Assessment of Hawaii’s Ability to Achieve 2010 Renewable Portfolio Standards

1. Assessment of Hawaii’s Ability to Achieve 2010 Renewable Portfolio Standards Presented to the Hawaii Public Utility Commission Terry Surles and Cary Bloyd Hawaii Natural Energy Institute September 5, 2008

2. Overview of Presentation • Background and Scope • Methodology • Results • Conclusions and Observations

3. HNEI Catalyzes Partnerships Critical For Addressing Overarching Issues Facing Electricity Systems Electricity System Issues Environment Quality: Life cycle analyses Grid Modernization: Renewable Technologies Peak Demand Global Climate Change Energy Security: Fuel Supplies, Critical Infrastructure Protection Environment Quality None Of These Issues Can Be Resolved Without Partnerships

4. Under HRS 269-95, HNEI Was Charged to Conduct Independent Analyses on RPS Status • The ability of Hawaii’s utilities achieve Renewable Portfolio Standards in a cost-effective manner • Impacts on consumer rates • Impact on system reliability and stability • Availability of appropriate renewable energy resources and technologies • Exogenous issues – permitting approvals, etc. • Exogenous impacts – environmental, economic, climate change, land use, demographics, trade, etc. • Analysis of the future of RPS – five to ten years beyond the current standards • Evaluation of analyses by an independent group of experts

5. Evaluation and Analyses • Kauai Island Utility Cooperative (KIUC) • Hawaiian Electric Company (by individual service area and as an aggregated company) • Hawaiian Electric Company (HECO) - Oahu • Hawaii Electric Light Company (HELCO) – Big Island • Maui Electric Company (MECO) – Maui, Molokai, Lanai

6. Oil-Fired Systems Provide 86% of the State’s Electricity Generation

7. Comparison of US and Hawaii Oil Demand

8. Hawaii’s Dependence on Foreign Oil Is Headed in the Wrong Direction

9. The State of Hawaii Has Adopted Four Statutory Energy Objectives • Dependable, efficient, economic energy systems for supporting the state’s citizens • Increased energy self-sufficiency leading to an increased use, on a percentage basis, of indigenous resources • Greater energy security in the face of threats to the state’s energy supplies • Reduction of greenhouse gas emissions resulting from energy supply and use

10. Consistent with State Energy Objectives, the Renewable Portfolio Standard Was Enacted into Law in 2001 • Revised statutes require 10% by 2010, 15% by 2015, and 20% by 2020 of delivered electricity to come from renewable electric technologies • At least 50% of these goals must be met by renewable electric energy • The other 50% may come from • Electrical energy displaced by other renewable energy technologies, i.e., solar hot water heaters • Improvements in end use energy efficiency and demand-side management

11. HNEI Has Submitted Five Reports Under Our Contract with the PUC • Methodology for Crediting End-Use Efficiency Letter Report • Definition of Renewable Electrical Energy Letter Report • Selection of the Expert Peer Review Panel Letter Report • Draft Letter Report on Peer Review Meeting Synopsis • Assessment of the State of Hawaii’s Ability to Achieve 2010 Renewable Portfolio Standards: Draft Report

12. An Expert Panel Was Convened to Evaluate the Findings of the Draft Report • Henry Curtis, President, Life of the Land, Honolulu • Mike Deangelis, Program Manager for Advanced, Renewable, and Distributed Generation, Sacramento Municipal Public Utility District, Sacramento, CA • Richard DeBlasio, Principal Program Manager for the Distributed Energy and Electric Reliability Program, National Renewable Energy Laboratory, Golden, CO • Carl Freedman, Sole Proprietor, Haiku Design and Analysis, Haiku, Maui • Victor Reyes, Energy Commissioner, county of Maui, Wailuku, Maui • Steve Rymsha, Staff Engineer, Renewable Energy, Kauai Island Utility Cooperative, Lihue, Kauai • Dennis Teranishi, Vice Chairman and Chief Executive Officer, Hawaiian Host, Inc., Honolulu (with facilities in Kona, Hawaii) • Dave Waller, Vice President for Customer Relations, Hawaiian Electric Company, Honolulu

13. Report: Analytical Results • Hawaii RPS Definitions • Analytical Approach • Results of Analysis • Kauai Island Utility Cooperative (KIUC) • Hawaiian Electric Company (HECO) • Hawaii Electric Light Company (HELCO) • Maui Electric Company, Ltd. (MECO) • Aggregated HECO 2010 Estimates

