Public Utilities Commission Chair Randy Iwase blasted Hawaiian Electric Co. on Wednesday for terminating a contract for three solar farms on Oahu.
“I am extremely disappointed,” Iwase said. “Over 100 megawatts they eliminated. Over 100 megawatts in one fell swoop. Three projects under 14 cents a kilowatt-hour, gone. That is not a momentum toward achieving renewable energy goals on this island.”
Hawaiian Electric Co. cancels contracts for utility-scale renewable energy projects due to developers not meeting deadlines.
Solar on Oahu
>> 50-megawatt Kawailoa Solar, to be built in Haleiwa
>> 15-megawatt Lanikuhana Solar, to be built southwest of Mililani
>> 47-megawatt Waiawa PV, being built in Waipio
Biomass on Big Island
>> 21.5-megawatt Hu Honua Bioenergy
Hawaii has a goal of generating 100 percent of its electricity from renewable sources by 2045.
HECO filed a formal letter last week to end its contract with SunEdison Inc. for three utility-scale solar facilities on Oahu totaling 112 megawatts. The solar farms were set to go online by the end of the year and would have sold solar power to HECO for approximately 14 cents a kilowatt-hour for the duration of their 22-year life span.
“Hawaiian Electric: No more talk. You come up with something concrete,” Iwase said. “Tell us how you are going to get 100 megawatts of renewable energy online ready to go, at less than 14 cents per kilowatt-hour, by December 2016.”
On Tuesday, Hawaiian Electric’s Big Island subsidiary canceled another renewable energy project. Hawaiian Electric Light Co. said in a filing with the state PUC it will terminate a contract with Hu Honua Bioenergy, which was building a 21.5-megawatt biomass power station to burn eucalyptus and other plants.
HECO said both independent power producers’ financial situation and failure to meet project deadlines caused the utility to terminate the contracts.
SunEdison has been facing financial difficulties. The Maryland Heights, Mo.-based solar and wind power provider lost 92 percent of its market value in the last year.
SunEdison was in the process of selling the three Oahu solar farms and other projects to pay off $336 million of debt. The company said it reached a sale agreement in December with D.E. Shaw Group, Madison Dearborn Capital Partners IV LP and Northwestern University.
“SunEdison missed multiple deadlines throughout the process, did not provide adequate assurances that it could secure financing to develop these projects, and did not propose viable options to address the significant risks to our customers of not securing lower-cost renewable energy,” said Darren Pai, HECO spokesman. “SunEdison has known for over a month that we had the right to terminate and were considering termination of the contract.”
Pai said Hu Honua was originally expected to start serving customers last month. The project has been delayed and has no ability to begin operations in the near future, Pai said. Last July, Hu Honua failed to meet a critical construction milestone, to pass a “boiler hydro test,” that was “guaranteed” in their contract, he said.
“Hawaiian Electric: No more talk. You come up with something concrete.”
“We’ve tried to work with (Hu Honua) and although we had the right to terminate the contract last November (2015), we provided them time to offer revised contract terms – such as lower pricing — that would benefit our customers,” Pai said. “However, they have not done so.”
The contracted price at Hu Honua is 25.3 cents a kilowatt-hour, Pai said.
Both SunEdison and Hu Honua said they have invested millions in the projects.
John Sylvia, CEO of Hu Honua, said the company has spent $100 million on the plant, which is halfway done.
SunEdison said it has invested $42 million in the three solar projects. One of the projects, Waiawa PV, was already under construction, with workers installing 11,000 metal structural posts on 150 acres, laying nearly 68,000 feet of underground wiring and mounting 1,240 solar panels.
“(HECO) you have workers on site and you walked from the project,” Iwase said. “Hopefully, it is not a waste of material that is on the site.”
Both developers plan to challenge HECO’s decision. Sylvia said Hu Honua plans to submit a response to HECO by Tuesday.
SunEdison said it is still committed to its three solar projects. The three solar-energy facilities include 50-megawatt Kawailoa Solar, to be built in Haleiwa; 15-megawatt Lanikuhana Solar, to be built southwest of Mililani; and 47-megawatt Waiawa PV, being built in Waipio.
“SunEdison is challenging the termination of the power purchase agreements for the Waipio, Mililani and Kawailoa solar projects. Upon a comprehensive review of the facts and circumstances relating to the PPA requirements, we do not believe we have missed the milestones,” said SunEdison spokeswoman Crystal Kua in an email.
Iwase, the PUC chief, said he wants to know why HECO found SunEdison’s buyers unfit to take over.
“We’re going to look at it very closely to see if there are good compelling reasons why Hawaiian Electric would have terminated the deal,” Iwase said. “Whether they had good cause for not allowing someone to step into the shoes of SunEdison. Part of that discussion is the person that was going to stand in the shoes. Were they ready to proceed with the project?”
Iwase said he was disappointed because HECO requested a waiver from the competitive bidding process to choose the independent power producers. To speed up the approval process for seven projects, HECO asked the PUC in 2014 to waive the usual requirement for competitive bidding. The PUC rejected three of the seven projects. Now HECO has canceled the contract for three others, leaving only one still active.
“A lot of thought went into this,” Iwase said. “We culled it down to four projects after careful review. (HECO) you asked for the waiver projects. The waiver from the competitive bidding requirements, because you felt this was the best way to get the best applicants.”
One of the solar projects the PUC rejected was proposed by NextEra Energy Inc., the Florida-based company working to buy HECO’s parent company Hawaiian Electric Industries. The PUC is currently reviewing the proposed $4.3 billion sale.
“(NextEra) came in at a higher costs, despite all of their proclamations,” Iwase said. “They came in at a higher costs.”
One lawmaker pointed out that HECO is proposing additional investments in fossil fuel power generation while canceling contracts for renewable energy generation. HECO said Tuesday it wants to replace three older oil-fired steam generator units at the Kahe Generating Station with a new system that would run on liquefied natural gas. Last month, HECO applied to increase the electricity supplied by AES Hawaii — the only coal-fired plant on Oahu — to 189 megawatts from 180 megawatts.
“When the utility kills cheaper renewable projects to announce new fossil fuel plants, it sounds bad,” said Rep. Chris Lee (D, Kailua-Waimanalo). “But worse, it could mean the utility is actually killing off competition from cheaper renewable generators that would have competed with its own fossil fuel plants which it wants to maximize profits from.”