Hawaii has a one-year deadline to ditch coal. Can it keep the lights on?

HONOLULU, Hawaii — The telephone rang. First electrons were imminent. Twenty-five-year-old Julie Blunden grabbed her binoculars and stepped onto the lanai, a covered porch tucked into the emerald hillside rising above Honolulu.

Looking past the turquoise coastline of Waikiki, across some 20 miles of bay to the west side of Oahu, she saw the evidence: a plume of smoke rising from Barbers Point.

On that day in September 1991, Blunden’s first reaction was relief: AES, the upstart independent power company she and her new husband had moved to Hawaii to work for, had fulfilled its promise. It had constructed a state-of-the-art coal plant, which would lessen Oahu’s overwhelming dependence on imported oil for electricity and deliver cheaper power for the island.

AES had packed the plant with equipment to cut air pollution to levels well below the industry norm, while spending $2 million to protect 143,000 acres of rainforest in Mbaracayu, Paraguay as an early form of carbon offset. This made Blunden hopeful.

“If we could figure out how to take old technologies, like coal boilers, and make them way, way better, certainly we’d eventually figure out how to start building wind plants and, maybe, someday, what I really wanted to be building: solar plants,” she recalled recently.

Thirty years later, that AES coal plant remains the largest source of power managed by Hawaiian Electric, the investor-owned utility that supplies most of the state. But not for long.

In August 2021, Blunden returned to the site of her old project — to bury it, not to praise it.

As concern about climate change mounted, public sentiment shifted against the ​“coal pile in paradise,” said Jeff Mikulina, who recently retired from leading Blue Planet Foundation, a Hawaiian nonprofit that advocates for clean energy. After years of urging by Blue Planet and others, the state legislature passed a law last year specifically to block new utility contracts for coal power. The law means that the AES plant must cease operations when its contract expires on September 1, 2022.

The legislators couldn’t have been clearer about their intentions: ​“The purpose of this Act is to eliminate the use of coal in Hawaii for electricity production.”

During her August visit to the site, Blunden rode past the turnoff for the AES plant, under the covered conveyor belt that shuttles coal from a nearby harbor, to a vacant dusty patch in the same industrial park. She watched as Plus Power, the grid storage developer she now advises, broke ground for the Kapolei Energy Storage (KES) facility, where it will install 158 Tesla Megapack batteries to help keep the grid running after the coal closure.

Catch up on Canary Media’s previous coverage of how KES will be a test case for clean energy replacing fossil-fueled plants, and watch our video about the battery facility.

That shutdown will carry Oahu and its 1 million inhabitants past a point of no return. The AES plant is Oahu’s biggest generator, meeting roughly 16 percent of the island’s peak demand. It’s also the first, and last, large coal plant in the entire state. Hawaii is now only building clean energy projects to take its place; a 2015 law mandates 100 percent renewable power in the state by 2045.

Hawaii’s willingness to dive headfirst into clean energy has earned it the moniker ​“postcard from the future,” a place the rest of the U.S. can look to for a glimpse of a cleaner world. Hawaiian Electric has already surpassed 30 percent renewable power, and rooftop solar adoption is well ahead of the mainland. But no one can say for certain if next year’s transition will be smooth.

The fleet of large solar projects handpicked by Hawaiian Electric to replace the AES plant has run into delays. This prompted state utility regulators to discard the somber, quasi-judicial approach common in many states and embrace a more muscular role in keeping the utility on track. This dynamic played out in an unusually fiery hearing in March. Governor David Ige (D) mobilized his office later that month to track progress and speed up permitting for the solar projects.

“There’s no shortage of challenges in execution,” said Jay Griffin, chair of Hawaii’s Public Utilities Commission, in an August interview. ​“At the same time, the plant is coming offline, date certain, so we’ve got to keep the focus on getting as much of the pieces in place as we can.”

Now the state must execute more clean-power plant construction than ever before, and continue that streak for the foreseeable future. And it must orchestrate smaller energy devices in homes and businesses to work alongside the major power plants. And it must prepare the island grid for catastrophic events as extreme weather becomes more common.

To avoid a turbulent transition, Hawaii is greenlighting policies that energy wonks and climate activists have long dreamed about. Lithium-ion batteries are taking over critical grid duties from fossil fuel generators. The state is asking for help from residents, who will be paid to install batteries and send more rooftop solar production to the grid. Regulators fast-tracked community-scale solar, too. Challenges for the large-scale power plants could give the smaller, nimbler ones a chance to shine.

In a year’s time, Oahu will offer either a cautionary tale about decarbonizing too rapidly — or a blueprint for moving faster than people elsewhere think possible.

“In a very serious hole”

The issue raising the collective blood pressure of Honolulu’s energy aficionados is the strong possibility that delays on new solar plants will leave the island in the lurch when the coal plant goes away.

“There were delays that were not told to the [Public Utilities] Commission, ultimately, for months,” recounted Griffin, who holds a doctorate in policy analysis and now leads the commission after a career researching clean and distributed energy. ​“By the time we found out that things were delayed another year to 18 months at times, you know, we’re in a very serious hole.”

The most extreme scenario would involve a shortage of electricity supply that triggers power outages in fall 2022 or summer 2023. Hawaiian Electric is rearranging maintenance schedules for other power plants to ensure they’re lined up and ready when the AES plant is turned off.

