Hawaiian Electric Company (Hawaiian Electric) seeks to lower the cost of electricity for its customers in the near term with qualified renewable energy projects on Oahu that can be quickly placed into service at a low cost per kilowatt-hour. To that end, Hawaiian Electric will consider requesting a waiver from the Hawaii Public Utility Commission (PUC) Competitive Bidding Framework for projects that meet these goals.
At the same time, Hawaiian Electric will continue plans to issue the Request for Proposals for Renewable Energy and Undersea Cable Projects Delivered to the Island of Oahu (RFP), in Docket No. 2011-0225. The RFP aims to procure 600 to 800 gigawatt-hours/year of qualified renewable energy for Oahu to help meet the goals of the 2020 Hawaii Renewable Portfolio Standards (RPS). On September 28, 2012, Hawaiian Electric posted a revised draft RFP at www.heco.com/renewablerfp. The company plans to file a proposed final RFP with the PUC for its approval in the second quarter of 2013.
Hawaiian Electric understands that the complexity and significant timeline necessary to develop projects through the RFP may be deterring some renewable energy projects capable of much shorter development periods. Some project developers/prospective bidders may have already expended substantial time and resources in preparing their proposals in anticipation of bidding in to the RFP. It is possible that by proceeding immediately some projects will be able to realize significant savings and offer lower energy rates as a result. For example, costs related to retaining land rights for a project site prior to commercial operations may increase the overall cost of energy when the project comes into service.
To take advantage of potential savings on behalf of its customers, Hawaiian Electric will consider requesting a waiver to proceed with one or more projects that can be completed quickly and that meet the following criteria:
1.) Proposed projects must be on Oahu and have a nameplate capacity greater than five megawatts from a new renewable source that qualifies under the Hawaii RPS.
2.) The energy payment per kilowatt-hour must provide an attractive reduction in cost for Hawaiian Electric customers. Energy rates must be calculated with and without the use of Hawaii State tax incentives.
3.) The energy payment rate proposed shall assume a 20-year power purchase agreement (PPA) term. If a significant cost savings can be achieved by a PPA term of 25 years, a reduced energy payment rate reflecting the discount may also be included. If an energy payment rate for a 25-year PPA is included in a proposal, the pricing assumptions and project pro-forma should clearly identify any costs associated with extending the useful life of the project from 20 to 25 years.
4.) Developers must have experience in the development and execution of at least one electricity generation project similar in size to the project being proposed. Hawaiian Electric will consider a developer to have reasonably met this criterion if the developer can provide sufficient information to demonstrate that members of the project team being identified to meet this criterion has a firm commitment to provide services to the proposed project.
5.) Developers must be willing to provide Hawaiian Electric, the PUC and Consumer Advocate with complete access to all project financial information, including the project pro forma, prior to application for waiver.
6.) Developers must provide proof of site control for the 20- to 25-year duration of a PPA, plus preliminary archeological and environmental assessments and an associated permitting plan.
7.) Developers must submit evidence of plans for, or actual, community relations outreach in connection with the proposed project.
8.) Developers must provide proof of control of fuel source for initial five years of a PPA, if applicable.
9.) Proposed projects must demonstrate that they can reasonably attain a commercial operation date no later than the end of 2015. Hawaiian Electric will assess when and to what extent the proposed projects can reasonably be expected to attain commercial operation before the end of 2015, taking into account factors such as the Guaranteed Commercial Operations Date to which the project developer commits, project feasibility, and the likelihood of timely project completion.
10.) Developers must accept all terms and conditions contained in the February 2013 Model Power Purchase Agreement for As-Available Energy included as Attachment 4 to this announcement without substantial modification. (For clarity, the terms contained in the Tiered Energy Pricing Alternative Term Sheet, included in the RFP as Appendix S, shall not be included in the PPA of projects selected for a waiver.)
11.) Developers must factor into their proposed pricing their own assumptions of interconnection costs and must assume any risk for higher actual costs. To assist developers in pricing their interconnection costs, per unit cost figures are provided in Attachment 2 of this announcement to be used to provide an approximate estimated cost for interconnecting, including substation, communications, and transmission or distribution line cost to the existing Hawaiian Electric system.
12.) Proposed projects must comply with performance requirements included in Attachment 1 to this announcement, with the possible exception of (1) Power Up and Down Ramp Rate Control and (2) Inertia Constant. If developer’s proposed project is unable to meet the ramp rate control and/or the inertia constant performance requirements, the developer should specify the most conforming performance characteristics with respect to ramp rate control and/or inertia constant their project is capable of providing.
13.) Developers must be committed to meeting the scheduled milestones listed in Table 1 of this announcement.
Project developers submitting proposals for possible waiver projects must agree to participate in “open book” negotiations with Hawaiian Electric, as is consistent with past PUC waiver approvals. Hawaiian Electric will consider proposals using a reverse auction methodology, with highest value given to projects with the lowest energy costs and earliest commercial operation date. Projects that have neutral bill impacts, or would increase customer bills, will not be considered for a waiver request. Generally, only projects with a levelized cost of energy below 17 cents/kilowatt-hour without the use of Hawaii State tax incentives will be considered. Hawaiian Electric anticipates proceeding with proposals significantly below the maximum energy payment rate described herein, and expects that any cost savings realized from Hawaii State tax incentives will further decrease the energy payment rate of any selected projects.
Hawaiian Electric reserves the right not to request waiver on behalf of a developer for any reason.
Execution of a PPA is contingent upon the PUC’s approval of the waiver as well as successful negotiation of a PPA with Hawaiian Electric. To the extent that the PUC grants a waiver from the Competitive Bidding Framework for a proposed project, such waiver does not guarantee that Hawaiian Electric will enter into a PPA with the developer of the project. Furthermore, any PPA executed by the parties will be subject to PUC review and approval, as provided in the February 2013 Model PPA. Projects not selected for a waiver request, or denied a waiver by the PUC, may still bid without prejudice into the RFP, subject to the terms and conditions to the RFP.
Proposals must be received by March 22, 2013, 4:00 pm Hawaii Standard Time electronically via email at email@example.com. All proposals must include a completed copy of Attachment 3 (Proposal for Renewable Energy Projects) to this announcement.
For reference, the Preliminary Data Requests for Interconnection Requirement Study are included as Attachment 5 to this announcement. Information in the Preliminary Data Requests for Interconnection Requirement Study is not required to be included with proposals, but must be provided by the date indicated in Table 1.
Hawaiian Electric plans to make its selections for waiver request no later than April 12, 2013, and to submit all waiver requests to the PUC by April 30, 2013. It is expected that the Interconnection Requirement Study would begin immediately after the PUC grants a waiver for a selected project (should such waiver be granted), and the developer has provided the Interconnection Requirement Study data to Hawaiian Electric. The Interconnection Requirement Study is anticipated to be completed in six months, after which approximately two months is necessary to finalize the PPA (i.e., incorporation of the results of the IRS into Attachments A-G of the PPA). Hawaiian Electric plans to submit PUC application(s) for approval of any executed PPA(s) approximately four weeks thereafter.
Table 1 – SCHEDULE
|Issue Invitation for Waivered Projects||Friday, February 22, 2013|
|Proposals Due||Friday, March 22, 2013|
|Notification of Selected Projects||Friday, April 12, 2013|
|Developer to Provide Additional Detailed Cost Information||Friday, April 19, 2013|
|Submit PUC Application for Waiver||Tuesday, April 30, 2013|
|Developers to Provide Interconnection Requirement Study Data||Monday, May 6, 2013|
Source: Hawaiian Electric Company
For more information on: Hawaiian Electric Company