Saturday, January 31, 2009

Gaining Host Community Approval for Renewable Energy Facilities

Local opposition to siting renewable energy facilities has the potential to derail Hawaii’s ambitious goals for converting to 70% renewable energy use by 2030. Power generating facilities of significant capacity (e.g., over 1 MW), such as large windfarms, solar photovoltaic arrays, and biodiesel conversion plants, can impact residents view planes, create noise, occupy large land areas from other uses, emit trace odors or fumes, etc. The State has partnered with the U.S. Department of Energy in the “Hawaii Clean Energy Initiative” (HCEI) to showcase Hawaii as a leader in renewable energy usage. Besides keeping $18 billion a year at home that would otherwise be spent for imported oil, achieving HCEI goals would create thousands of high-skilled “green collar” jobs. But implementation of these goals will require siting many new renewable energy facilities near resident communities across the State, so the big question now is, “How do we achieve these goals?”

A useful example of how to address potential local opposition due to siting impacts is the Payments for Ecosystem Services (“PES”) model developed by the United Nations Environment Programme (UNEP) and used in recent years by the World Bank and Asian Development Bank for siting infrastructure projects in environmentally sensitive areas in developing countries. The PES model is used to promote equitable benefit sharing and sustainable resource management with communities that host development projects that impact their environment. In the PES model, the ecosystem host community negotiates an equitable agreement with the project developer to share in the economic benefits of a project, as recompense beyond the usual considerations of facility design, operation, amenities, and impact mitigation.

In a similar manner in Hawaii, communities that are hosts to renewable energy power generating facilities that impact their environment can share in the benefits with the utility company or project developer. Benefit sharing can be readily implemented through the convenient vehicle of applying discounts to metered electricity rates for residents in the host communities. This approach, which I call “Metered Benefit Sharing”, allows host communities in effect to partner with the utility company or project developer by sharing in the economic benefits of renewable energy power generating facilities sited in their communities. By encouraging communities to become proactive consumers (“prosumers”), Metered Benefit Sharing can change the so-called NIMBY syndrome (“not-in-my-backyard”) into PIMBY (“put-in-my-backyard”) cooperation.

The State Legislature should give the Public Utility Commission statutory authority to study the use of Metered Benefit Sharing, which might be used to change the attitudes of host communities to enable widespread siting of renewable energy generating facilities within the 2030 timetable for achieving the State's ambitious renewable energy goals. While sharing in the economic benefits, Hawaii residents can do their part to reduce imported oil costs and supply risks for all energy users in the State and promote the economic health and sustainable future of the State as a whole. For developers and investors, the Metered Benefit Sharing model can mitigate or eliminate risk that a project will be derailed, giving them an incentive to participate in achieving the State’s renewable energy goals.


  1. Jim Dator asked the question whether the Metered Benefit Sharing proposal is feasible if Hawaii’s utility company HECO gets out of electric power generation and becomes a power management company instead, as has been indicated in some articles in the press. Here is my response:

    My impression is that HECO does not expect to get out of electric power generation "entirely", or even mostly by 2030. HECO has publicly targeted to have at least 40% of electric power transmitted through its grid in 2030 come from renewable energy sources, whether its own or from independent power producers (IPPs). My impression is that HECO expects perhaps half (20%) of the RE total to come from its own sources, and the majority of the other half to come from IPPs of over 1MW capacity. HECO is now wrestling with the issue of whether the IPPs should be required to have their own on-site storage for intermittent power generation, or whether HECO should build additional electric storage capacity for the IPPs into the grid and ratebase the costs.

    As for individual home or small business ("rooftop") cogeneration under 1 MW, my impression is that HECO does not expect it to be a significant part of the total baseload power mix by 2030. This is because not only is rooftop power intermittent, but also the amount of power that individuals will choose to sell back into the grid is totally discretionary, i.e., a personal choice whether to use most of the power for themselves or sell it to HECO at discounted feed-in tariff rates.

