Past Policy Initiatives

Influence Energy Policy

2013 LEGISLATIVE PRIORITIES

Blue Planet will be tracking the following bills closely throughout the legislative session. Please visit our facebook page for more updates as the bills move through the House and Senate.

HB 856 HD2: Green financing program
On-bill financing—currently being developed at the Public Utilities Commission—overcomes the
biggest hurdle to energy efficiency and clean energy: the up-front cost. By eliminating the initial
cost and enabling ratepayers to pay off the investment directly from energy savings over time,
adoption of efficiency and clean energy will accelerate. This measure establishes a regulatory
financing structure to enable low-cost capital to fund the on-bill financing program. It does so by
using a small portion of the existing ratepayer-funded “public benefits fee” to securitize bonds
that can be used to fund on-bill financing. This would enable residents and small businesses
statewide to access the benefits of solar and efficiency investments.
 
The Green Financing program proposed in HB 856 HD2 offers several critical benefits:
1. It can be an “anchor” funding source for on-bill financing, ensuring program feasibility
irrespective of the scope or magnitude of private funding sources that wish to participate
in the on-bill program;
2. It can ensure that the on-bill program includes equitable financing options for all
residents, including residents who are otherwise unable to access traditional sources of
private capital for energy improvements, such as renters and low-income households;
3. It can unlock large-scale private capital markets, pushing down the cost of capital, and
making energy efficiency and clean energy even more cost effective for ratepayers;
4. Green Financing bonds do not become a state liability; thus, the on-bill program
catalyzes private investment in our energy infrastructure;
5. It does not raise costs for energy ratepayers; the Green Financing fee established by HB
856 HD2 can simply utilize of a portion of the existing Public Benefits Fee,  and bond
repayments will be made by the program participants (i.e. the ratepayers whose energy
bills will be reduced by energy improvements).
 
HB 857 HD2: Barrel tax reallocation
Hawaii’s barrel tax law is keystone clean energy policy that provides a dedicated investment in
clean energy, funding the critical planning, development, and implementation of clean energy
programs that will foster energy security for Hawaii. Unfortunately, only $0.40 of the $1.05 tax is
dedicated to clean energy and food security. This measure reallocates the $1.05 to fulfill the
intended sustainability purposes of the policy, with almost half of the funding being directed to
energy security. This measure also repeals the sunset date for the tax. We believe that this
measure properly amends Hawaii’s “fossil fuel fee” to reflect the original intent of the policy.
Blue Planet has found—through extensive market research—that the policy of taxing our fossil
fuel imports to fund clean energy solutions has broad support among Hawaii residents. Although
HB 857 HD2 does not expand the barrel tax to include other fossil fuels, such as coal or gas,
Blue Planet supports such a sensible policy to ensure equity among fossil fuels and to raise
additional funds for clean energy and food security.

HB 497 HD3: Renewable Energy Tax Credit amendments
Solar energy is currently a bright spot in Hawaii’s progress toward energy independence, and
the renewable energy tax credit has been extremely effective at making Hawai‘i a leader in solar
installations—creating local jobs and providing steady revenue from its business creation. Blue
Planet has found that the renewable energy credit yields a clear, significant net fiscal benefit to
the state, with each commercial PV tax credit dollar invested generates $2.67 in new tax
revenue, among other benefits to the overall economy.
 
House Bill 497 HD3 contains a number of elements which make it an attractive policy, for the
state economy, the solar sector, and for achievement of Hawaii’s aggressive clean energy
goals. First, the measure follows the framework and definitions of the federal tax credit law,
making it easier for the state to administer. Second, the proposed policy ratchets down the state
renewable energy tax credit for photovoltaic in a fair and predictable manner, reducing job-
jeopardizing volatility in the solar sector. Finally, the measure establishes a production tax credit
for certain projects to reduce the first year fiscal impact of the credit and to foster innovation and
efficiency in renewable energy systems (the incentive is on the output, not the system cost).
 
