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Hawaiian Electric objects to conditions on Kapolei battery project

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                                A rendering shows what the Kapolei Energy Storage Project could look like, but with PUC conditions “the project might not be able to move forward as planned.”


    A rendering shows what the Kapolei Energy Storage Project could look like, but with PUC conditions “the project might not be able to move forward as planned.”

Hawaiian Electric has filed a motion asking the state Public Utilities Commission to reconsider the operational and financial conditions the agency has attached to its approval of the Kapolei Energy Storage project.

The PUC in late April approved the project — considered by many as key to keeping the lights on when Oahu’s coal plant retires next fall — with nine conditions.

Hawaiian Electric on Monday objected to four out of the nine conditions, in particular, which it says are “highly problematic” and should be reconsidered, removed or modified, or else the project might not be able to move forward as planned. The utility requests that the PUC promptly issue a modified decision to enable the developer to bring the battery online in the summer of 2022, a schedule it says has already been delayed by the uncertainty of approvals.

The PUC on Tuesday said it was reviewing the motion, but had no further comments.

“All of us are aiming for the same goal, to get Hawaii off imported fossil fuels and to decarbonize our energy system,” said Scott Seu, president and CEO of Hawaiian Electric in a statement. “Most of the time we’re in alignment with our regulators’ direction and we don’t take this action lightly, but this is one of the infrequent times we disagree on tactics. We’re offering to be flexible and we hope the commission will make some adjustments that enable us to keep moving us toward our decarbonized future.”

Either the PUC or Hawaiian Electric can declare the Kapolei project’s Energy Storage Power Purchase Agreement — first submitted for consideration eight months ago — null and void.

The utility said it has demonstrated that the project would help lower customers’ bills, reduce greenhouse gas emissions and ensure the energy security and reliability of the Oahu grid, but that without modifications to the PUC order, it “will be nearly impossible for the project to move forward.”

Some of the conditions, Hawaiian Electric said, are not actually related to the battery project, but “appear to be an assembly of directives on issues still being considered in other dockets.”

The Kapolei Energy Storage project is a 185-MW lithium-ion battery project with 565 megawatt-hours of storage planned on industrial land, with support from the local neighborhood board.

San Francisco-based developer Plus Power said it would connect to a critical Hawaiian Electric substation and provide load shifting and fast-frequency response services, plus improve grid reliability. If completed, it would be the largest stand-alone battery storage system in the state.

The battery system is intended to help replace AES Hawaii, Oahu’s 180-megawatt coal plant, after its legally mandated retirement in September 2022.

Due to yearlong delays in getting a number of large-scale solar-plus-storage projects online, however, the battery will have to be charged primarily by fossil fuel-based sources, which the commissioners have for years said should be a “last resort.”

Among the conditions the PUC attached to its April 29 decision and order were that Hawaiian Electric not receive up to $1.7 million in performance incentives from “stage 1” renewable energy projects on Oahu. The Kapolei system is part of “stage 2” projects selected from a later round of bidding.

Also, that the utility ease grid restraints so more community-based and residential solar rooftop projects can go online, and that minimum thresholds for renewables be used for the battery project.

Additionally, that Hawaiian Electric retire another six fossil-fuel units at Waiau and Kahe as planned in stages from 2023 to 2028, without delays, or else the utility will have to foot the potentially higher costs instead of consumers.

The utility considered these four problematic, along with additional reporting requirements it said would be burdensome to comply with.

Hawaiian Electric said removing grid restraints must occur with physical upgrades to preserve stability, and that it will need to plan for an increase in circuit hosting capacity. Also, the utility said establishing a minimum threshold of renewables for the battery project was not practical, and could diminish the project’s economic benefits.

PLUS POWER, which filed a motion as Kapolei Energy Storage I LLC, said it, too, was concerned with the “burdensome conditions” placed on Hawaiian Electric. It also warned that further delays would place the project’s viability in jeopardy.

The developer added that if the commission does not issue a clear approval to Hawaiian Electric’s satisfaction in the next few weeks, then Kapolei Energy Storage may “be forced to decide to withdraw the Project due to substantial near-term financial obligations required to continue development.”

Plus Power said its withdrawal would “have a chilling effect” on other renew­- able energy projects, and on all investment in Hawaii subject to the PUC’s approval, given that the international business community is watching.

Hawaiian Electric had no objections to conditions No. 8 and No. 9 in the PUC’s order, which ask for an end-of-life management plan for Kapolei Energy Storage, and that the developer’s daily delay damages go to ratepayers.

The utility, however, said the commission should strike certain words from its decision and order that “serve to impugn Hawaiian Electric’s integrity.”

Among phrases that Hawaiian Electric wants removed are “appalling failures” to consider alternative to the project, “willful disregard” of the commission’s guidance and “negligence” in preparing for the retirement of the AES Hawaii coal plant.

Earthjustice, a nonprofit environmental law group, lauded the PUC’s order for prioritizing renewable energy projects in order “to avoid the financial and environmental disaster of filling a giant battery with oil power.”

“HECO should be doing everything it can to maximize the project’s potential, instead of threatening to pull the plug on the deal and put ratepayers and the grid at risk,” said Earthjustice attorney Kylie Wager Cruz in a statement.

Marco Mangelsdorf, president of ProVision Solar in Hilo, said this latest back-and-forth appears to be a “high-stakes game of chicken.”

“Over the course of the past 21 years, I’m struck by how this particular commission is daring to challenge Hawaiian Electric like no previous commission has on both substance and process, an effort and action that many of us in the energy field in the state support,” said Mangelsdorf in an email. “In a strategic sense, the commissioners laid down the gauntlet by their conditional approval of the KES (Energy Storage Power Purchase Agreement). To substantially cave before HECO’s motion to reconsider and stay the D&O would clobber the credibility and gravitas of this commission.”

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