Lessons From Hawaii:The Journey To 100% Renewable Grids

ARENA Insights Forum, June 25, 2019

Lorraine H. AkibaFormer Commissioner, Hawaii Public Utilities Commissionand President/CEO, LHA Ventures

Hawaii Electric Systems – 4 Electric Utilities; 6 Separate Grids; % Renewable

Oʻahu

Molokaʻi

HawaiʻiLanaʻi

Maui34%

21%

42%

57%

%Renewable

Kauaʻi Island Utility CooperativeSystem Peak: 75 MW77 MW PV, 33 MW AC PV w/ 113 MWh storage, 7 MW Biomass, 9 MWHydro (14 MW AC PV, 70 MWh storage under construction)

Installed PV≡ 103% of System Peak

Maui ElectricMaui System Peak: 199 MW110 MW PV, 72 MW Wind (60 MW more PV & storage under review)

Installed PV & Wind≡ 91% of System Peak

Lana’i System Peak: 5.4 MW2.8 MW PV (52% of System Peak)

Moloka’i System Peak: 5.9 MW2.2 MW PV (37% of System Peak)(+2.64 MWac PV under review)

Hawaiian ElectricSystem Peak: 1,209 MW502 MW PV, 99 MW Wind, 69 MW WTE(220 MW more under review)

Installed PV & Wind≡ 50% of System Peak

Hawaiʻi Electric LightSystem Peak: 191 MW90 MW PV, 32 MW Wind, 38 MW Geothermal, 16 MW Hydro(50 MW more under review)Installed PV & Wind

≡ 64% of SystemPeak

Kauaʻi

Policy and Regulatory Reforms toAchieve Hawaii’s Clean Energy Future

• Recent PUC directives and orders to Hawaii’s utilities to implement new business models to become a world leading operator of a high renewable energy resource grid with affordable access for all customers

• Regulatory policies and pricing also need to reflect these new business models with new incentives to achieve Hawaii’s clean energy future

• Review and revision of pricing of energy services to reflect new business and technical demands

• On July 1, 2015 Hawaii adopted a renewable portfolio standard of 30% by 2020, 70% by 2040, and 100% by 2045

• Recent legislation enacted into law July 1, 2018 requires 100% decarbonizationand zero emissions by 2045

• PUC is investigating the implementation of performance based regulation in Docket 2018-0088 4

Envision the Integrated Grid of the Future

• Hawaii is the living laboratory for the integrated grid of the future to achieve the 100% renewable energy portfolio standard and 100% decarbonization

• Implementing new programs like community renewables to give all customers access to renewable energy

• Implementing real time DER actions and combining the tools of both traditional central plant utility scale and decentralized distribution generation models

• Achieving an integrated energy network through grid modernization and a shared integrated grid with water, telecommunications and electrification of transportation

• Regulating in a time of innovation includes empowered customers, dynamic markets and sustainable infrastructure

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Future Trends and ActionsTransforming the Energy Industry

• Advances in technology lead to consumerization of energy and new wave of utility customer engagement solutions

• Advanced usage of data analytics for energy management services and operations of the grid

• With the internet of things (“IOT”), utilities become energy management service providers to customers and fill the role of advisor and facilitator of all things energy

• Increased electrification of “Smart Cities” and smart transportation including autonomous mobility

• Utilities assume dynamic roles as conductors of the complex orchestra that makes up the integrated grid

• Energy is becoming more local. Community and utility engagement with community renewables, integrated energy districts (microgrids), EE and DR

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Roles of Digital Utilities of the Future• The digital economy is being driven by technology developments including open

cloud interoperable software platforms and grid control technology

• Big data analytics and technology tools allow for real time visualization and operation to help integrate more intermittent renewable energy resources and DER onto the grid

• We are moving from the digital economy to the virtual economy with development and usage of AI (artificial intelligence), sensors, drones, and machine to machine learning tools

• Blockchain technology and transactive energy transformation

• Utilities will need to leverage and facilitate usage of information and communications technologies across energy, water and transportation sectors

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Tesla PPA: 52 MWh storage, capable of providing 13 MW at 13.9 cents / kWh