HB 810 HD2: Grid modernization consideration at Public Utilities Commission
To take advantage of distributed and diversified sources like solar, wind, and wave, the grid has
to become smarter and have the capacity to store electricity. It will resemble today’s Internet—
where distributed servers both send and receive packets of information—and less like
yesterday’s commercial television. Such a self-aware, robust “smart grid” will instantaneously
adjust to shifts in wind strength or cloud cover over solar, balancing energy loads on the other
side of the wire and drawing on stored energy when needed. This measure requires that the
PUC consider the value of the smart grid and the benefits of modernizing Hawaii’s electricity
grid to accommodate more clean energy sources. This measure will provide important policy
guidance to the PUC to help them weigh the often competing objectives in their deliberations.
 
HB 1405 HD2: Transparency in power purchase agreements
Public energy utilities in Hawai‘i are a regulated monopoly. Thus, utilities enjoy gain no
competitive advantage from keeping their costs proprietary, and the public has an important
interest in disclosure of those costs. As a result, there is no justifiable reason for power
purchase agreements to remain hidden from the rate-paying public. Indeed, increased market
transparency will allow our energy market to operate more efficiently, leading to fairer
opportunities for power producers, and leading to better rates for consumers. For this reason,
Blue Planet supports HB 1405 HD2, which increases transparency in power purchase contracts.
However, we request that the bill be amended to promote transparency for all power purchase
agreements, rather than just to agreements for the purchase of energy from non-fossil fuel
sources.

SB 1087 SD2: Green financing program
On-bill financing—currently being developed at the Public Utilities Commission—overcomes the
biggest hurdle to energy efficiency and clean energy: the up-front cost. By eliminating the initial
cost and enabling ratepayers to pay off the investment directly from energy savings over time,
adoption of efficiency and clean energy will accelerate. This measure establishes a regulatory
financing structure to enable low-cost capital to fund the on-bill financing program. It does so by
using a small portion of the existing ratepayer-funded “public benefits fee” to securitize bonds
that can be used to fund on-bill financing. This would enable residents and small businesses
statewide to access the benefits of solar and efficiency investments.
 
The Green Financing program proposed in SB 1087 SD2 offers several critical benefits:
1. It can be an “anchor” funding source for on-bill financing, ensuring program feasibility
irrespective of the scope or magnitude of private funding sources that wish to participate
in the on-bill program;
2. It can ensure that the on-bill program includes equitable financing options for all
residents, including residents who are otherwise unable to access traditional sources of
private capital for energy improvements, such as renters and low-income households;
3. It can unlock large-scale private capital markets, pushing down the cost of capital, and
making energy efficiency and clean energy even more cost effective for ratepayers;
4. Green Financing bonds do not become a state liability; thus, the on-bill program
catalyzes private investment in our energy infrastructure;
5. It does not raise costs for energy ratepayers; the Green Financing fee established SB
1087 SD2 can simply utilize of a portion of the existing Public Benefits Fee, and bond
repayments will be made by the program participants (i.e. the ratepayers whose energy
bills will be reduced by energy improvements).
 
SB 17 SD2: Fossil fuel tax and reallocation
Hawaii’s barrel tax law is keystone clean energy policy that provides a dedicated investment in
clean energy, funding the critical planning, development, and implementation of clean energy
programs that will foster energy security for Hawaii. Unfortunately, only $0.40 of the $1.05 tax is
dedicated to clean energy and food security. This measure—in preferred form—reallocates the
$1.05 to fulfill the intended sustainability purposes of the policy, with almost half of the funding
being directed to energy security. This measure also repeals the sunset date for the tax. We
believe that this measure properly amends Hawaii’s “fossil fuel fee” to reflect the original intent
of the policy. Blue Planet has found—through extensive market research—that the policy of
taxing our fossil fuel imports to fund clean energy solutions has broad support among Hawaii
residents.

Senate Bill 17 SD2 also expands Hawaii’s fossil tax beyond petroleum products. Blue Planet
strongly supports expanding this “fossil fuel fee” to all fossil imports, including coal (nearly one
million tons imported annually) and industrial methane and gas. We would prefer, however, that
SB 17 SD2 base the fossil tax on energy content, not the carbon emissions at the point of
burning, to accurately capture the impacts of each fuel.  
 
