Hawaii

Hawaii CHP
Total Installed Megawatts: 500 MW

 

The Hawaii CHP Landscape

Hawaii currently has approximately 500 MW of installed CHP capacity, or 24% of total electricity generating capacity in the state. The Pacific region of California, Hawaii and Nevada has over 9 GW of CHP capacity, most of which is in California. The average capacity of Pacific region CHP installations is 10.7 MW, and 55% of the CHP capacity is in large industrial systems of 50 MW or greater (Hedman, 2006). CHP systems in the western states of California, Hawaii, Nevada, and Arizona are estimated to be saving more than 370 trillion BTUs of fuel and 50 billion tons of CO2 emissions per year, compared with the conventional generation they have replaced (Hedman, 2006).

Hawaii’s electrical services are provided by one investor-owned utility company (known as an “IOU”) and one island cooperative. There is currently one provider of electric services on each island that supplies power to the vast majority of homes and businesses. Hawaii Electric Light Company (HELCO) is the provider of electric utility services on the island of Hawaii. Maui Electric Company (MECO) is the provider of electric utility services on the islands of Maui, Lanai, and Molokai. Hawaiian Electric Company (HECO) is the provider of electric utility services on Oahu and is the parent company of MECO and HELCO. Kauai Island Utility Cooperative (KIUC) is the provider of electric utility service on the island of Kauai. The Gas Company provides utility gas services throughout the state of Hawaii.

Technical and Economic Status of Key CHP Technologies

The various types of CHP systems have different capital and maintenance costs, different fuel costs based on fuel type (e.g. natural gas, landfill gas, etc.) and efficiency levels. The main types of CHP system “prime mover” technologies are reciprocating engines, industrial gas turbines, microturbines, and fuel cells. The more efficient systems (in terms of electrical efficiency) tend to have higher capital costs. See Table ES-1 below for a summary of key characteristics of each of the commercially available types of generators. Fuel cell systems are in an early commercial phase at present, with relatively high capital costs and an uncertain “track record” for O&M costs.

Table 1. CHP System Characteristics
Reciprocating Engines Capacity Range (kW) 100 — 500 500 — 2,000
Electric Generation Efficiency, % of LHV of Fuel 24 — 28 28 — 38+
Installed Cost, $/kW (with Heat Recovery) Up to 3,500* Up to 3,000
O&M Costs, $/kWh 0.025* 0.025*
Gas Turbines Capacity Range (kW) 1,000 — 10,000 10,000 — 50,000
Electric Generation Efficiency, % of LHV of Fuel 24 — 28 31 — 36
Installed Cost, $/kW (with Heat Recovery) 1,500 1,000
O&M Costs, $/kWh 0.015 0.012
Microturbines Capacity Range (kW) 100 — 400  
Electric Generation Efficiency, % of LHV of Fuel 25 — 30  
Installed Cost, $/kW (with Heat Recovery) 2,000  
O&M Costs, $/kWh 0.015  
* Estimate adjusted for Hawaii installations

Summary and Status of CHP Policy Issues in Hawaii

The policy context for CHP in Hawaii is complex and multi-faceted. Hawaii has simplified interconnection rules for small renewables and other interconnection guidelines that cover all other distributed generation (DG). The state has simplified interconnection rules and allows for net metering of solar, wind, biomass, and hydroelectric unites up to 50 kW. An external disconnect is required. Mutual indemnification requirements exist, but otherwise there are no additional insurance requirements. Rule 14 covers the interconnection of DG systems. An external disconnect is also required for these systems.

