Company Pitches 37-Acre Solar Project
A utility-scale renewable energy project pitched to Molokai residents a couple weeks ago could help to stabilize a portion of their electric bills while significantly reducing the island’s reliance on fossil fuel. Additionally, a revised plan now includes the potential for a local nonprofit to purchase the plant after a few years.
Officials from a Chicago-based company that acquired a former solar power project on Molokai a couple years ago are saying their renewed plan would provide cleaner, cheaper electricity to more than a third of Molokai’s energy needs, including battery storage that would provide energy after sundown. Though the initial savings would be only a few pennies on kilowatt-hours, if oil prices increase in the next 22 years — the proposed contract’s length — the savings for residents could be substantial.
“The project we are proposing is something that will help lower costs (of electricity) for the long term,” Half Moon Ventures CEO Mike Hastings said at a public meeting at Mitchell Pauole Center Oct. 2. Moreover, the project would help to reduce pollution, preserve the environment, promote energy independence, and may improve reliability, he said.
But community support seems to be key for the project’s viability, according to company officials and others financing the project. Besides the attractive options HMV is putting on the table, the company has added a possibility for a Molokai nonprofit to have first option to buy the plant after five years, provided Maui Electric Company (MECO), Molokai’s energy provider, agrees to change the proposed Power Purchase Agreement (PPA). This added benefit has won some support for the project among the community.
HMV Chief Technology Officer Jason Katcha said the company acquired Molokai Island Energy — formerly Ikehu Molokai — from Princeton Energy Group in 2015. The former proposed project, which included a pumped hydroelectric, changed significantly since its initial pitch years ago. After listening to community concerns, the original project slimmed down and changed its proposed location from Manila Camp to an industrial area near MECO’s existing diesel plant.
If the project ultimately goes through, it would mean 41 percent of the island’s electricity would come from a 35-acre, 2.74-Megawatt solar array adjacent to MECO’s plant, according to Hastings. An additional two acres would be used for operations and a 15 Megawatts/hour battery storage system manufactured by LG.
Charles Magolske, HMV Executive Vice President of Corporate Development, said the project would not adversely affect current residential rooftop solar systems because the project’s battery storage would absorb and store excess energy during peak solar periods. Furthermore, the project’s solar array is not designed to discharge directly to the grid, instead it uses its batteries to buffer outgoing electricity based on demand.
Currently, there’s no room for additional rooftop solar on Molokai, according to Magolske. But in the future, additional battery storage projects could change that. New rooftop solar systems are constrained by the minimum level the current diesel system must run measured against periods of low demand. By eliminating the diesel constraint — which could occur in a 100 percent renewable scheme — it would make additional rooftop systems viable, he said.
“This project is the first major and significant step toward the complete elimination of diesel-generated power (on Molokai),” Magolske said.
In December 2016, MECO proposed updated plans with the state Public Utilities Commission (PUC), the state’s energy rate setter, mapping out a possible path for Molokai to meet 100 percent of its power from renewable resources by 2020.
Overall, the proposed solar array would produce 12 million Kilowatts/hour, the energy equivalent to power 1,908 homes on Molokai, according to Hastings. The amount of solar-generated power would mean 300,000 less gallons of diesel burned, a reduction of seven million pounds of CO2 released into the environment, according to the presentation Oct. 2.
Hastings said his company has been coming to Molokai for a couple years, “mostly low key,” to explore a potential utility-scale solar and energy storage project. After going through a series of technical aspects and financial concerns to see if they could “thread the needle” — satisfy MECO’s, the community’s and the company’s concerns, plus make “a decent amount” of profit — the company held its first public meeting earlier this month.
“We didn’t want to make promises to the community and say, ‘Hey this is great for you, this is why,’ and shove it down your throat,” Hasting said at the meeting. “Now that we have the (feasibility) studies, we want to present it to you.”
The Chicago-based HMV has 10 projects on the Mainland and eight in Hawai‘i. Though the company is relatively young — it was founded in 2006 — it has partnered with S&V Electric, a company that has been around for 111 years, has sold products to Hawai‘i for 70 years and has been laying out plans and designing substations throughout the state for 12 years.
Dan Girard, S&C Director of Engineer Procurement and Construction, said about 95 percent of the company’s products are built in Chicago, the company’s headquarters, where they employ 3,200 people. They have designed 21 micro-grids around the country, and a number of them have the same type of technology that would be used on the Molokai plant.
“We deal with utilities every single day, and we know the utility market very well,” Girard said.
An important caveat in the project is community support. Pono Shim, CEO of the Oahu Economic Development Board, said gauging support was one of the main reasons the Oct. 2 meeting was being held. In November, OEDB is slated to receive $55 million for the New Markets Tax Credit program. If the proposed Molokai solar plant were to benefit from this program — allowing cheaper rates — it would need the backing of the community, according to Shim.
“If you don’t want (this project), that’s not what I’m here to do. We won’t finance this project if it’s not what Molokai wants,” Shim said.
But while the electric bill could lower initially, it doesn’t necessarily guarantee it wouldn’t go up in the future, as there are other factors influencing the bill.
Magolske explained half the cost of the bill comes from power generation, while the other half comes from operational and other costs. Since the proposed solar plant would account for 41 percent of Molokai’s power supply, it would only impact about 20 percent of the bill. Furthermore, Magolske said the price HMV is offering MECO is only a few cents for kilowatt-hours cheaper than diesel, but the savings could be a lot more if oil prices spike. However, he said he doesn’t want to create any impression the bills will drop substantially, and that he has no idea what oil prices or MECO’s operational costs will be in the future.
Ten days after the meeting, MECO requested the PUC to authorize its first base-rate increase in six years, which would cause a typical Molokai residential bill for 400 kilowatt-hours to increase by $11.25 a month, to $147.60. If approved, this increase would likely take effect in the second half of 2018, according to a MECO news release.
A handful of community members spoke following the company’s presentation. Those who had been following the project since its original proposal expressed support, especially with the latest changes and continued pledge for community support.
“I don’t want to see Molokai going from potentially being at the tip of the spear in terms of moving toward renewable energy and getting off of fossil fuels, and getting kicked to the back of the line because we’re not ready for this. I think we are ready for this,” said Matt Yamashita, adding this project is the only concrete one that addresses that very basic idea for Molokai to get away from the status quo of shipping diesel fuel here to provide power.
He said his late grandfather was largely responsible for bringing diesel power to Molokai almost a hundred years ago.
“It’s time to take grandpa’s system and upgrade it. It’s not the vision we want for this island; we want to be sustainable. We want to power ourselves and the sun can do that for us,” Yamashita said.
The PPA would last 22 years, but the tax credits would phase out in five years, at which point HMV would have the option of selling the plant or continue ownership until the life of the agreement. Hastings said the idea is, after five years, a Molokai-based nonprofit would have first dibs, ahead of MECO, in buying the solar plant. But for that to happen, the community would need to petition MECO to change the agreement, Hastings said.
Magolske said if the company retains ownership of the project for the entire length of the PPA, it would be a lot cheaper to purchase it then. This is because a typical life span of a solar plant is 25 to 30 years. The batteries would have been replaced before the agreement’s sunset. But the solar cells and inverters would have to be replaced at the 30-year mark. These components only account for a third of the project’s costs, and while the cost for residents is attractive now, it would be “really attractive” for the next generation after 30 years, Magolske said.
Company officials are seeing urgency in going through with approval before the end of the year. Magolske said they asked MECO for a commercial agreement in time, to start and finish construction in 2018, and for the plant to start operating in 2019. This would enable the project to qualify for the Investment Tax Credit combined with the New Markets Tax Credit.