14. Hawaii RPS Definitions • “Renewable portfolio standard” means percentage of energy sales that is represented by “Renewable electrical energy” • “Renewable electrical energy” includes: • Electrical energy generated using renewable energy as the source; • Electrical energy savings brought about by the use of renewable displacement or off-set technologies, including solar water heating, seawater air-conditioning, district cooling systems, solar air-conditioning, and customer-sited, grid-connected renewable energy systems; or • Electrical energy savings brought about by the use of energy efficiency technologies, including heat pump water heating, ice storage, ratepayer-funded energy efficiency programs, and use of rejected heat from co-generation and combined heat and power systems, excluding fossil-fueled qualifying facilities that sell electricity to electric utility companies and central station power projects.

15. The PUC established RPS reporting guidelines Every Annual RPS Report shall state1: • the utility’s total electrical energy sales for the Reporting year; • the utility’s total renewable electrical energy for the Reporting Year, with details including; • Electrical energy generated using renewable energy as the source (required to be at least fifty percent of the RPS); • Electrical energy savings brought about by the use of renewable displacement or off-set technologies, including solar water heating, seawater air-conditioning district cooling systems, solar air-conditioning, and customer-sited, grid-connected renewable energy systems; and • Electrical energy savings brought about by the use of energy efficiency technologies, including heat pump water heating, ice storage, ratepayer-funded energy efficiency programs, and use of rejected heat from co-generation and combined heat and power systems, excluding fossil-fueled qualifying facilities that sell electricity to electric utility companies and central station power projects. 1Framework for Renewable Portfolio Standards, December 20, 2007, D&O 23912, Docket No. 207-0008

16. Analysis Evaluated Each Utility in Terms of the Following Existing Electric System Information from their most recent IRP • DSM programs • Renewable energy resources RPS Status Report Demand analysis Current performance evaluation Overall RPS performance evaluation The following slides present the results of the evaluation

17. Many Uncertainties Impact Hawaii’s Energy Future Available information was examined to gain insights into four basic uncertainties which could impact attaining the RPS goal • Electricity demand • Implementation of DSM programs • Implementation of new renewable energy programs • Availability and performance of renewable energy technologies

18. Kauai Island Utility Cooperative (KIUC) • Current generation capacity • KIUC owned: 116 MW • KIUC/IPP non-firm renewable energy : 14.0 MW • IRP-3 is expected to be completed in 2008 • IRP status reports filed for 2005, 2006, and 2007 • RPS Trend • 2005 2006 2007 • % Renewable Electrical Energy 13.9 13.9 11.4 • % RE as source of 10% target 79.4 77.8 54.1

19. KIUC Demand Projected KIUC Total Electricity Sales (MWh) *Estimates

20. KIUC Conserved Energy Projected KIUC Total Conserved Energy (MWh) *Estimates

21. KIUC Renewable Generation Projected KIUC Total Renewable Generation (MWh) *Estimates

22. KIUC Probable 2010 RPS Estimate

23. Hawaii Electric Company (HECO) • Current generation capacity (Total: 1668 MW) • HECO owned: 1207 MW • IPP firm: 434 MW • IPP non-firm 27 MW • IRP-4 is expected to be completed in 2008 • IRP status reports filed for 2005, 2006, and 2007 • RPS Trend • 2005 2006 2007 • % Renewable Electrical Energy 8.8 10.3 11.0 • % RE as source of 10% target 43.2 51.4 42.7

24. Hawaii Electric Light Company (HELCO) • Current generation capacity (1297 MW-firm) • HELCO owned: 1207 MW • HELCO non-firm: 6.6 MW • IPP firm: 90 MW • IPP non-firm 43.4 MW • IRP-4 has recently started • IRP status reports filed for 2005, 2006, and 2007 • RPS Trend • 2005 2006 2007 • % Renewable Electrical Energy 29.4 31.3 39.7 • % RE as source of 10% RPS target 242 257 337%

25. Maui Electric Company (MECO) • Current generation capacity (Total: MW) • MECO owned: 266 MW • IPP firm: 16 MW • IPP non-firm 30 MW • Currently working on IRP-4 • IRP status reports filed for 2005, 2006, and 2007 • RPS Trend • 2005 2006 2007 • % Renewable Electrical Energy 14.0 19.4 24.7 • % RE as source of 10% target 60.2 108.1 154.5

