DOE Uses GEMS Loan to Install Air Conditioning: Is That Allowed?

posted in: February 2018 | 0

The Hawai‘i Green Infrastructure Authority has recommended that the Legislature consider allowing at least part of the balance of Green Energy Market Securitization funds to be used as “a revolving credit facility for any state agency to access low-cost financing to install energy efficiency measures.”

In a sense, this has already been done. Last year, the Legislature approved allowing the HGIA to lend $46.4 million, interest- free, to the Department of Education for “installation costs for energy-efficient lighting and other energy-efficiency measures related to heat abatement at public schools.” The funds must be encumbered by June 30 of this year.

Riki Fujitani. DOE

Riki Fujitani of the DOE said his agency is “in aracetodo that.” So far, he added, about $12 million has been en- cumbered or spent. About 80 percent of old fluorescent light bulbs have been replaced with LED lighting, he said. And now the DOE was working to replace older, inefficient air conditioning units. The cost of this effort is more than $90 million, he said, meaning that the DOE will use up all the remainder of the GEMS loan and still come up short.

But did the law authorizing the loan — Act 57 of the 2017 Legislature — include air conditioning as one of the specified uses of loan proceeds?

As originally drafted, the bill that became Act 57 (House Bill 957) did include language allowing “installation costs for air-conditioning.” (Whether that actually means purchase of air-conditioning units or just the installation of them is a question for another day.) But after the bill was heard by the Senate Committees on Education and on Transportation and Energy, all refer- ences to air conditioning were removed and the focus was put on heat abatement.

The Senate committees’ report on that draft says that “heat abatement in public school classrooms is an important policy goal of the State,” going on to note that in 2016, the Legislature had appropriated $100 million for heat abatement in public schools. The committees “also find that the installation of energy efficient lighting and other fixtures can result in a reduction of waste heat and facilitate heat abatement,” the report stated.

Testimony on House Bill 957 also suggested that the DOE itself and the HGIA were aware of the fact that air conditioning was not included. Kathryn Matayoshi, at the time superintendent of schools, said that the measures anticipated in the bill would “result in cooler classrooms, lower utility bills, and help offset increased costs of additional air conditioning.”

Gwen Yamamoto Lau, executive director of the HGIA, stated that “reducing energy consumption and lowering the kW load may enable classrooms earmarked for the ‘Cool the Schools’ initiative to install air conditioners without requiring expensive and time-consuming electrical upgrades.”

At the time the GEMS program was established, air conditioning, which consumes electricity rather than saving it, was excluded as a technology whose purchase could be underwritten by GEMS funds. In 2016, a proposal that would have called for the $100 million “cool the schools” initiative to be taken out of the GEMS fund failed, with critics pointing out that air-conditioning was not an energy-saving technology and was contrary to the purpose the GEMS program was intended to achieve.

Yet Fujitani insists that the use of GEMS funds to replace inefficient air- conditioners is consistent with the PUC’s order, issued four months before Act 57 became law, approving GEMS loans to the DOE.

That order, which was issued by the PUC on February 22, 2017, controls what the DOE can do with the funds, Fujitani told Environment Hawai‘i, and Act 57 “mirrors that order.”

When the HGIA proposed the loans to the DOE, in its Program Notification 11, the objective was “to expand access and affordability of energy efficiency retrofits for the Department of Education.” Eligible technology was identified as “Lighting (LED), Controls and Monitoring Devices, Mechanical Upgrades, and other Commercial EE.” The agency informed the PUC that its intention was to finance “the high-impact replacement of all interior, exterior, and stadium lights with energy efficient LED for the 42 schools on the island of O‘ahu, Maui, Lana‘i, Moloka‘i, and Hawai‘i.”

In approving the program, the PUC seemed to draw a distinction between the technologies that would be financed through GEMS funds and air conditioning: “the energy savings will reduce the kW load and facilitate the installation of air conditioners or other heat abatement technologies,” the order stated.

In testimony to the Legislature on HB 957, Randy Iwase, PUC chairman, reiterated this point. The DOE’s Ka Hei program, intended to minimize electricity consumption, “has developed shovel-ready EE initiatives, including energy efficient LED lighting and other energy conservation measures, such as the optimization and control of existing equipment and facilities (i.e., refrigeration and ventilation systems, etc.). [Program Notification] 11 is intended to provide DOE with access to financing to install EE and certain heat abatement measures that could significantly reduce DOE’s kW load, energy consumption, and costs.”

Still, the DOE’s Fujitani insisted, allowed uses of the funds include retrofit- ting and replacement of old equipment, including replacing air-conditioning units that were 17 years old or older. “Energy-efficiency retrofits include AC,” he said.

Yamamoto Lau, HGIA’s director, also sees no issue with the use of GEMS funds to replace old air-conditioning units. “Replacing old (the median age of the equipment being replaced is 17 years), inefficient split and central A/C is considered ‘other energy efficiency measures,’” she stated in an email to Environment Hawai‘i, quoting language in Act 57. “Replacing the inefficient older units with more efficient units will reduce energy consumption. The DOE is also working with closely with Hawai‘i Energy on this project.” Hawai‘i Energy is the PUC contractor that helps residents and businesses lower their energy bills by supporting replacement of energy-guzzling appliances, underwriting costs of LED lighting, and educating the public about their energy use. It is funded by a monthly fee on Hawaiian Electric customers’ bills, part of which has been diverted for the last three years to pay off the GEMS bonds.

— Patricia Tummons

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