 single family homes for total credits of $750,000; 25 units in multi residential for total credits of $50,000; 2 commercial installations for total credits of $100,000)

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Renewable Energy and Energy Efficiency Tax Provisions

Amend 2007 Mandatory Solar Water-Heater provisions and clarify:

a. The tax credit for solar thermal energy systems continues to apply to existing single-family residential homes.

b. The tax credits will apply to existing single-family residential homes installing solar thermal energy systems, wind-powered energy systems, and photovoltaic systems.

c. The applications requesting a variance from mandatory solar water heating shall be assigned to the Public Benefits Administrator.

d. Developers allowed to take tax credit in 2009.

e. After January 1, 2010, any newly constructed residence is not allowed a tax credit.

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Refundable Low Income Residential tax credits (Admin. Bill in 2008)

Refundable tax credits for individuals with less than $20,000 adjusted gross income; two taxpayer households allowed $40,000 adjusted gross income. (Estimated impact: $41,000/yr. per DoTax)

Other Refundable Tax Credits

a. Residential and corporate refundable credit for up to 70% of nonrefundable credit; taxpayer elects if refundable or nonrefundable; selection is irrevocable.

b. Refundable credits apply to solar water heating, photovoltaics, and wind systems.

(Estimated impact for commercial and multi-family residential refundable credit:$1.12M

Estimated impact for residential refundable credit:$1.66M/yr)

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Consumer Information

– PBA shall develop rules for reporting energy information to consumers at time of sale or rental of commercial/residential building.

– Energy Consumption Information required in sale/lease of property after certain date.

– PBA shall develop programs and information to educate banks, financial institutions, mortgage lenders and mortgage brokers on economics of energy efficient properties, including savings over the life-cycle of such properties

– PBA establish a web-based model showing data and publicize to realtors and others.

– Banks and new occupants shall have energy report/label before lease/sale.

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Contents

Efficiency


Transportation

• Background

• Infrastructure (p. 51-63)

• Incentives (p. 63-86)

• Requirements (p. 87-103)

• Plans and Studies (p. 103-112)

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OBJECTIVE:Reduce the transportation sector’s dependence on petroleum

Encourage alternatives to petroleum, defined as vehicles capable of operating on:

Electricity

E85 (ethanol flexible fuel vehicles)

Biodiesel

Hydrogen

Other alternative fuels

Policy does not “pick winners;” allow flexibility and the mix to change

Electric vehicles have greater barriers to overcome, but could provide significant grid benefits

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Part X - Infrastructure (needs to precede vehicles)

Income tax credit of up to $500 per charge point (or 70%, whichever is less) for electric vehicle charge points installed before 1/1/2016.

Income tax credit of up to $10,000 (or 30 %, whichever is less) for alternative fuel refueling property installed before 1/1/2016.

Electric vehicle parking required to be designated in parking lots of 100 or more spaces by 12/31/2010.

Non-electric vehicles not allowed to park in electric vehicle parking spots.

Electric car charging capability required on all new single family housing units constructed after January 1, 2015.

Modification of HRS§269-1 to allow third party sale of electricity for vehicle recharging (EV charging excluded from the definition of “public utility.”)

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Part XI - Incentives

GET exemption for Alternative Fuel Vehicles and Fuel Economy Leader Vehicles (4% / 4.5% GET on retail sales) January 1, 2010 through December 31, 2015

Waiver of motor vehicle registration fees for electric vehicles – 2010-2015

Electric Vehicle grant program (more efficient and fair than tax credit; capped)

2010: $4000 ... 500 vehicles 2016: $500 … 10,000 vehicles2011: $3500 … 1000 vehicles 2017: $500 … 10,000 vehicles2012: $2500 … 2000 vehicles 2018: $500 … 10,000 vehicles2013: $2500 … 2000 vehicles 2019: $500 … 10,000 vehicles2014: $2000 … 2500 vehicles 2020: $500 … 10,000 vehicles2015: $2000 … 2500 vehicles 2021: $500 … 10,000 vehicles

Biofuels Production:

Revise ethanol facility incentive to allow ethanol and biodiesel production facilities; remove facility size limit; keep dollar caps in place.

Rental Car Company Incentive:

Exempt up to 200 alternative fuel vehicles per rental car fleet from the $3 per day rental car surcharge from January 1, 2010 through December 31, 2015

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Part XII

Mandates - State and County Vehicle Fleets

Beginning January 1, 2010, all State and County entities shall, when purchasing new vehicles, select vehicles with reduced dependence on petroleum-based fuels, in following descending order of priority:1. When purchasing a vehicle for use in a State fleet, the agency shall select an electric

or plug-in hybrid electric vehicle.2. If an electric or plug-in hybrid electric vehicle that meets the needs of the agency is not

available, the agency may select a hydrogen or fuel cell vehicle.3. If a hydrogen or fuel cell vehicle that meets the needs of the agency is not available, the

agency may select a flexible fuel vehicle.4. If a flexible fuel vehicle that meets the needs of the agency is not available, the agency

may select a hybrid electric vehicle.5. If a hybrid electric vehicle that meets the needs of the agency is not available, the

agency must select a vehicle that is a Fuel Economy Leader in its class.

Life cycle vehicle and fuel costs may be included in the determination of whether a particular vehicle meets the needs of the agency. Estimates of future fuel prices shall be based on projections from the United States Energy Information Administration.

Beginning January 1, 2012, all State-owned diesel vehicles and equipment are required to be fueled with blends of biomass-based diesel.

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Mandates - Non-Government Fleets

Each fleet consisting of more than fifty light duty vehicles shall meet an annual minimum alternative fuel vehicle standard: beginning January 1, 2012, at least 4% of annual new light-duty vehicles acquired by the fleet shall be alternative fuel vehicles (AFV). This percentage shall increase by 4% per year until it reaches 76% in 2030.

A fleet owner and its affiliates may aggregate their vehicle purchases

Fleets acquiring vehicles earlier than the program start date or in excess of the number of vehicles required will be able to accumulate alternative fuel vehicle credits

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Mandates - Dealers

Each motor vehicle dealer with annual sales of more than fifty light duty vehicles shall meet an annual minimum alternative fuel vehicle standard of at least:

10 % of its annual new vehicle sales for each calendar year between January 1, 2015 and December 31, 2019;

20 % of its annual new vehicle sales for each calendar year between January 1, 2020 and December 31, 2024;

50 % of its annual new vehicle sales for each calendar year between January 1, 2025 and December 31, 2029; and

75 % of its annual new vehicle sales for each calendar year beginning January 1, 2030.

A motor vehicle dealer and its affiliates may aggregate their vehicle sales in order to achieve the alternative fuel vehicle standard

Dealers exceeding alternative fuel vehicle sales requirements will be able to accumulate alternative fuel vehicle credits applicable in subsequent years

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Part XIII - Plans and Analysis

DAGS will develop an implementation plan for installation of electric vehicle charging stations at State owned parking facilities

Counties and DOT will be enabled to provide vehicle registration data to DBEDT to allow tracking of the number and type of vehicles in use and the effectiveness of efforts to diversify the fuel needs of Hawaii’s transportation sector

Energy demand projections are to be included in State and County transportation plans that utilize travel demand forecasting estimates

hawaii state capitol december 31, 2008

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