26. HECO Utilities RPS Trends Year (GWh) 2005 2006 2007 Renewable Energy Generation 678.4 827.6 911.1 Total Electrical Energy Savings 504.3 574.4 714.4 Total Electricity Sales 10,089 10,116 10,118 % Renewable Electrical Energy 11.7 13.8 16.1 % RE generation in 10% target 67.2 81.8 90.0

27. HECO Utilities Demand Projected HECO Utilities Total Electricity Sales (GWh) *Estimates

28. HECO Utilities Conserved Energy Projected HECO Utilities Total Conserved Energy (GWh) *Estimates

29. HECO Utilities Renewable Generation Projected HECO Utilities Total Renewable Generation (MWh) *Estimates

30. HECO (Combined HECO, MECO, HELCO) Probable 2010 RPS Estimate

31. HNEI Will Be Developing the “Next Steps” Report Under Task 5* • Builds upon work performed as part of this report • Builds on comments received from expert peer panel • Also builds upon work being done as part of contracts with USDOE • Report will describe work to be performed to best evaluate • Meeting RPS goals in 2015 • Implications of more aggressive renewable energy and energy efficiency policies *Not covered in the current report

32. Next Steps Report Will Build Upon Work to Date • Barring some unusual set of events, utilities will readily meet their 2010 RPS goals • Plans for near term illustrate that – based on early indications – 2015 goals should be met • There are a number of issues that could inhibit or accelerate additional renewable energy systems deployment in the longer term

33. Issues Related to the Accelerated Commercial Deployment of Renewable Energy Systems • Nomenclature for systems must be clear and consistent • A standardized template is critical for reporting results • Reasonable expectations must be made as to the commercial maturity of technologies • Policies are needed to support deployment of new technologies • Policies and technologies must be linked to obtain the greatest benefit for new systems, as well as being clear on the advantages that new policies offer

34. Reprise: Uncertainties Effect Hawaii’s Energy Future The expert panel members agree about four basic uncertainties that could impact attaining the RPS goal • Electricity demand • Implementation of DSM programs • Implementation of new renewable energy programs • Availability and performance of renewable energy technologies

35. These Additional Existing Policies Must Be Addressed in the Future* • Public Benefits Fund • Net Metering • Competitive Bidding *Note that these policies were summarized in the RPS 2010 Report

36. The Policies for Accelerating Renewable Energy Systems Must Be Integrated • T&D system upgrades will be critical for distributed energy systems, with the emphasis on renewable systems • Additional policies to promote renewable energy, such as green energy tariffs and Renewable Energy Certificates or Credits • Rules that are more aggressive in encouraging energy efficiency, peak demand reduction, and demand-side management • Rules, training programs, and incentives for big energy users to become more energy efficient • Incentives for linking local technology deployment with more broader funded projects at a national level – leverage financial resources • Incentives that support the deployment of renewable-enabling technologies (storage, advanced electronics and sensors) • State funding for life-cycle systems analyses for ensuring that the risks of renewable energy deployment do not outweigh the benefits • State funding for consumer education

37. Pursuant to These Possible Policies, Hawaii Can Take Advantage of “Lessons Learned” in Other States • RPSs are being implemented across 33 states • Targets range from 8% in Illinois to 25% in New York by 2013 • Hawaii’s RPS is one of the most inclusive • Track progress and impacts of private projects and public incentives related to the RPS • Utilize this information to assess additional renewable energy resources beyond 2020 – 2025, 2030

38. Next Steps Report Will Build Upon On-going DOE-Funded Program That Addresses Needs of Different End-Users • Address state (DBEDT and PUC) initiatives • A methodology and set of analytical tools for State policymakers to analyze the impacts and tradeoffs of technologies and policies • An in-state capability to perform further energy analyses • Use these tools for future RPS evaluations • Address utility system planning needs • Mechanism for evaluating new technologies to address system impacts • Understanding of the technical impact of renewable energy technology deployments • Meet DOE mission needs

39. Basic Research & Development Collaborative Technology Development Integration Application Technology Commercialization National Laboratories Universities Industry R&D Suppliers Vendors End Users HNEI Works to Link R&D and Public Policy to Commercialization Process Institutional Issues Regulations Incentives Government

40. Questions?