SB 623 SD2: Renewable Energy Tax Credit amendments
Solar energy is currently a bright spot in Hawaii’s progress toward energy independence, and
the renewable energy tax credit has been extremely effective at making Hawai‘i a leader in solar
installations—creating local jobs and providing steady revenue from its business creation. Blue
Planet has found that the renewable energy credit yields a clear, significant net fiscal benefit to
the state, with each commercial PV tax credit dollar invested generates $2.67 in new tax
revenue, among other benefits to the overall economy.
 
Senate Bill 623 SD2—although largely devoid of specific amounts—does contain a number of
elements which make it an attractive policy, for the state economy, the solar sector, and for
achievement of Hawaii’s aggressive clean energy goals. First, the measure follows the
framework and definitions of the federal tax credit law, making it easier for the state to
administer. Second, the proposed policy ratchets down the state renewable energy tax credit for
photovoltaic in a fair and predictable manner, reducing job-jeopardizing volatility in the solar
sector. Finally, the measure establishes a production tax credit for certain projects to reduce the
first year fiscal impact of the credit and to foster innovation and efficiency in renewable energy
systems (the incentive is on the output, not the system cost).
 
SB 1040: Grid modernization consideration at Public Utilities Commission
To take advantage of distributed and diversified sources like solar, wind, and wave, the grid has
to become smarter and have the capacity to store electricity. It will resemble today’s Internet—
where distributed servers both send and receive packets of information—and less like
yesterday’s commercial television. Such a self-aware, robust “smart grid” will instantaneously
adjust to shifts in wind strength or cloud cover over solar, balancing energy loads on the other
side of the wire and drawing on stored energy when needed. This measure requires that the
PUC consider the value of the smart grid and the benefits of modernizing Hawaii’s electricity
grid to accommodate more clean energy sources. This measure will provide important policy
guidance to the PUC to help them weigh the often competing objectives in their deliberations.

BLUE PLANET FOUNDATION'S PERSPECTIVE ON HAWAII ENERGY POLICY

Blue Planet Foundation's policy advocacy seeks to drive systemic change by constructing the framework for markets and behavior—“institutional acupuncture.” We engage in lawmaking at the state capitol and county councils and rulemaking at the Public Utilities Commission. By working with other clean energy advocates, experts, and community and business leaders, we can develop smart policy solutions that will enable Hawaii to achieve energy independence.

Let us consider what policy changes are essential to making Hawaii's clean energy future a reality.

If we were to sit down today and design — from scratch — an energy system for Hawaii, it’s unthinkable that we’d choose one that relies on a steady supply of Middle Eastern oil and Indonesian coal. Nor would we craft a system that places control of Hawaii’s electricity in a single entity whose bottom line is indifferent to whether the energy source is sustainable.

Yet that is precisely where we find ourselves today. Hawaii has the most oil-dependent and most expensive electricity in the nation, requiring an uninterrupted flow of some million barrels of oil monthly. Electricity is largely controlled by a utility that receives scant financial benefit in plugging into clean energy sources, particularly if those sources are widely distributed.

Achieving the preferred system of energy self-sufficiency for Hawaii — one where wind and solar are no longer considered “alternative” energy — requires intelligent, transformative policy. Fortunately, lawmakers have the opportunity to remove some of the myriad institutional, regulatory, and financial barriers blocking Hawaii’s clean energy future. New policies are needed to separate power generation from distribution, encourage financial innovation in clean energy investment, provide independent oversight of grid reliability and interconnection, and allow for the recovery of costs for unused fossil power plants.

Why are these policy changes required?

Nearly four years have passed since the state launched the Hawaii Clean Energy Initiative, ostensibly a game-changing effort to transition Hawaii “decisively and irreversibly away from imported fossil fuel.” While the increased energy focus, federal assistance, and project facilitation has been valuable, the Initiative is hindered by having to operate within the current institutional and regulatory paradigm — a paradigm that is at odds with an energy future powered by non-fuel renewable energy sources.

