Manager Suggests Various Changes to Improve Feed-in-Tariff Program

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The state’s feed-in-tariff (FIT) program is simply experiencing growing pains.

That’s the opinion of Harry Judd, the independent observer (IO) appointed by the state Public Utilities Commission to oversee the FIT program, launched in 2010 to facilitate the interconnection of renewable energy projects to grids controlled by the Hawaiian Electric companies.

In response to complaints about the status of applications and apparent lack of movement in the FIT queue, Judd submitted a status report to the PUC on May 23 detailing what he believed were the problems and possible solutions. His report expands on a motion for clarification regarding program administration, filed by HECO on May 4 to address many of the same queue management issues.

Rather than having to negotiate with utilities for a power purchase agreement, qualified FIT projects are guaranteed interconnection and standard rates for 20 years. Late last year, the program approached its 80 megawatt capacity, set by the PUC, leaving projects totaling more than 100 MW in the reserve queue.

The resulting competition among developers to maximize the number and size of projects that can be installed has led to complaints of parties “gaming” the FIT application process, among other things.

“Some applicants expressed concern that the queues appeared to be populated with multiple applications from a limited number of applicants, and that there appeared to be little effort by Hawaiian Electric Company or the IO to police the queues,” Judd wrote.

And in his review, Judd found they had reason for concern:

Some FIT applications were submitted without meeting the prerequisite of having submitted a building permit application to the county. Others reserved queue capacity with unrealistic development time frames, then demanded 180-day extensions (the maximum).

“Too many applications have gotten a queue position and then fail to be developed,” he wrote. Of the 76.5 MW of projects in the active queue, less than 5 MW had actually been installed.

Once a project meets all of the prerequisites – controlling a site, applying for a building permit, paying the required fees — the FIT program has no mechanism to track whether a project is being constructed, Judd wrote. As a result, an idle project can sit in the active queue until its allotted development period expires, which can be up to a year and a half in most cases.

In other cases, delays by HECO in determining whether or not a project required an interconnection requirements study (IRS) have kept some projects from moving forward.

“In some cases, applications have lingered for months without the initial determination of whether an IRS is needed, which is both contrary to the requirements of the Tariff and a frustration of the intended goals of the FIT program,” he wrote, adding that “too many applicants complained of slow responses by the HECO Customer Installation Service (CIS) personnel, after completion of projects.”

Judd also expressed his frustration with some of HECO’s efforts to help FIT applicants work around program requirements.

“It is apparent that neither HECO personnel nor developers fully embrace the concept of a Tariff program,” he wrote.

Judd described how HECO, in trying to accommodate the needs of applicants, had sought ways to allow the utilities to reach their development goals, even if they are inconsistent with FIT program requirements. In addition, applicants have misrepresented facts, attempted to change the size and completion dates of their projects after acceptance into the program, and submitted multiple projects for a single tax map key without permission, among other things.

At least one applicant, unhappy with program requirements, “attempted to acquire political influence and use threats to further a desired goal,” he wrote.

“It is understandable that individuals more accustomed to the traditional PPA [power purchase agreement] process, where negotiation of terms is the norm, would default to a familiar behavior. However, one goal of the FIT program is to be ‘plug and play’: either a project qualifies and is ‘shovel-ready’ or it is not,” he wrote.

Proposed Solutions

To address some of these problems, HECO proposed creating a single queue in which current FIT applicants were ranked by the time and date of their applications (rather than a mix of application dates and completion dates), and giving applicants who had not properly applied for a building permit a short grace period to do so. In general, HECO sought clarification from the PUC regarding the discretion its companies and the IO have “with regard to ensuring that only viable projects that meet program requirements are allowed to remain in the queue.”

With regard to building permits, Judd recommended simply removing projects that had not applied for one from the queue. Among other things, he also recommended the following:

  • Use the FIT website for communications and delivery of documents.
  • Outsource IRS determinations.
  • Set completion milestones for FIT projects and remove projects that fail to meet them.
  • Assign a HECO account representative and an alternate to respond to applicant requests for CIS.

