In March, Environment Hawai`i provided details – to the extent they were available – of a state-administered program called GEMS, short for Green Energy Market Securitization. The program is intended, according to enabling legislation, to bring the blessings of solar power and other energy-efficiency and energy-saving technologies, to markets that have traditionally been underserved in this regard.
Since our report, the Hawai`i Green Infrastructure Authority, which oversees the GEMS program, has rolled out several new initiatives.
Small Business Loans
Perhaps the most significant is the expansion of eligibility for GEMS loans to include small businesses. This was proposed to the Public Utilities Commission on April 8. Recognizing that this category of consumers was not among those named as “underserved” when the Department of Business, Economic Development, and Tourism originally sought PUC approval for the GEMS program, DBEDT was now claiming that “financing available to small businesses is limited” and that “traditional underwriting criteria … hinder the ability of small businesses to access financing.”
“DBEDT does not intend to add small businesses to the critical underserved groups as identified in the Application or modify the metrics for ‘underserved’,” it states in the PUC filing. Still, it goes on to note that when the PUC approved the GEMS program last fall, the commission “did not restrict the GEMS Program from providing small businesses access to PV systems.”
The appendix that describes the “small business loan product” specifies that the minimum loan amount is to be $150,000, with a 20-year payback term. Eligible borrowers are described as “small businesses … that do not have investment grade ratings.”
In another notice to the PUC of a program change, on April 2, DBEDT announced it was expanding the range of technology that could be included in a GEMS-financed project to include now “Advanced Inverters,” “Smart Modules,” “Monitoring Devices,” “Other Technologies that Support PV Interconnection,” and/or “Physical Infrastructure to Support PV Installations.”
The HGIA justifies inclusion of such technologies by referring to another PUC docket, this one opened last August by the commission to investigate various issues raised by advances in Distributed Energy Resources (DER). Hawaiian Electric Industries, which owns the electric utilities on all islands but Kaua`i, submitted its proposal in that docket that would accommodate an expansion in the number of rooftop photovoltaic installations – which all but stopped in the islands in 2014, the result of HEI declaring that certain circuits were oversaturated with solar. But that expansion would come at a cost: customers who install solar would no longer get credit for unused power that is fed back into the grid (a practice known as Net Energy Metering), and electric rates governing distributed generation (DG, which in most cases is solar power) “must fairly allocate the fixed costs of the grid to all customers.” In addition, HEI is proposing putting new technological requirements on solar installations – increasing their cost substantially – such as advanced inverters, two-way communications between the utility and the customer, “and other elements of the modernized grid.”
The theme of fairness is picked up by the HGIA in its April 2 filing with the PUC. “In a market-based scenario, where consumers must pay for their choices, PV systems and PV-Related Technologies are selected based on function and cost. … In regards to the deployment of PV-Related Technologies for the GEMS Program, it is the understanding of the Authority that the motivation behind current and future interconnection requirements … is to reduce negative impacts to the distribution system that occur as a result of integrating distributed generation. So while the perception is that PV systems may cost more as a result of more advanced PV-Related Technologies, such costs may be necessary to expand the number of customers approved for interconnection. … Additionally, such costs also likely reflect costs that should be borne by the PV customer but are currently being borne by all ratepayers.”
On March 31, the HGIA sent to the PUC its plan for the 2016 fiscal year (July 1, 2015 through June 30, 2016).
The plan calls for about $80 million to be drawn from the $146 million remaining in the GEMS bank account (of $150 million raised through a bond sale last fall). That amount would be used to support installation of solar panels and other technologies on the roofs of homes, businesses, or non-profit entities. Administrative costs to support the HGIA are expected to run around $1 million.
But the plan submitted to the PUC does not agree with actions anticipated or called for in other documents obtained by Environment Hawai`i.
For example, in describing “administration and operating controls,” the plan states: “During this implementation phase of the GEMS Program, the [Hawai`i Green Infrastructure] Authority must seek approvals from its executive board for contracts [and] necessary program approvals…” However, several recent contracts were signed on behalf of the HGIA without having been approved by the board or even brought before the board for discussion.
On April 8, deputy attorney general Gregg Kinkley signed a contract on behalf of the HGIA allowing one of the principal GEMS contractors, Clean Power Finance (CPF Asset Management, LLC) to assign a large part of its responsibilities under an existing contract, signed last November, to Coronal Group, LLC. Although the HGIA board approved the CPF contract after the fact at its February 26 meeting, by that time, CPF and Coronal contract had already entered into their separate contract. At no time during the February 26 meeting was the HGIA board informed of this development, much less asked to consent to it.
(The CPF agreement, by the way, calls for CPF to “make available tax-advantaged power-purchase agreements” worth $65 million in GEMS nonprofit and commercial loans, “which would result in $100 million of clean energy systems funded.” Performance standards set in the original CPF agreement require at least 10 percent, or $6.5 million, of that amount to have been obligated through letters of commitment for GEMS loans from participating banks by June 30 of this year. Otherwise, HGIA and CPF are to develop a “Program Improvement Plan” by August 31. If no such plan is agreed to by that date, the contract may be terminated at either party’s request.)
Another contract that the state has entered into on the HGIA board’s behalf, without the board’s prior approval, is with the Electric & Gas Industries Association, Inc. (EGIA). Although Environment Hawai`i was unable to obtain a copy of the contract by our publication deadline, the association is tasked with vetting installers who want to participate in the GEMS program. A DBEDT website describing the benefits of becoming an approved solar installer links to a site maintained by EGIA. As of mid-May, five companies were on the approved installer list: Haleakala Solar, Hawai`i Energy Connection, Island Pacific Energy, Photonworks, and Trane.
But two years after passage of the legislation that created the GEMS program, it had yet to benefit the first customer. According to Alan Yonan, public information officer for DBEDT’s energy office, as of mid-May, “The Hawai`i Green Infrastructure Authority is actively working with several local nonprofit organizations to finalize loan applications. … The first loans are expected to be made in the near future.”
— Patricia Tummons
For Further Reading
Environment Hawai`i published several articles on the GEMS program in our March 2015 edition. It is available free of charge to current subscribers on our website: http://www.environment-hawaii.org. Non-subscribers may view these articles upon payment of a $10 fee for a two-day pass to our archives.
The documents in the PUC docket are also available for viewing. Go to the PUC website (www.puc.hawaii.gov) and then select the “Dockets” link in the upper right hand corner of the screen. When the Dockets page appears, enter “2014-0135” into the “Docket Quick Link” search function. Once the summary of the docket appears, click on the “Documents” tab to see a list of all filings in the docket.