The Tokyo-based company that has been vying to bring liquefied natural gas to Hawaii wants to create a new utility company to do so, but Hawaiian Electric Co. is arguing the “unprecedented” move would create complexity, inefficiencies and risk in Hawaii’s energy grid.
JERA Americas, a subsidiary of Japan’s largest energy company, JERA Co., filed a notice of intent Friday with the Public Utilities Commission seeking approval to
establish a new Hawaii-based regulated wholesale power-generation company called GenCo that would own and operate the proposed power plant and supply liquefied natural gas, or LNG, to Oahu’s energy grid.
The company had
proposed a $2 billion, 500-megawatt, LNG-fueled plant and offshore infrastructure to state officials in March.
The PUC filing seeks a “certificate of public convenience and necessity,” which is a regulatory permit required to construct utilities and came the same day HECO was required to file a request for proposals for its integrated-grid planning.
HECO criticized JERA’s
application, alleging the company is attempting to circumvent the competitive bidding process.
“JERA is a deal pre-packaged by a for-profit, foreign-owned entity, presented as the only choice. It is not,” HECO said in its RFP letter to the commission. “There is no bidding and no competition for what would be one of the largest infrastructure projects in state history.
By moving ahead with
the arrangement that has been structured by JERA, Hawaii locks itself into a multibillion-dollar single-source contract that we will be committing this and future generations to pay.”
Gov. Josh Green supports JERA’s plan, according to a JERA news release Friday announcing the PUC filing.
“Energy has to become more affordable in Hawaii,” Green said in the release. “The status quo isn’t good enough anymore, and I believe Hawaii will benefit from competition and new ideas.”
The governor signed a nonbinding strategic partnering agreement with JERA in October and has been a strong proponent of bringing LNG to Oahu ever since.
Hawaii is in the midst of figuring out how it will reach 100% renewable energy and net-zero carbon emissions by 2045 while strengthening energy-grid reliability and lowering costs for ratepayers. Supporters of LNG claim it is a necessary “bridge fuel” that burns cleaner, could save ratepayers money and have its infrastructure reused for renewable fuel.
Opponents claim LNG would be more expensive, create more emissions when considering the its entire life cycle and thwart Hawaii’s progress and focus on renewable energy.
HECO CEO Scott Seu confirmed to the Honolulu Star-Advertiser Friday that the utility company and JERA had previously engaged in talks on how to work together, but the effort ultimately fell flat.
“We actually did spend a fair amount of time talking to JERA, really trying to understand what they were proposing and how we might be able to work together,” Seu said. “Ultimately, we weren’t able to figure that out. We’re not in any discussions with them at this time. Then they took the next step with their filing to the PUC.”
JERA’s plan is to provide power “under a regulatory framework” that would then be distributed to HECO to serve customers and operate its electric grid. JERA contends the proposed structure would provide more oversight because rates, operations, performance, financing and major capital investments would be subject to PUC oversight.
“Rather than relying principally on contractual protections negotiated at a single point in time, the Commission would retain continuing authority to oversee the prudence of investments, financing, operations, and rates throughout the life of the facilities,” JERA’s filing said, adding the structure “would provide regulated wholesale generation service within the existing integrated electric system, while preserving Hawaiian Electric’s existing retail responsibilities and franchise obligations.”
Seu said JERA’s proposal creates unneeded complexities to the current structure, which entails HECO working with energy producers directly to distribute energy to the grid. JERA’s proposal is not only unprecedented in Hawaii, he added, but on the U.S. mainland as well.
“Hawaii is a very small electric market, and there have been analyses done in the past, including recently, that have really questioned whether or not customers would see any real benefit if you were to split off a generation utility business from Hawaiian Electric, because we’re such a small market here,” Seu said. “There’s lots more questions than answers.”
HECO does think LNG should be analyzed, he said, adding there needs to be an unbiased and transparent analysis by entities that can do so objectively.
HECO’s filing asks for
any interested developer to propose plans for around 1,695 gigawatts of variable renewable energy, such as solar and wind, 463 megawatts of grid-forming sources and 111 megawatts of firm generating capacity. It also is seeking a separate expedited regulatory
approval to expand fuel-flexible firm generation on Oahu by up to 500 megawatts.
This expansion should be a “transparent, Commission-supervised forum” that seeks proposals from multiple bidders and is not tied to a specific project size or fuel source through an RFP process, the filing says.
This process would allow the PUC, the state Department of Commerce and Consumer Affairs’ Division of Consumer Advocacy and stakeholders “to evaluate whether additional firm, dispatchable, and fuel-flexible capacity is beneficial to customers and will support reliability, affordability, customer protection, fuel optionality, and Hawaii’s clean energy transition.”
Seu said he agrees with Green that “the status quo isn’t good enough,” arguing that HECO’s plan is the best way to drive competition and evaluate all options.
“Even as we are now proposing that we open up this new RFP, we want that to be an accelerated process,” he said. “We want to move things as quickly as we can so that we can really get to the answers sooner rather than later.”
