Oahu ratepayers may face a significant increase in electricity costs in late 2022, as the island’s power company turns to oil temporarily to fill the gap when it shutters a coal-burning power plant now producing about one fifth of the island’s power.

Hawaii’s top energy regulator, Public Utilities Commission Chairman Jay Griffin, suggested the cost of producing power at the plant could triple. He offered the “back of an envelope” calculations during a tense meeting with Hawaiian Electric officials earlier this month in which the company provided an update on its planned shutdown of the company’s coal-burning AES power plant in Kapolei.

But the utility disputed that estimate in a later filing, saying the plan was approved by the PUC because it would save customers money.

The problem is Hawaiian Electric will have little new electric generating capacity when the coal plant’s long-anticipated shut down takes effect in September 2022. Instead, the company hopes to have brought online a giant battery storage project in Kapolei. The idea is that the battery can provide fixed, firm power when needed and fill the hole left by the coal plant.

AES Hawaii Power plant coal burning electric powerplant Kalaeloa pollution.
The AES power plant is switching from coal to oil as the source of electric generation in 2022. State regulators expect the cost of electricity to go up substantially. Cory Lum/Civil Beat

But Griffin and fellow Commissioner Jennifer Potter expressed dismay about a central part of the plan: until more big renewable projects can be brought on line, the giant battery will be charged largely with electricity produced by oil-burning power plants, and not renewables, which are central to Hawaii’s much-ballyhooed plan to generate virtually all of the electricity sold in the state with renewable resources by 2045.

“We’re going from cigarettes to crack,” Griffin at one point told Hawaiian Electric’s Colton Ching, senior vice president of planning and technology. “We’re going from coal to oil.”

And that’s not all.

As Griffin described it, the change will cost Hawaiian Electric customers significantly more, and that cost will be subject to volatile oil prices. While the coal plant generates power for about 8 cents per kilowatt hour and some renewable projects using solar and storage are expected to cost 11 cents, Griffin said the giant battery costs will be 25 cents to 30 cents or more per kWh, depending on oil prices.

“It’s not hard,” Griffin said about his calculation. “I did it on the back of an envelope. It’s not pretty.”

Hawaii customers face the nation’s highest costs for electricity at just over 28 cents per kWh, according to the U.S. Energy Information Administration. That’s almost three times the national average of just over 10 cents, and 40% higher than the next most expensive state, Alaska, which was a little over 20 cents.

When Oahu’s largest power plant shuts down in September 2022, depicted by the large, red arrow to the left, only one major project, a giant battery facility in Kapolei shown by the purple arrow, is expected to be up and running. And that battery will be charged primarily with energy produced from oil. Hawaiian Electric

In a document filed with the commission on Wednesday, Hawaiian Electric rebutted Griffin’s assertions, saying in the longer term, the battery project, officially called Kapolei Energy Storage I LLC, or KES, will mean lower costs.

“The KES Project is estimated to reduce the typical monthly O‘ahu customer bill by approximately 28 cents per month over the course of the project, and it is an integral part of a portfolio of resources that, together, will have an estimated net result of lowering customer bills by approximately $1 per month,” the company wrote.

Hawaiian Electric further argues an independent observer appointed by the commission approved the battery project “citing ratepayer benefits among its reasons.”

A March 5 update letter from Ching, which Hawaiian Electric filed before the meeting, explains the enormously complex task facing Hawaiian Electric. The utility isn’t just shutting down the largest single source of electricity – the coal plant produces about 20% of Oahu’s power — on the state’s most populous island.

Hawaiian Electric also is working to bring online dozens of renewable energy projects built by third parties, at times amidst protests from residents who want clean power, but not produced in their back yards. There are also contracts with the project developers, which require approval by the regulators, among other hurdles.

Such projects are central to effecting Hawaii’s renewable energy policy.

“The Commission has very clearly stated its concern that the process to interconnect these and other projects may cause delayed achievement of the objectives they are intended to meet,” Ching wrote. “However, the Companies respectfully point out that project delays, or the risk of delays, are not solely attributable to the Companies.”

But the commission pointed out that Hawaiian Electric has had years to prepare for the coal plant going offline, and now has put, as Potter said, all of Oahu’s electricity “eggs in one basket” – an expensive, giant battery to be charged with fossil fuel, at least for the short term.

Starting around two hours into this March 16 meeting, Hawaii Public Utilities Commissioners began firing pointed questions at Hawaiian Electric officials.

The commission’s tone was striking enough to get the attention of industry types accustomed to more bland, technical discussions. Marco Mangelsdorf, a longtime solar energy advocate, said in an email, “In the more than 20 years that I’ve been in the Hawaii energy arena, I have never witnessed that kind of scene in the usually staid setting of a PUC stakeholder meeting.”

For instance, at one point, when Ching said Hawaiian Electric is taking responsibility for the situation, Griffin shot back: “You say you’re going to own responsibility, but that’s not what I read in 40 pages here. All I read is about how it’s everyone else’s fault.”

In its filing on Wednesday, Hawaiian Electric also addressed the question of its plan to use oil-burning power plants until more renewable generation projects  are developed.

“The Companies accept and appreciate the Commission’s expectation that urgency and aggressiveness must be demonstrated in procuring and integrating renewable generation to replace fossil fuel generation currently part of their energy systems,” Hawaiian Electric wrote. “However, this transition will necessarily occur as part of a planned progression; it cannot occur at once.”

Over time, renewable resources will replace fossil fuel, the company wrote. But “for a relatively short time – not indefinitely – fuel oil is still expected to be called upon to replace at least a portion of the energy that would have otherwise been provided by coal.”

“This is true,” the company wrote, “regardless of whether the KES Project is in operation.”

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