Hawaii Offers Guidance for RFPs

The Hawaii Public Utilities Commission has provided the HECO Companies with a framework for issuing requests for proposals (RFPs) through which to satisfy a recently mandated procurement process for acquiring new dispatchable and renewable energy. The commission’s decision builds on an earlier order that had accepted power supply improvement plans filed by the HECO Companies (Hawaiian Electric Company, Hawaii Electric Light Company, and Maui Electric Company). Those plans set forth the utilities’ proposed strategy for competitively procuring new grid-scale generation resources. The plans included solicitation of approximately 400 megawatts of new renewable resources across the HECO Companies’ service territories by 2021.

Citing the short time frame available for the upcoming bidding process, and noting declining federal tax credits for certain renewable energy installations, the commission told the utilities that it was critical that they streamline the number of variables involved and reduce the complexity of the RFP project selection process. The commission indicated as well that it is contemplating several performance-based regulatory mechanisms that it believes may encourage the HECO Companies to successfully execute the procurement process on a more accelerated timeline. Speaking to the federal tax credit issue, the commission pointed out that Production Tax Credit schedules reflect a step-down for wind technologies for which construction commenced after 2016. That is, the commission explained, the credits decline annually to 80%, 60%, and 40% of the full value of such facilities for which construction begins in 2017, 2018, and 2019, respectively. Moreover, the commission observed, the credit will not be available after 2019 unless it is further extended.

The commission likewise related that the Investment Tax Credit (ITC) will be lower in future years as well. It said the ITC provides a 30% credit for qualified commercial, utility, and residential solar projects through 2019. However, the commission stated, the ITC for solar technologies will decline in subsequent years, to 26% in 2020 and then to 22% in 2021. Beyond 2021, only a 10% credit will be available for commercial and utility systems. According to the commission, similar decreases in the ITC will occur for large wind projects, going from 30% in 2016, to 24% in 2017, then 18% in 2018, and finally 12% in 2019.

Perhaps most importantly though, the commission said that it has “a strong preference against self-build or affiliate bids for the first phase of the Variable RFPs, to allow the procurement process to move forward without any direct or perceived conflicts of interest.” At the same time, however, the commission signaled that it may reconsider that preference against self-build or affiliate bids prior to the second phase of the Variable RFPs.

To help with the bid review process, the commission found that the services of an independent observer (IO) may be beneficial in many situations. It directed the utilities to work closely with any IO so appointed. The commission also instructed the companies to provide additional details in their final RFPs related to their bid evaluation methodologies. Such information is to cover modeling assumptions (load forecasts, system marginal energy costs, historical energy price curves, etc.) to be made available to participating bidders. The commission called special attention to analysis of energy storage assets as an option to be considered. With respect to storage capabilities, the commission said the companies must fully explain their cost assumptions for proxy storage units and how the utilities intend to dispatch and charge the storage units. Re Hawaiian Electric Co., Inc., et al., Docket No. 2017-0352, Order No. 35224, Jan. 12, 2018 (Hawaii P.U.C.).