    The cap on feeding-in individual cogenerated power has recently been raised by the PUC to 2% in relation to total baseload. It may be raised higher in future years if a financing vehicle is put together to make it easier for individuals to have individual arrays installed. Rooftop power is still disproportionately expensive to install, about $3,000 per KW versus $500 per KW of utility power, so it cannot be paid back from feed-in tariffs unless enormous subsidies are provided and/or long-term debt financing is arranged.

    Even if sufficient subsidies and financing are put together, I think HECO expects that most individuals will probably use the rooftop power themselves (to displace usage from HECO at 31 cents/KW) rather than sell it into the grid at discounted feed-in rates. In the unlikely event that a lot of rooftop power is sold into the grid, once the feed-in total reaches 5% the rooftop intermittency can have negative impacts on the stability of the grid, and HECO will have to decide whether to accommodate it by adding expensive electric storage capacity to the grid. If it does, the costs will be ratebased into electric rates anyway.

    So, bottom line, I would guess that HECO's view is that 95% of its electric baseload capacity in 2030 is still expected to come from HECO and IPP power generation, and any rooftop generation may be offset by ratebased storage costs. So the Metered Benefit Sharing model to offer discounted electric rates to host communities for siting RE facilities for 40% of the baseload total would still makes sense.

    BTW, in the 2007 PUC hearings on the Community Benefits Package for Waianae proposed by HECO for siting the Campbell Industrial Park biodiesel plant, the amount of discount offered was 8% of electric rates, i.e., about 2.5 cents on 31 cents/KW. Assuming HECO's cost of generating or IPP purchasing is in the 15 cents to 20 cents/KW range, this would represent a benefit sharing of about 20% of net profit.

  2. Great post. Jay Fidell today indicated that residential PV owners essentially pay for the interface with HECO and get nothing back for feeding solar electricity into the greed. That needs to be adjusted. For several years now, Germany has mandated that home PV systems get more than 50 cents/kWh for their contribution. Germany is now #1 in PV.

  3. Is that "greed" or "grid"? Either one raises an apt point!

    Regarding Germany's electric power system, HECO has noted that the majority of Germany's baseload power (other than nuclear) comes from Scandanavian sources of hydropower, which although renewable is nevertheless "firm" baseload capacity. Also, the German grid is a mesh type system connected to many "firm" sources, and therefore can accomodate high levels of feed-in intermittent power like solar PV arrays.

    It thus seems that the generous subsidies Germany offers for installation of home solar PV systems is really a form of local economic stimulus for consumer-level contribution into a grid system that can readily accommodate high levels of intermittent power sources.

  4. For this circumstance, greed is more appropriate. Here, I always thought net metering meant at least getting back what you contributed. Do you know if Fidell is right?

  5. I think Jay Fidell's article was a bit unclear on this point. My understanding is that HECO's Net Metering Program approved by the PUC has allowed small PV systems of less than 50 KW capacity to essentially sell power into the grid at the full retail rate price to the customer (the meter is essentially run backwards). Producers of large systems (say, over 1 MW) typically must negotiate the purchase price with HECO in a Power Purchase Agreement (PPA). It would only be those mid-range systems larger than 50 KW but not large enough to negotiate a separate PPA with HECO which would have their net metering payback capped at 50 KW. Going forward, the net metering cap has recently been raised to 100 KW. And when the PUC approves a Feed-In Tariff structure after public hearings this Spring, the mid-size producers would be paid whatever rate tariff that has been set.

  6. Did everyone read in this morning's Advertiser the article about SuperFerry having to shutdown operations and leave the State because of a Supreme Court ruling that they must spend millions and months of effort preparing an EIS as proclaimed by their NIMBY opponents? Need I remind readers what $300 million in investment in SuperFerry going down the tubes does to the State's image as a place to do business? The NIMBY problem is a significant to economic progress in our Islands, as it is throughout the world. Oh, and need I point out that not a single whale suffered a brush with the SuperFerry in all the time that it was operating "illegally"?

    Lucky you live Hawaii, eh???