Maui and the energy deregulation debate

Maui
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Maui's Mayor Arakawa believes deregulating the energy market is the key to Hawaii becoming 100 percent renewable.

At a conference highlighting innovations such as utility scale battery power, the latest electric cars, and a state-of-the-art microgrid, you may think a panel discussion about how to transition Hawaii’s grid to accommodate renewables would focus on technology.

Instead, one spirited conversation during VERGE Hawaii: Asia Pacific Clean Energy Summit centered on the regulatory environment of the electricity grid.

“The key to remember is that this is a design problem, not an engineering problem," said Ned Harvey, managing director of the Rocky Mountain Institute (RMI), from the mainstage. “Most people come in and say that we have to re-engineer the grid. The reality is that you have to redesign the entire energy economy.”

The 2045 deadline set by Hawaii’s legislature to consume electricity from only renewable sources has heightened some age-old tensions. One is the challenge of long-term planning: How do you integrate and keep up with the rapid changes in technology when long-term commitments such as 20 to 30 year power purchase agreements are par for the course?

Colton Ching, vice president of Energy Delivery for the utility Hawaiian Electric Company (HECO), put the timeframe in perspective: “That lawmaker, engineer or that financing guy or gal who is going to play that important role for us in 2045 may not even be born yet.”

Flexibility — in thought, regulation, design and technology — may be a necessity. But how much of a shakeup are we talking about?

Maybe the strongest tension concerns the question of whether nations, states and counties should deregulate their energy economies. This debate runs against the widely held assumption that a single entity must own the entire system, even as many producers and service providers are allowed to plug into it.

Under a deregulated system, utilities that are traditionally integrated vertically are separated into entities such as power generators, transmission owners and distribution services. With Hawaii’s position in the middle of the Pacific, the state can look for counsel to the recently deregulated markets of New York state to the east or Japan to the west.

Of course, deregulating the energy market is no guarantee that an energy market becomes more renewable, as is evidenced by the boon in the Japanese natural gas industry when the country deregulated. But those who wish to deregulate hope that by breaking up the sanctioned vertical monopoly of the utility, other companies will be able to compete to establish a market price for energy, with the further hope that it will be cheaper than what's currently offered by the utility.

And opening up the market to independent energy producers at the edges of the grid could result in lower energy prices for consumers.

At the heart of this debate for Hawaii is how much protection should be given to incumbents’ revenue streams in the face of the state’s aggressive mandate.

Not much, according to Maui’s Mayor Alan Arakawa. “I’ve watched major companies disappear... The entities that exist today cannot set the parameters for what we need to have in a long term discussion, because they may all disappear,” he said.

Off the stage, Mayor Arakawa was more candid about Maui County’s relationship with the utility.: “The utilities can either become partners, or they can become adversaries — it’s really their choice... Three years ago the electric companies were saying it’s impossible to go all alternative. The state of Hawaii said ‘we will’ and the electric company overnight, all of a sudden, said that it can be done.”

The mayor’s concerns stem from actions HECO has taken that the mayor believes impede the fastest possible road to 100 percent renewables for the Maui community — from the now-discontinued fee imposed for an interconnection study to ending net-metering last year.

Due to their concerns, the County of Maui commissioned the Guernsey consulting company to conduct a study (PDF) to see what the best energy utility model would be there. The report concluded that a traditional, regulated utility framework — one where net-metering and wheeling are not allowed and where the grid has a limited renewables capacity — is not conducive to Maui’s goal of kicking fossil fuels as fast as possible.

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