Hawaii’s largest utility, HECO, has a set of simple interconnection guidelines. Hawaii’s other primary utility -- KIUC -- currently has no interconnection standard. A proposed standard is under review by the PUC and interveners in an open docket 2006-0498. The Public Utility Commission (PUC), created a docket (No. 03-0371) to review and improve the state’s DG regulations in 2003. The PUC released its Decision and Order on 03-0371 on January 27, 2006. Utility rates and standby fees are important and controversial aspects of CHP, and ones that are constantly changing – especially in Hawaii recently. Recent Hawaii PUC dockets have examined proposed standby charges by the utilities, and these dockets have allowed the PUC, the state’s “consumer advocate,” and all other parties to examine the assumptions and methodologies used to determine these costs and its impact to the deployment of beneficial and economic CHP generation in Hawaii. The latest decision has allowed utilities to propose higher standby charges as part of larger utility rate cases in the 2010 timeframe, rather than keeping them at their present level of $5/kW-month through 2014 as had been proposed (for the next 5 MW of CHP installed in the state).

On May 3, 2007, Hawaii passed House Bill 226 (Thielen) the “Global Warming Solutions Act of 2007.” The bill requires the state to identify all sources of greenhouse gases, regulate greenhouse gases as a pollutant, and reduce emissions to 1990 levels by 2020 (and further thereafter). While the details of this legislation have yet to be worked out, the goal of reducing emissions of greenhouse gases may provide an incentive for advancing the CHP market in the state because of the greater energy efficiency and reduced emissions that CHP systems can provide relative to conventional grid power.

More recently, on January 31, 2008, Hawaii’s Gov. Lingle signed a memorandum of understanding with U.S. DOE for the “Hawaii-DOE Clean Energy Initiative.” The goal of this initiative is to decrease energy demand, accelerate the use of renewable and indigenous energy sources in Hawaii, and establish a target of 70% renewable energy in Hawaii by 2030 (DBEDT, 2008).

The Market Potential of CHP Systems in Hawaii

Hawaii is an exciting and economically attractive market opportunity for CHP. In general, the economic conditions for CHP in Hawaii are aided by high prevailing electricity prices, but hindered by relatively high gas prices. All of Hawaii’s natural gas is synthetic natural gas (SNG)1 derived from naphtha. The SNG is provided through The Gas Company’s utility business, which is regulated in its rate offerings by the state PUC. The Gas Company also sells regulated and non-regulated propane to those customers without access to SNG. Propane prices in Hawaii are determined by The Gas Company’s procurement costs, and are closely tied to the price of oil that is imported into the state. The Gas Company purchases its propane or “liquefied petroleum gas” (LPG) from two local refineries as well as offshore suppliers. This LPG, along with SNG, is used to meet the needs of their customers. There are no naturally occurring sources of petroleum products or natural gas in Hawaii.

In order to support the adoption of CHP, The Gas Company offers its non-utility and utility propane customers who install CHP dedicated propane gas rates. These rates are specifically designed to assist CHP customers by lowering operating costs and managing pricing risk Summary of CHP System Financial Assistance Programs There are limited financial assistance programs available for CHP system installation in Hawaii. These include federal tax programs and CHP project screening services that are available on a limited basis from the Pacific Clean Energy Application Center and the U.S. Envionmental Protection Agency.

Conclusions

Hawaii represents an attractive market opportunity for CHP due to a combination of economic conditions, strong growth in demand for energy services, and energy and environmental concerns. There currently is approximately 500 MW of CHP capacity in the state, although some of this capacity is represented by relatively old projects of which some may no longer be operational.

CHP economics in Hawaii are both island and site specific. On Oahu, projects can be attractive where there is a good use for thermal energy that matches the profile of electrical output. On the other major islands of Hawaii, Maui, and Kauai, economics are more attractive due to the very high cost of electrical power. Efficiently designed projects can easily be attractive on these islands.

The greatest immediate threat to the CHP market in Hawaii is the large increase in standby charges for CHP projects that are being proposed by the major island utilities. If these charges are implemented, CHP economics will be dramatically affected and may no longer be attractive except possibly in the very best settings. We hope that moving forward, changes in electricity tariff structures are made carefully and fairly, and in ways that do not preclude the important principle of customer choice with regard to the provision of electrical services for commercial and industrial sites in the state.

References

  • 2011 Combined Heat and Powerand Other Clean energy System Baseline Assessment and Action Plan for the Nevada Market (March 2011)