September 14, 2018 – ELP Students attended the 2018 Hawai’i Clean Energy Law, Finance, and Policy seminar at the Hilton Waikiki Beach. The seminar was hosted by The Seminar Group and co-chaired by Douglas A. Codiga, Esq. (Schlack Ito, LLC.) and Gerald A. Sumida, Esq. (Carlsmith Ball, LLP).

The seminar featured presentations on clean energy in Hawai’i from speakers, panelists, and faculty from various fields. Panelists from private and public sectors, academic institutions, and nonprofit organizations discussed their specific roles related to the implementation of grid modernization, future development of distributed energy resources, implications of tax law changes, viability of community-based activities, and local government perspectives and initiatives.

Mr. Codiga expressed his hope that the seminar would provide an intimate setting for discussion and collaboration on clean energy solutions. He thanked the ELP Students for participating in the event and challenged them with the responsibility to forge ahead into the future bearing the learnings from the discussion. Similarly, Atty. Gerald Sumida shared the importance of understanding past and present clean energy initiatives in Hawai’i, both challenges and successes, in order to chart a better future. In addition, Atty. Sumida was happy to know that 1L students were given a chance to participate in the event to help build awareness and consciousness in the legal practice.

The main event commenced with presentations on the 5-Year Power Supply Implementation Plan (PSIP) by Mr. Michael E. Champley (former Commissioner of Hawai’i Public Utilities Commission), Mr. Colton Ching (Vice President of Planning and Technology of Hawaiian Electric Company, Inc.), and Dr. Matthias Fripp (Assistant Professor of Electrical Engineering at the University of Hawai’i at Manoa). The presentations highlighted the move from planning to implementation of various clean energy initiatives as well as their proper integration within the 5-Year timeframe. Despite intensive research and planning, the path forward remains a blank canvas. The cost of investment is an important challenge.

Rachel James ‘19 expressed particular interest in the unrelenting issue of power purchase agreements. She observed that Dr. Fripp’s suggestion of take or pay contracting could be a solution to dampen the trend of power purchase agreement pricing in Hawai’i being triple that of mainland prices. She articulated,

The point was of particular interest in conjunction with Ms. Rebecca Dayhuff Matsushima’s, (Manager of Renewable Energy Acquisition at Hawaiian Electric Company, Inc.) update on a new pricing framework the Utility will be offering.. Ms. Matushima shared that the Renewable Dispatchable Generation requests for proposals that are forthcoming will introduce a fixed monthly payment schedule (as opposed to the standard “must take obligation”). This new framework, Ms. Matushima noted, will not only eliminate “must take obligations”, it will also support the economic dispatch of energy across the grid. The developments resultant of this innovative approach will be of keen interest in the months and years to come.

Chase Livingston ‘19 noted the importance of Michael Champley’s comments.

Former Commissioner Champley pointed out that the best power purchase agreement (PPA) prices for renewable energy in Hawai‘i happened over ten years ago, in 2007. This was surprising because the cost of renewable energy technology has decreased drastically during that same time. In fact, Commissioner Champley said that in the ten years between 2007 and 2017 the average renewable (solar?) PPA price on Oʻahu has gone up by 33%. With the drastic (33%) increase in renewable PPA prices taking place during the same time that solar (and other renewable technology) was plummeting in price, the question becomes why?

While Commissioner Champley did not provide a direct answer, he suggested that the independent power producers (“IPPs” are the owner/operators of the renewable energy facility contracting with the utility through a PPA) would bid their projects at just below the utility’s avoided cost of generation (that is the cost the utility would incur to purchase the next unit of energy). In other words, the IPPs were not subjected to a competitive market (because of Hawai‘i’s market conditions and utility policies) and quickly learned that they could undercut the utility’s cost of generation while still securing very favorable contract terms. Other issues that might contribute to the price increase are land prices, legal and permitting fees, and expensive interconnection fees administered by the utility.

