Honolulu Star-Advertiser Editorial: Hu Honua Suffers Regulatory Setback
July 27, 2020
As Hawaii builds its renewable energy future, there have been stumbles along the way. But few ventures have fallen as hard as the Hu Honua Bioenergy project, which would generate electricity by burning eucalyptus trees at a repurposed facility in Pepeekeo, Hawaii island.
The power plant was nearly ready to go — 99% complete and $350 million invested, according to the company. But earlier this month, it hit a regulatory roadblock that could turn what was once a promising renewable energy project into a white elephant.
On July 9, the state Public Utilities Commission (PUC) refused to grant Hawaiian Electric Light Co. (HELCO, now known as Hawaiian Electric) a waiver from the competitive bidding process, and dismissed without prejudice the amended power purchase agreement (PPA) between HELCO and Hu Honua Bioenergy (now known as Honua Ola).
Among its conclusions, the PUC noted that the renewable energy landscape has changed significantly since Hu Honua was proposed in 2008. Hawaiian Electric has been busy expanding its solar energy portfolio. The PUC recently approved six of seven PPAs, “including two on Hawaii Island, both 30 MW renewable facilities paired with a battery energy storage system (“BESS”) of 120 MW-hours (“MWh”), and which feature unit pricing of $0.08/kWh and $0.09/kWh, respectively.”
On paper, that sounds like a better deal than Honua’s project, which promised to generate 21.5 MW with an estimated pricing of $0.221/kWh, according to the PUC. (In a 38-page memorandum, Hu Honua strongly disputed this conclusion, saying the pricing comparisons are “erroneous and misleading.”)
In addition, Hawaiian Electric is pursuing 16 new solar-plus-storage or stand-alone storage projects, including three new projects on Hawaii island.
In other words, the renewable energy market has evolved and grown more competitive. And battery storage offers a challenge to one of the primary benefits of burning fuel: firm, dispatchable power that’s more reliable than a sunny day. If Honua wants to be a player, it needs to compete rather than get a waiver, the PUC said.
Fair enough. And the project has had its problems, including construction delays. Federal tax credits for the project — crucial to keeping costs low — seem to be in limbo, as a 2018 deadline for the plant to be operational has passed. Another wrinkle came from the Hawaii Supreme Court, which ruled last year that the PUC failed to explicitly consider the effects of greenhouse gas emissions.
Still, the Honua Ola project developers have reason to be aggrieved. The PUC previously had approved HELCO’s PPAs and a request for a waiver from the Competitive Bidding Framework, assurances the company said it relied on when it committed millions of dollars to the plant. They argue that many of the project’s unique benefits, including the superiority of its firm power and the development of a supporting agriculture industry, have been slighted.
In a request for reconsideration filed July 20, Hu Honua argued that the PUC “without notice or any due process killed a project that would generate hundreds of jobs and cost nearly $500 million to build … effectively telling investors that this State’s word cannot be trusted.”
It would be easy to find fault all around: Hu Honua for betting on a wood-burning power plant that would require a waiver from competition to succeed; and state regulators and Hawaiian Electric for allowing the project to get as far as it did without fair warning that the project’s foundations were growing shaky.
Honolulu Star-Advertiser, July 27, 2020: https://www.staradvertiser.com/2020/07/27/editorial/our-view/editorial-hu-honua-suffers-regulatory-setback/