AES PPA 1: 100 MWh storage, capable ofproviding 20 MW at 11 cents / kWh

AES PPA 2: 70 MWh storage, capable ofproviding 20 MW at 10.85 cents / kWh

HECO Solar and Storage PPAs

u Recent RFPs subject to approval in Docket 2017-0352 u Phase 1 complete and Phase 2 pendingu Goal: replace all fossil fuel generation to reach 100% renewable by 2045u On March 27, 2019, six grid scale solar plus battery storage projects were

approved for the islands of Oahu, Maui and Hawaii island and represent the largest and lowest cost portfolio of renewable energy resources at one time for the state and firm dispatchable renewable energy

u Projects add 247 MW of solar energy and 1 GW hour of storage-Each project has battery capacity to store four hours of energy-Six projects can power 105,000 homes per year and eliminate 48 million

gallons of imported fossil fuels

HECO Solar and Storage PPAs

u Ho’ohana Solar 1, by 174 Power Global, 52MW /208MWh at $0.10 per kWh, Oahu

u Mililani I Solar, by Clearway, 39MW /156MWh at $0.09 per kWh, Oahuu Waiawa Solar, by Clearway, 36MW /144MWh at $0.10 per kWh, Oahuu Waikoloa Solar, by AES, 30MW /120MWh at $0.08 per kWh, Hawaii

islandu Hale Kuawehi, by Innergex, 30MW /120MWh at $0.09 per kWh, Hawaii

islandu Kuihelani Solar, by AES, 60MW /240MWh at $0.08 per kWh, Maui

PUC Orders Address DER Interconnection and New Customer Options

• Interconnection of Energy Storage Systems (Docket No. 2014-0130)• Storage systems will be reviewed for safety and reliability

• Resolution of further technical issues moved to DER docket

• Distributed Energy Resources Policy Docket (Docket No. 2014-0192)• Established to investigate technical, economic, and policy issues

• Opening order highlighted 3 key objectives:

1) Clear interconnection backlog

2) Enable DER market growth

3) Create new DER marketchoices

• Included Staff Paper and Proposal

• Continues work started by stakeholders in the Reliability Standards Working Group (RSWG)

• These various orders in the DER docket proceeding are aimed at evolving and migrating from the traditional net metering to a grid services market and reflect the DER market transition underway in Hawaii

• October 2015 Order 33958 approves two new rooftop PV programs for HECO customers to facilitate transition to long term technical and policy solutions that support continued distributed energy resources on the grid

• Customers given more choices and opportunities to utilize new energy storage technology on the customer side of the meter

• Grid supply option with bill credit at fixed rates based on wholesale rates for PV at approximately 15 cents per kwh on Oahu and Big Island, 17 cents per kwh on Maui, 24 cents per kwh on Molokai and 28 cents per kwh on Lanai.

• Self supply option designed for customers with rooftop PV systems and energy storage; expedited review and approval for interconnection

• KIUC customers already on similar schedule Q rates for NEM

• December 9, 2016 Order 34206 addressed further changes to the DER programs with Phase 2 technical and market track issues

• Technical track• Hosting capacity analysis• Technical improvements to DER tariffs• Modifications to applicable Rule 14H interconnection standards

• Market track• Improving efficiency and transparency of interconnection process• Market improvements to DER tariffs• Develop market structures and successor rate designs to improve DER value on each island

grid

• February 5, 2018 Order 35266 approved Smart Export tariff and Customer Grid Supply Plus Storage (CGS+) tariff revisions with appropriate program capacity caps

• New bill credit fixed rates for Smart Export with no credit during peak overgeneration period for solar from 9 a.m. until 4 p.m. Oahu: 14.97 cents per kwh; Big Island (Hawaii): 11 cents per kwh; Maui: 14.1 cents per kwh; Molokai: 16.64 cents per kwh; and Lanai: 20.79 cents per kwh

• CGS+ program allows HECO to measure and monitor and control CGS+ systems with revised bill credit fixed rates at 10.8 cents per kwh on Oahu, 10.55 cents per kwh on the Big Island (Hawaii), 12.17 cents per kwh on Maui, 16.77 cents per kwh on Molokai, and 20.8 cents per kwh on Lanai

Demand Response - Docket No. 2015-0412• The HECO Companies first set of comprehensive DR Portfolio Plans approved on

January 25, 2018

• Significant stakeholder input and engagement through technical working groups comprised of industry and community representatives with analysis and recommendations gathered from 2 years of meetings

• Core efforts include:• (a) identify system response requirements;• (b) define grid service needs in technology-neutral terms;• (c) model costs of requisite ancillary services (avoided cost basis);• (d) determine DR potential to meet said ancillary services

• HECO identified 4 broad ancillary service tariff categories: Fast Frequency Response; Regulating Reserves; Replacement Reserves; and Capacity.