Response to the recommendations has been mixed. Blue Planet Foundation supports the use of the FIT website to avoid bi-lateral discussions and accommodations with HECO. The Hawai`i Solar Energy Association agreed with the recommendation to consolidate the current FIT queue. However, it opposed setting milestones in this round, as well as the outsourcing of IRS determinations.

“[O]nly the HECO companies possess the full circuit data and modeling capability necessary to perform this determination,” association attorneys wrote in their June 12 filing with the PUC.

Whether the PUC adopts any of the IO’s or HECO’s recommendations, or those raised by other FIT docket parties in response, remains to be seen. The commission plans its first re-examination of the FIT program this fall.

***

Another Status Update:

Reliability Standards Working Group

In its report to the PUC, FIT program manager Harry Judd was clearly struggling with managing the more than 300 applicants seeking to develop renewable energy projects on O`ahu, Hawai`i, and in Maui County. Between trying to keep the queue populated only with diligent and qualified applicants, and ensuring that the Hawaiian Electric companies are helping rather than hurting the process, he has his hands full.

But he is not alone.

An offshoot of the PUC’s FIT docket — the Reliability Standards Working Group — has experienced some growing pains of its own, according to a June 1 report to the PUC by Alison Silverstein, the group’s independent facilitator.

On May 4, the PUC ordered Silverstein to submit a status report on the group’s progress toward reaching its goal of recommending standards, to help determine how the state can interconnect the maximum amount of renewable energy to the grid while preserving grid reliability.

Silverstein admits that the group got off to a “rocky start,” but says it has been working diligently in the past few months to reach its goals. The group held its first meeting last July and has met five times in person since then, meeting last on May 22.

In that time, the group has created seven subgroups and developed work plans for them (as well as for the group as a whole), and received several informational briefings.

The group’s Minimum Load and Curtailment subgroup designed two analyses of the Hawai`i Electric Light Company’s 2011 operations and wind curtailments, which were carried out by PUC consultant Brendan Kirby. The subgroup is working to do a similar study of Maui Electric Company’s grid operations.

It also prepared a scope of work for a study on ancillary services, which will be done by a Hawai`i Natural Energy Institute contractor, and created a glossary of terms.

The group is expected to complete its work by the end of the year and the PUC has asked it to develop a list of recommended reliability issues and/or related studies, if any, that would best be addressed in the PUC’s Integrated Resources Planning docket opened on March 1, 2012. It has also encouraged the group to evaluate and make recommendations on any technical issues that would inform the commission’s FIT re-examination.

While Silverstein assured the commission in her report that the RSWG has recently been working “with talent, conviction, enthusiasm and good will” to complete its projects, the state Division of Consumer Advocacy executive director Jeffrey Ono seemed to think more was needed. In a June 4 filing, he suggested that the PUC might want to identify deliverables that it would like to have from the RSWG.

If the intent of the RSWG process was to identify steps and establish measures to facilitate renewable energy development, the PUC might want to analyze the overall process and subgroup objectives to determine whether the process will meet the commission’s needs, he wrote.

“Without this review, it is not clear that the RSWG process will provide timely meaningful analyses regarding potential technical solutions and, at some later point, the cost impact for each solution and the time necessary to implement each solution for the commission to use in its decision-making process. While significant efforts and lengthy discussions have occurred, the progress in terms of providing the commission the wherewithal to make decisions on critical reliability measures is not entirely clear,” he wrote.

For Further Reading

Environment Hawai`i has published several articles (available at www.environment-hawaii.org) that will provide additional background on the FIT program Reliability Standards Working Group:

“Renewable Energy Projects Trickle In with Launch of Feed-in-Tariff Program,” December 2010;

“Utilities Propose Stricter Standards for Distributed Generation Facilities,” January 2011;

“New & Noteworthy: Powerful People,” July 2011;

“Group Meets to Resolve Impasse over Renewables,” October 2011;

“Renewable Energy Projects Languish as Feed-in-Tariff Program Maxes Out,” April 2012.

— Teresa Dawson

Volume 23, Number 1 July 2012

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