The high-cost PPAs drive up electric rates for utility customers. According to Commissioner Champley, customers on all islands except Kauai have seen their electricity rates increase over the past ten years, with each investor-owned utility (HECO, MECO, HELCO) increasing in price. Meanwhile, the cooperatively owned utility on Kauai (KIUC) managed to reduce electric rates during the same 10-year period.  

The contracts (PPAs) that the utilities have entered in to over the past ten years (and continue to enter in to) have the potential to “lock-in” high electric rates for the foreseeable future.  Most PPA contract terms are for a period of 20-30 years, with some even containing annual price-escalator clauses. As technology improves, prices drop and capability expands. This theoretically creates a situation where the longer a utility waits to sign a PPA with a renewable IPP, the better the price and the more advanced the technology (but see Hawai‘i between 2007 and 2017). In short, the public interest is not served when the utility (and by extension the rate-payer) is locked-in to uneconomical power purchase agreements.

Constancio Paranal III ‘22 found the Community-Based Renewable Energy (CBRE) Panel particularly interesting. Moderated by Isaac H. Morikawe, Esq. of Earthjustice, with panelists Dr. Keiki-Pua Dancil (Hawaiian Electric Company Inc.), Mr. Stephen Daniel Gates (Neighborhood Power Corporation), and Mr. Ryan McCauley (Tritium Enterprises), the panel focused on current implementation of the CBRE initiative, its future market, and eventual social impact. Paranal found it reassuring to know that small-to-medium local developers are given an opportunity to play in the market and even provide services to larger corporations, such as HECO, to support customers realize the benefits of solar technology. Given the high upfront cost of Photovoltaic (PV) technology, CBRE allows a greater community to share, invest, and use the technology at a lower cost. It is a prime example of how redefining business and mental models helps promote social value through entrepreneurship. Paranal wonders, however, whether scalability is within reach given long development time and limited scope as it currently stands. Similarly, he notes,

Given that there are plans to expand the CBRE initiative, presumably beyond solar, the issue of security compliance is one that I believe needs specific  attention. I am curious to know the type of investment contract test that will be in place to satisfy state and federal securities rules. And how do we ensure compliance? Quite often, it’s the regulation or in some cases lack thereof that could serve as a hindrance. Still, knowing all these initiatives provide some level of comfort that we are tracking the right direction.

Former Governor George R. Ariyoshi delivered a special presentation on the future of Hawai’i Clean Energy Law and Policy. He stressed the importance of understanding the roles that everyone plays in these changing environmental landscape. Mayor Bernard P. Carvalho shared the initiatives he spearheaded to ensure Kauai’s sustainability. Elise Kaneshiro ‘20 reflected,

I enjoyed learning about the advancements that Kauai has made toward energy independence.  Mayor Carvalho spoke about his administration’s comprehensive approach, which includes seeking input from the Native Hawaiian community, demonstrating the proposed benefits of changes to naysayers, and educating the public on going green.  I look forward to visiting the proposed educational center and feel that this is a fantastic idea.

Kekoa Andrade ‘21 also found former Governor Ariyoshi particularly notable for his unwavering commitment to the importance of clean energy sources in Hawaii and the emphasis he placed on implementing today’s technologies while still making room for those of tomorrow.

Chase Livingston ‘19 articulated,

Governor Ariyoshi broached a delicate topic that could potentially be very important for Hawai‘i’s ratepayers in light of the last point. He reminded the audience that utilities are supposed to act “in the public interest” and regulators are expected to regulate “in the public interest.” The wise Governor then suggested that it would follow that regulators should be able to renegotiate disadvantageous PPAs when it is in the public interest.

The event was informative and insightful. The students express their sincere gratitude to Douglas Codiga and Jerry Sumida for their generosity in supporting law students through various seminars and programs, The Seminar Group for a well-organized event, and Professor Richard Wallsgrove for sharing this opportunity.