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• Under each of these tariffs, more granular service riders can be included:

• FFR1 and FFR2

• RegUp/RegDown

• Non-spin Auto Response

• Capacity services including time-of-use and PV curtailment

• Broad open platform technology approach using third party DR aggregators and customer sited energy storage systems and EVs

Grid Modernization - Docket No. 2017-0226

u Hawaii PUC issues Order 34281 in Docket 2016-0087 which rejected w/out prejudice the HECO Smart Grid Foundation Project and outlined concerns regarding cost effectiveness, how the project would support renewable and DER integration, risks of technology obsolescence and stranded costs, and the pace of implementation of the “smart grid”.

u The commission ordered the utility to develop a holistic grid modernization strategy including not just sound technology solutions and tools but also providing new business models, new regulatory approaches, and the emergence of new providers to facilitate increasingly innovative solutions

Grid Modernization Guidance

u Grid modernization guidance in April 2014 when the Hawaii PUC issued the seminal white paper and strategic road map for the utilities, “Commission’s Inclinations on the Future of Hawaii’s Electric Utilities”

u The Inclinations and the corresponding orders in 4 separate dockets initiated proceedings addressing:

1) Integrated resource planning;2) Migrating from net metering to a grid services market;3) Launching community renewables (community solar);4) Growing demand response capabilities; and5) Aligning cost recovery with performance incentive mechanisms and new

performance metrics

• Integrated Planning through PSIP and DGIP and Grid Modernization dockets

• Integrated energy systems planning is a must to achieve the 100% RPS goal• Grid Modernization as Part of the Regulatory Framework• DER Investigation and Grid Modernization• Demand Response and Grid Modernization

• After receiving input from stakeholders, HECO filed its final grid modernization strategy on August 29, 2017, in Docket No. 2017-0226

• On February 7, 2018, Order 35268 gave final approval for the HECO grid modernization plan focusing on:

1) use of advanced inverter technology for rooftop PV2) expanded use of voltage management tools, especially on circuits with heavy solar

penetration3) enhanced outage management and notification technology4) strategic deployment of AMI rather than blanket system wide deployment; which will

enhance sensing and monitoring functions to work with DR portfolio plan actions and implementation

HECO Integrated Grid Plan

u In Docket 2018-0165 the Hawaii PUC reviewed Hawaiian Electric’sIntegrated Grid Plan (IGP) Report filed in July 2018 to provide guidance anddirectives where necessary and appropriate regarding the integrated gridplanning processu In March 2019 the first phase of HECO’s four year IGP was approved and authorized an $86.3 million expenditure to install digital technology across all of its service territoriesu Allows the utility to develop a dynamic high technology open platform for itsgrids that can provide real time data on two-way power systemsu Will help expand amount of private rooftop solar including storage, advancedmeters and smart inverter usage to provide demand response tools andancillary services to the grid

Community-based Renewable Energy (CBRE)• Order 34388 and CBRE Program Framework issued on February 10, 2017, in

Docket No. 2015-0389 identified key components and parameters of successful CBRE program and tariff

• Flexible structure to allow for business model innovation (any party can own and operate CBRE facility)

• Time-differentiated credit rates across three time periods:• Mid-day (9am to 5pm)• On Peak (5pm to 10pm)• Off Peak (10pm to 9am)

• Competitive procurement examined (reverse auction)

• Potential to include community storage paired with solar

• Focus on access and participation by underserved customers including renters, multi-family unit dwellers, and LMI

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• Guiding Principles for Policies• Accessibility and affordability• Community involvement and engagement• Consumer protection• Sustainability and flexibility• Integration into and compatibility with existing programs

• On December 22, 2017, Order 35137 adopts the final Community Based Renewable Energy Program Framework for the HECO companies and directs the utility to file the respective program tariffs consistent with the framework

• KIUC also filed its tariff filings consistent with its 2015 CBRE Program Proposal

• Main interest in the CBRE tariff has been amongst large customers including the counties and municipalities. Great potential also for low income community solar with storage and microgrids for resilience

• Maui County issued a CBRE request for proposals seeking bids from third parties to develop CBRE projects on county lands and buildings

• C&C Honolulu is also pursuing possible CBRE projects in conjunction with its community resilience planning actions as one of the 100 Resilient Cities

Other Key PUC dockets

u Hawaii PUC is investigating the implementation of performancebased regulation and the establishment of performance metrics inDocket 2018-0088

u Hawaii PUC Docket 2018-0163 is underway to provide the regulatoryframework for the establishment of microgrid services tariff rules

u Hawaii PUC reviewing Hawaiian Electric’s electrification oftransportation (EOT) strategic roadmap filed in March 2018 andupdated on November 29, 2018 in Docket 2016-0168. The proposedEOT roadmap is available at www.hawaiianelectric.com/EoT

We have everything we needto change our energy culture.

Mahalo!

For any questions, please contact: lhakiba@gmail.com

Lorraine H. Akiba, Former CommissionerHawaii Public Utilities Commission and

President/CEO, LHA Ventures37