The Hawaii Clean Energy Initiative

Mark Glick(suit1)_2013

By Mark Glick, Administrator, Hawaii State Energy Office.

Hawaii’s commitment to clean energy took a big leap forward this summer when the state became the first in the United States to enact a 100 percent renewable portfolio standard for the electricity sector. The new law, signed by Hawaii Governor, David Ige on June 8, calls for renewable energy to account for 100 percent of utility electricity sales by 2045. This bold pledge has attracted national and international attention. Not only is it an ambitious number, but it pushes the envelope of what is possible under current technology. Yet, we firmly believe it is a target that can be achieved. As Gov. Ige has stressed, it is important to have goals that are aspirational, but not out of touch with reality. We think our new target of achieving 100 percent renewable energy in the electricity sector strikes this balance.

The Hawaii Clean Energy Initiative (HCEI), an unprecedented partnership of energy stakeholders launched in 2008, set targets for renewable energy production and energy conservation that were considered unreachable at the time by some. In fact, the original HCEI goal of generating 40 percent of electricity sales by 2030 was actually too conservative. By the end of 2014, Hawaii’s Renewable Portfoio Standard (RPS) stood at 21 percent, well ahead of the interim 2015 target of 15 percent. It is this proven performance, and our steadfast commitment to break Hawaii’s addiction to fossil fuels, that make us confident about achieving our renewable energy goals going forward.

Leadership in renewable energy penetration, combined with isolated, islanded grids, high energy costs and connections to the Asia-Pacific region make Hawaii a uniquely attractive laboratory for clean energy solutions.

Economic and energy security were the initial drivers for Hawaii’s clean energy plans nearly 40 years ago. There was a wide and growing recognition at the time that Hawaii’s exposure to the volatility of global crude markets presented serious risks that needed to be addressed. Nonetheless, it took more than 30 years for those plans to become actionable policies for greater energy self-sufficiency. There was considerable inertia resulting from Hawaii’s historic reliance and interdependence on petroleum as the predominant fuel in all sectors. However, increasing calls for greater food and energy security, along with a rising sense of the harmful impact of climate change on Hawaii’s island communities, created the urgency and momentum for change.

We also see clean energy as an opportunity to diversify our economy and create good jobs. Our leadership in renewable energy penetration, combined with isolated, islanded grids, high energy costs and connections to the Asia-Pacific region, make Hawaii a uniquely attractive laboratory for clean energy solutions. This is helping fuel the growth of a new clean energy sector with innovation at its core. Under the umbrella of the Hawaii Growth Initiative model, we are beginning to attract entrepreneurs from around the world looking to develop, test and prove emerging technologies and strategies before going to market.

A prime example of this is a homegrown technology incubator called the Energy Excelerator. An initiative of the Pacific International Center for High Technology Research, the Energy Excelerator was founded three years ago with the belief that Hawaii has ideal economic, environmental and policy conditions for launching clean energy companies. Several of the Energy Excelerator companies are working on solutions aimed at allowing Hawaii’s electric grids to accommodate greater amounts of renewable energy.

The Green Energy Market Securitization program… (is an) innovative approach to funding clean energy projects that is replicable and scalable.

As our clean energy sector grows, so will thevalue of investment flowing into the Hawaii economy. From homeowner-finance rooftop solar panels to advanced metering infrastructure done by the utilities, it will take many billions of dollars’ worth of investment in hardware and software to achieve our goals. A high-level analysis prepared for the National Renewable Energy Laboratory, in conjunction with the launch of the HCEI, estimated the net present value of capital investment would be approximately $16 billion in order to achieve the original target of a 40 percent RPS and a reduction in electricity use of 4,300 gigawatt hours through conservation and efficiency measures. This estimate would undoubtedly increase under a 100 percent RPS scenario.

The necessity of attracting capital in order to grow a clean energy sector is a concept well understood at Hawaii’s Department of Business, Economic Development and Tourism (DBEDT). This recognition spurred DBEDT to develop a groundbreaking financing structure known as the Green Energy Market Securitization program, or GEMS. The structure of GEMS is based on traditional rate reduction bonds that have typically been used by utilities to finance stranded assets or disaster recovery projects. GEMS takes this structure, and for the first time utilises it to finance clean energy infrastructure. With an initial $150 million issuance of “AAA” bonds and roll-out of loan products, GEMs has elicited international attention for its innovative approach to funding clean energy projects that is replicable and scalable.

Our strategy for carrying out the Hawaii State Energy Office’s mission is guided by five key energy policy directives: Diversifying our energy portfolio; connecting and modernising our electrical grids; balancing technical, economic, environmental and cultural considerations; leveraging our position as an innovation test bed; and creating an efficient marketplace that benefits producers and consumers. Things like indigenous alternative fuels will be considered as we pursue diverse clean energy sources that compete favourably with the petroleum products they are replacing.

Hawaii has taken a very deliberate approach to energy policy. We have been able to leverage our isolation and the challenges faced in the arena of clean energy to great advantage. We have succeeded in attracting international investment from governments and corporations that see Hawaii as a bellwether for renewable energy, and a place where the next generation of energy solutions will be born. Yet, perhaps Hawaii’s biggest advantage is the broad-based support throughout our stakeholders that has coalesced behind clean energy. It will take an entire community to carry out our clean energy transformation, and the people of Hawaii are pulling together to face the challenges ahead and secure their clean energy future.

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