In a major blow to a controversial wood-burning power plant in the works for the Big Island for more than a decade, Hawaii utility regulators on Thursday denied a request by Honua Ola Bioenergy to let its Hu Honua project sidestep the competitive bidding process and enter a contract to sell power to Hawaiian Electric’s Big Island subsidiary.

The Hawaii Public Utilities Commission rejected Hu Honua’s argument that giving the project special treatment would serve the public interest by noting, among other things, that Hu Honua wanted to sell power to Hawaiian Electric for much more than the going rate for power from renewable plants.

The company said it has already invested $350 million in the project.

Hu Honua can’t sidestep the competitive bidding process, the Hawaii Public Utilities Commission said. Jason Armstrong/Civil Beat/2018

“At $0.08-0.09/kWh, the approved AES Waikoloa Solar and Hale Kuawehi projects are less than half of the Hu Honua Project’s effective levelized price estimate of $0.221/kWh,” the PUC wrote.

The commission’s ruling technically doesn’t prevent Hu Honua from moving forward; however, in a practical sense it could be the end of the project, which had also planned to lower its costs by taking advantage of a federal tax credit that it won’t have access to because of project delays.

For its part, Hu Honua indicated the project will pack its tent for the short term, at least.

The “Public Utility Commission’s decision results in imminent layoffs of 64 current Hu Honua employees and contractors and the loss of an additional 145 positions to be filled, consisting of ancillary jobs in trucking, forestry and support services on the Big Island,” the company said in a statement.

Hu Honua Price
The price Hu Honua is seeking to charge Hawaiian Electric for power is about twice what recently approved solar projects are charging, according to the Hawaii Public Utilities Commission. Hawaii PUC

Environmentalists, meanwhile, applauded the move.

“It’s a very good decision,” said Henry Curtis, executive director and vice president of the environmental organization Life of the Land. “I think it totally stops the project. They’re way overpriced.”

Hawaii’s energy policy calls for largely weaning itself from fossil fuel used to produce electricity by 2045. To that end, Hawaiian Electric has been issuing requests for proposals from third-party developers who would build primarily wind and solar farms and sell the power to Hawaiian Electric for a certain amount, approved by the commission.

These RFPs have attracted an enormous response. The latest round, for instance, led to 16 new projects being selected for Oahu alone under the competitive bidding process. But Hu Honua has been seeking permission to sidestep the bidding process.

Hu Honua’s project fits the state’s legal definition of a renewable energy project because it would burn biomass instead of a fossil fuel like oil, gas or coal. Still, environmentalists opposed the project, saying it still would generate greenhouse gas emissions.

Hu Honua has been in the works since 2008, and although it had gotten various approvals in that time, the project was marked by fits and starts. In 2016, for example, Hawaiian Electric terminated a contract — known as a power purchase agreement, or PPA — it had signed to buy power from Hu Honua saying the project had failed to meet construction milestones laid out in the contract.

In May 2019, Life of the Land scored a major victory when the Hawaii Supreme Court ruled that the Public Utilities Commission had improperly approved a new contract between Hawaiian Electric and Hu Honua by not considering greenhouse gas emissions the project would produce. That sent the matter back to the commission.

“A lot has changed since this project was first proposed 12 years ago and the renewable energy landscape and economics are dramatically different.” — Jim Kelly, Hawaiian Electric

In a statement issued late Thursday, Hu Honua blasted the commission for not letting it present evidence about greenhouse gas emissions and move forward.

“Hu Honua has been waiting for more than a year to demonstrate at the hearing that its plant operations will result in a significant reduction of GHG and bring numerous other benefits to Hawai’i Island,” the company said. “Instead, it appears that the PUC has opted to contravene the Supreme Court’s instructions to hold a hearing and to consider Hu Honua’s evidence on the reduction of GHG.

“The PUC’s action essentially reverses its two prior approvals of the PPA and waivers that allowed the project to proceed and which Hu Honua relied on in spending hundreds of millions of dollars,” the company said.

Hawaiian Electric expressed regret about the decision but said it understood the commission’s decision, given dramatic changes in renewable energy technology in recent years. Most notably, large-scale battery storage projects coupled with solar farms have created what industry experts generally see as a source of reliable, on-demand power comparable to that of traditional power plants that burn fuel to power generators.

“A lot has changed since this project was first proposed 12 years ago and the renewable energy landscape and economics are dramatically different,” Jim Kelly, Hawaiian Electric’s vice president of corporate relations said in a statement. “While we believed Hu Honua could be an important element in the mix of resources on Hawaii Island, we understand and respect the commission’s decision.”

The setback for Hu Honua comes as there appears to be less emphasis on the need for “firm” power from traditional plants that burn fuel to power generators. Curtis acknowledged there was a time when such power plants were more necessary to ensure the lights would stay on, but he said that’s no longer the case.

“Five years ago, that might have been a valid argument,” he said. “But today with solar and storage that’s no longer valid.”

For its part, the PUC stressed that Hu Honua and biomass-burning projects generally are still relevant and can have a place in Hawaii’s renewable energy portfolio. The issue was whether Hu Honua would have to compete like everyone else to ensure Hawaiian Electric and its customers were getting the best deal.

“The Commission is aware that biomass resources offer different considerations than other renewable resources, such as solar and wind, but believes that these distinctions are better weighed and addressed in the context of the Competitive Bidding Framework,” the commission said.

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