Existing laws give the utility little economic incentive to pursue clean energy projects. Long-term utility profits are tied mostly to capital investments that the utility makes, encouraging them to purchase expensive new plants or undertake major upgrades to existing ones. Since third-party renewable energy projects displace the need for utility investments, and energy efficiency reduces electricity use, the utility does not profit directly from such clean energy initiatives.

Further, adding substantial amounts of renewable energy and energy efficiency will render existing fossil generation facilities useless, leaving the utility holding the bag with “stranded” investments on its books. Finally, when the utility purchases power from independent power producers, like large solar farms, the utility is exposed to additional financial risk (something it can’t afford, given its current credit rating of triple-B minus, one notch above junk bond status). These institutional barriers — decreasing sales on top of increasing costs to enable a system that doesn’t help their bottom line — make change incredibly difficult for the utility.

What’s needed here is “institutional acupuncture.” The Public Utilities Commission (PUC) should be directed to implement a “performance incentive mechanism” to reward the utility for achieving clean energy goals. This will give Wall Street reasons to invest in the utility and help fund Hawaii’s clean energy transition. The PUC should also be given guidance to adopt a policy allowing for the recovery of the utility’s “stranded assets,” preventing these facilities from becoming anchors that restrain clean energy progress.

Changes also need to be made on a broader scale. Hawaii’s current utility regulatory structure is a holdover from the 19th century. A vertically integrated monopoly that controls all aspects of electricity generation, transmission, and distribution no longer makes sense in a world where entrepreneurial independent power producers (including homeowners and business owners), enabled by technological advances, can develop Hawaii’s renewable energy resources.

Solar photovoltaic (PV), for example, is rapidly evolving. The installed cost of PV in Hawaii has decreased 25 percent since 2008, and the cost of energy storage (necessary to make solar a complete solution) has dropped 8 percent annually. Given such rapidly accelerating advancements, further investment in the existing electricity model is akin to repairing an old VHS player instead of developing the capacity for streaming video.

Today’s policy should contemplate tomorrow’s innovations. This is best achieved by replacing utility control of grid access with control by a neutral entity tasked with establishing reliability and interconnection rules that encourage clean energy development in all appropriate forms. Such a third-party oversight model for grid access has succeeded elsewhere in democratizing power production. Beyond that, a new framework should be adopted to separate energy generation from transmission and distribution, enabling the utility to focus on the smart grid and the management and delivery of clean, reliable electricity.

Failing this, the utility will continue to stumble over real-world hurdles to embracing clean energy. Or it will attempt to transition within the existing paradigm. Take, for example, the utility’s push to replace oil with biofuel in its existing generating units. That swap allows it to avoid fundamental change (while passing on any increased fuel costs to ratepayers). But the result may thwart Hawaii’s overall transition to clean energy by taking away liquid biofuels from the transportation sector — where other renewables, such as solar and wind, are out of reach. If biofuels can be sustainably and economically produced locally, they should be put to work powering our cars, trucks, ships, and airplanes — not stationary power plants. A state policy clarifying this preference for biofuels would help prevent solving one energy problem at the expense of another.

Finally, the long-term planning, development, and implementation of Hawaii’s clean energy future requires dedicated funding. In 2010, the legislature enacted one of the first carbon taxes in the nation, tapping the source of our problem — imported oil — to help fund renewable energy solutions. Unfortunately, only 25 percent of the additional $1 per barrel tax is directed to Hawaii’s clean energy transition, about $5.5 million annually. Compare that investment with the more than $70 million in tax dollars that Hawaii dedicates to tourism. Yet we spend upwards of $6 billion — almost half of what tourism brings in — to pay for foreign fuel. The barrel tax should be significantly expanded to provide ample funding for Hawaii’s clean energy transformation.

Hawaii’s energy independence won’t result from tweaking the edges of an increasingly obsolete regulatory scheme. It will prevail only if empowered by forward-thinking policy dedicated to a robust, modern power system that fosters innovation and puts Hawaii’s clean, indigenous, and renewable energy sources to work for Hawaii’s people.

 

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