Renewable Energy Projects Languish As Feed-in-Tariff Program Maxes Out

posted in: April 2012 | 0

It started out with a whimper, but the state’s feed-in-tariff program has ramped up so fast that renewable energy projects totaling more than 100 megawatts are now sitting idle until room opens up for them.

Under the program, renewable energy producers are guaranteed grid interconnection and standard rates for 20 years. But with only 80 megawatts of electricity allotted to the program statewide — 60 MW for O`ahu, 10 MW for Hawai`i, and 10 MW for Maui, Moloka`i, and Lana`i combined — there simply isn’t space for some of the larger projects.

Utah-based Alohi Sun, LLC, which proposes to develop one of the few concentrated solar projects in the state, is one such project.

Under the FIT program, projects fall into three tiers:

Tier 1 includes projects generating 20 kilowatts or less.

Tier 2 projects may produce up to 100 kW of wind and hydropower and up to 500 kW of photovoltaic solar (PV) and concentrated solar (CSP) on O`ahu. Tier 2 PV and CSP projects on Lana`i and Moloka`i are capped at 100 kW on Moloka`i and Lana`i. On Maui and Hawai`i, PV projects are capped at 250 kW and CSP is capped at 500 kW.

Tier 3 projects include all systems larger than the Tier 2 caps, up to 5 MW on O`ahu and 2.72 MW on Maui and Hawai`i. No wind projects on Maui or Hawai`i are allowed in Tier 3.

In November 2010, the state Public Utilities Commission opened Tiers 1 and 2, which saw little action until late last year, as the opening of Tier 3 neared. Then the applications for Tier 2 came flooding in, and on the Big Island, they came so fast they left no capacity at all for Tier 3 projects.

A developer in Ocean View submitted applications for 40 Tier 2 projects at once, according to Alohi Sun’s Michael Cole. That left Alohi Sun and three other Tier 3 projects out in the cold, in the reserve queue. (Projects that have been accepted to the FIT program are listed in the active queue.)

Alohi Sun is seeking a sublease of several acres seaward of the Keahole airport runway from the state Natural Energy Laboratory of Hawai`i Authority. In a presentation to NELHA’s board in January, Cole said the company expected to produce 4.2 million kilowatt hours/year. Its application under the FIT program is for 5 MW.

Cole told the board he thought many of the Ocean View projects were going to fall through and that he hoped the issue would resolve itself in the next few weeks.

“As soon as we proceed to the ‘active’ queue, we can move forward,” Cole told the board.

The board unanimously approved the project in concept, but as of last month, all four Tier 3 projects in HELCO’s reserve queue were still waiting for space to open up.

Across the state, nearly 80 projects totaling more than 103 MW are in the reserve queue, mostly in Tiers 2 and 3. Although the FIT program has about 3.5 MW in available capacity, most of that has been allocated to Tier 1.

For now, space may open up in one of two ways: Projects in the active queue may fall out or the PUC may order an increase in the program’s capacity. Under the PUC’s 2009 order establishing the FIT program, the Hawaiian Electric companies must file a reexamination report two years after the effective date of the first FIT tariff, which was in November 2010.

“The commission shall thereafter conduct periodic reexaminations every three years,” the order states.

Alohi Sun, which was first in line for a Tier 3 project on Hawai`i island, has been waiting since December. So how long can it hold out?

“That’s a very good question,” Cole told Environment Hawai`i. He says that a PUC decision to add capacity to the program is at least a year away. For now, he is waiting for projects to shake out of the Tier 2 queue.

According to Cully Judd, owner of Inter-Island Solar Supply, some solar projects can hold out for only a few months without grid access before they fold.

Ron Richmond, business development manager at Inter-Island, also questions whether all of the projects in the active queue are ready to go or are just squatting.

“That’s what happens when you have caps. There shouldn’t be any,” he says. However, unless those projects meet certain HECO deadlines, they’ll eventually be rejected, he adds.

Harry Judd, the independent observer overseeing the feed-in-tariff program, did not respond to questions about queue management by press time.

Reliability Standards Working Group

Whether or not the PUC increases the capacity of the FIT program may depend on what, if anything, emerges from its reliability standards working group.

The group, which grew out of the FIT docket, was established to vet and address claims made by the Hawaiian Electric companies in 2010 that they could not integrate any more renewable energy on the outer islands without harming their grids. Now including more than 20 representatives from various entities, the group has held several meetings over the past year, most of them mediated by an independent facilitator.

Although the PUC has opened a separate docket to cover the group’s activities, the commission conceived it as an informal process, says Isaac Moriwake, an attorney with Earthjustice who represents the Hawai`i Solar Energy Association. “So there’s been a lot of meetings, but no filings,” he says.

After a year of subgroup meetings, which included a lot of talk and rehashing of problems, members are finally getting an idea of what can be achieved and have begun sketching out work plans, he says.

“Obviously we were swimming around for a while. HECO did not seem that interested in finding a solution,” he says.

The group has decided to focus on capacity, interconnection procedures, and pricing, and has established a subcommittee to devise reliability standards, a task, Moriwake says, akin to “trying to squeeze a balloon or put your arm around sand.”

The North American Electric Reliability Corporation (NERC), which establishes and enforces reliability standards on the mainland, may provide a template, he says. NERC’s standards go down to a very technical level and are “hundreds and hundreds of pages” long, but they may help the Hawai`i group put on paper just what constitutes ‘reliability.’ “Now it’s a complete black box,” he says.

The group is also trying to address curtailment of renewable energy by utilities when the electricity demand is low. In Hawai`i, utilities are shutting wind off at night, presumably to protect their grids.

“How do we resolve that? We’re basically throwing away clean energy,” Moriwake says. “Why don’t we start paying people for lost revenue or create some kind of transparent policy?”

Finally, the group is exploring “ancillary services,” which basically means all other things that make the grid more flexible and keep it afloat.

Moriwake seems to expect little help from the utilities in resolving these issues, noting that while they claim their grids can’t handle more renewable power, “they are furiously working with other developers to put in big projects like Big Wind. They have their agenda and FIT is not at the top of their list.”

Once the PUC completes its two-year review of the program, it may or may not release another chunk of capacity. But if the reliability standards working group finds that no other projects should be allowed, that issue is moot, he says.

Whether or not the group will be ready to make such a recommendation in time is unclear. Moriwake says that with regard to the group’s overall goal of finding solutions in a short time frame, it hasn’t made any progress.

— Teresa Dawson

Volume 22, Number 10 April 2012

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