Why Maui should create its own utility
Maui County should create a new electric utility. Creating a rival electric utility is legal even though the HECO Companies have a monopoly. The New Utility could be county-owned, private or utilize a co-op model. It would be regulated by the Public Utilities Commission. The same funding streams that were available for KIUC to buy Kauai Electric from its Connecticut owners are still available today.
Over the past 10 years the global-installed solar photovoltaic capacity has grown at an astounding 44 percent increase per year. This has fueled vast technological advances and cost reductions.
Last week former Obama Energy Secretary Stephen Chu told National Public Radio of his vision. He would like utilities to start installing solar panels and batteries in people’s homes. “The [utility] will say, allow us to use your roof, allow us to use a little corner of your garage, and we will equip you with solar power. We own it. We maintain it. We’re responsible for it. You don’t have any out-of-pocket expenses. You just buy electricity at the same rate, or maybe even a lower rate.”
This is similar to a proposal presented by this author to the Molokai Clean Energy Initiative. The New Utility will be a facilitator. They would serve as a link between communities, financial institutions and private energy efficiency and renewable energy companies to install PV and batteries in peoples’ homes. The solar/battery facilities would be leased to customers while maintained by the installers.
On Maui the cost of solar-based electricity is about half of the cost of grid-based electricity. Batteries cost between 30-100 percent of the cost of the solar photovoltaic (PV) system. Thus a non-grid connected renewable energy system is cost effective on Maui today.
A New Utility could test the alternative model at a community level in places such as Hana, Lahaina or Molokai. To incentivize the solar/battery deal, free high-speed wi-fi would be offered to subscribers. The New Utility could also facilitate the leasing of electric vehicles.
On November 23, 2011 Hawaii Public Utilities Commission (PUC) Commissioner Michael Champley addressed the Rotary Club of Kihei-Wailea, Maui: “What the utility Maui Electric [and] Hawaii Electric are having to decide is, what is their long-term business model? Because their rates are going in one direction, up. And the competing new technology prices are going down.”
Maui’s electric rates are three to four times the national average. Rates are going up because MECO is pushing the Smart Grid concept that requires costly infrastructure: new generation, new transmission lines, computer software, new telecom systems and cyber-security systems.
Imagine the price of electricity eating up ever more of a family budget. Imagine the rising cost of doing business in Hawaii. Imagine not conducting price comparisons to see whether grid-based or stand-alone systems offer the greatest reliability at the least cost.
Time is on the New Utility side. Solar prices are decreasing in cost. According to the U.S. Department of Energy’s National Renewable Energy Labs, the installed price of solar is expected to fall 5-7 percent per year for several years. There is also a downward price trend for batteries.
Financial Arrangements
In early 2014 the Hawaii PUC plans to implement On-Bill Financing for homeowners, renters and small businesses. The program would allow customers to finance energy efficiency and renewable energy systems at no upfront cost. Customers simply pay a reduced monthly electric bill, part of which pays for the systems. Similar financial arrangements should be implemented for non-grid applications.
National firms like One Roof Energy, Sun Run (http://www.sunrunhome.com/) and Solar City have entered the Hawaii market. These solar brokerage firms and solar installers are being financed by major investors. They are offering fixed cost, no money down, long term leases for on-site systems that they maintain.
The Maui Electric Vehicle Alliance advocates for electric vehicles that can be leased from car companies for $200-300/month.
Everything is now in place for leaving the grid. The New Utility can offer customers security and peace of mind, knowing that a Maui-based firm will be serving as a one-stop shop facilitating the transition.
The Utility Response
Some may see this approach as somehow attacking the incumbent utility. It isn’t. First, HECO knew this problem was arriving on their door step. The threat of customer sited generation was fully anticipated by the utility.
On February 17, 2012 Hawaii Electric Industries (HEI) filed a report with the U.S. Securities and Exchange Commission. “Increasing competition and technological advances could cause HEI’s businesses to lose customers or render their operations obsolete. [ ] HECO and its subsidiaries face competition from IPPs [Independent Power Producers] and customer self−generation.”
HECO is a member of the Edison Electric Institute. In January 2013 the Edison Electric Institute released a Report titled “Disruptive Challenges.” “The combination of new technologies, increasing costs, and changing customer-usage trends allows us to consider alternative scenarios for how the future of the electric sector may develop. [ ] Today, a variety of disruptive technologies are emerging that may compete with utility-provided services. [ ] Disruptive forces, if not actively addressed, threaten the viability of old-line exposed industries.”
Second, HECO knew that State Regulators wanted to know whether Smart Grids make economic sense.
Last year the Public Utilities Commission (PUC) opened a regulatory proceeding for the HECO Companies to develop a Five Year Action Plan. The PUC specifically listed a number of issues that the HECO Companies were to address.
One of the Issues was: “Smart Grid Implementation. The Companies must analyze the comparative costs and benefits of whether adoption and utilization of a smart grid, including smart meters, should be completed by the Companies.”
On June 28, 2013 the HECO Companies submitted their Action Plan to the PUC. The Report contained no Smart Grid cost benefit analysis. Instead it stated: “Our comprehensive analysis into implementing Smart Grid technologies is designed to lead the Companies to adopt and utilize a Smart Grid, which also includes implementing advanced metering systems.”
Last week I asked HECO where the cost benefit analysis was in the Report. HECO Vice President Scott Seu said “We have to do that. [ ] We have to go ahead and file a Smart Grid Plan showing the cost benefit analysis. So we recognize that’s actually one of the first steps.”
It is time that some entity steps up to the plate to determine if there is a better bang for the buck than racing ahead with a billion dollar Smart Grid system at a time when there is a long-term statewide trend for decreasing electricity sales.
PUC regulation of the New Utility would facilitate a side-by-side comparison of reliability issues and costs issue associated with non-grid and utility-grid based electricity.
Multi-Utilities
The New Utility paradigm isn’t radical, it is being implemented elsewhere. Several utilities in the U.S., Europe and Australia offer their customers multiple utilities including electricity and internet.
NRG Energy, an 8,000 employee U.S. company operating in 11 states, has proposed doing away with the middle man (the grid). NRG proposes transitioning to on-site PV combined with natural gas turbines.