But those other plants run on diesel or oil, which Hawaii imports at considerable expense. The plan was for new solar plants to work in concert with the KES battery, filling it up cheaply by day for use at night. If KES comes online without sufficient new clean resources to charge it, it will have to fill up on oil-fired electrons.

That prospect didn’t seem to alarm Hawaiian Electric, which can pass additional fuel costs on to consumers. But it had a different effect entirely on consumer and environmental advocates.

“What the PUC saw was an avalanche of relying on more oil, rates going up for customers and possibly subjecting the grid to energy shortages during the hottest time of the year, so they had to do something,” said Kylie Wager Cruz, senior attorney with nonprofit advocacy group Earthjustice.

Griffin pressed utility representatives on this point in an unusually watchable regulatory hearing in March.

The fallback plan of burning more oil in place of coal amounted to ​“going from cigarettes to crack,” Griffin declared. The line has since become as close to viral as you’ll find from a utility regulatory hearing — seemingly every clean energy wonk on Oahu quoted it to me during my visit. (Click here to watch the viral moment.)

Fighting for acreage

The reasons for the construction delays are both specific to Hawaii and indicative of challenges that will confront the mainland sooner or later. 

Hawaiian Electric, sometimes known as HECO, is solely responsible for running the grid on Oahu. But to build the myriad clean energy projects needed to replace the coal plant, the utility awarded contracts to independent developers (as well as awarding a couple to itself). It’s the job of a developer to secure land rights, get permits, acquire the necessary components, and build the power plant as promised.

Bidding out contracts for solar energy ensures more competitive pricing. But it also complicates the task of figuring out who is responsible for delays, due to overlapping spheres of influence and responsibility.

Everyone can agree on one culprit: Hawaii’s scarcity of land. Large-scale solar, the principal form of new generation being planned, eats up a lot of acreage. That sends developers away from the coastal hubs in search of wide-open terrain. Open spaces tend to be zoned as agricultural land, a legacy of decades of colonial exploitation by sugar and fruit plantations.

“It all comes down to Hawaii’s history, the land-use decisions, who benefits, who doesn’t benefit, and how we share in the collective vision of what is a thriving Hawaii,” said longtime renewables developer Noelani Kalipi, who now develops offshore wind as chief strategy officer at Progression Energy.

Many present-day communities in Hawaii are located where plantation workers used to live, said Colton Ching, who oversees the transition to a renewable grid as Hawaiian Electric’s senior vice president for planning and technology. Converting former plantation lands into solar sites can require extra permitting effort — and it can trigger community pushback. The dynamic grows even more complex if the developer is dropping in from the mainland, as is the case for many of the planned solar developments on Oahu.

“There is such unanimous support for renewable energy in Hawaii, but that doesn’t necessarily translate into support for building a renewable energy project in my neighborhood,” said Ching. ​“So I think there might be a little bit of surprise there for some folks, especially folks who are not used to doing business in Hawaii.”

Communities that have been burned by developers before look warily at new developers, even if they are from an entirely different industry, he added.

Successful development takes more than hiring local partners, Kalipi noted. It requires connecting with communities and actually grappling with the issues that they raise. Building trust as a responsible partner for the community takes time and money.

“Hawaii has a long history of developers coming in and promising the world,” Kalipi said. ​“Money talks, but money doesn’t always win.”

The same issues and constraints crop up in the mainland U.S., even though other states have far more land to work with. As prime development spots fill up and renewables encroach farther into populated or sensitive areas, siting concerns will grow more potent.

“I think this definitely will be a broader industry issue five or 10 years from now, for a number of reasons,” Ching said.

Study fast

Hawaiian Electric can’t do developers’ jobs for them. But the utility is responsible for a number of potential bottlenecks, such as studying what impacts a project poses for the grid system and building out transmission lines as needed to connect it.

Renewables developers complain about utilities taking too long on their grid studies just about anywhere utilities study the impacts of new renewables. There’s a fundamental mismatch in incentives. Speed of construction matters hugely for a cash-strapped developer trying to finish a project and get paid, whereas the utility generally will do fine whether or not a developer hits a deadline.

Frustration with Hawaiian Electric’s pace has, on occasion, led to court battles.

Hawaiian Electric subsidiary Maui Electric finalized a deal in 2018 with developer Molokai New Energy Partners for a solar-plus-battery plant on the island of Molokai. The utility then canceled the contract in 2020 because the developer missed its deadline. But the developer sued, arguing that it missed the deadline because Maui Electric hadn’t finished the interconnection study. A federal judge in Hawaii allowed the suit to move forward this summer.

That particular project is on a different island and doesn’t impact readiness for Oahu’s coal retirement. For the most part, the interconnection studies on Oahu’s forthcoming solar and storage projects are done now, Ching noted. The exceptions are projects that changed a major technical component, thereby prompting a redo of the study process (the same factor that initially delayed the Molokai study).

Real-world laboratory for decentralized power

Grid wonks and entrepreneurs have spent the last decade evangelizing the transformative power of small-scale or ​“distributed” energy sources, like rooftop solar, to serve the grid and households at the same time. Swaths of studies and pilot programs have proven this can work, but hardly any jurisdiction practices it at appreciable scale.

Hawaii had also been tinkering with policies to promote distributed energy. But the looming grid shortfall prompted a rapid jump from planning board to reality, as Griffin and his fellow regulators raced to approve anything that could supplement the delayed projects.

“HECO had a long time to begin planning for what the transition would look like,” said Earthjustice attorney Wager Cruz. ​“The [Public Utilities Commission] has had to play catchup by finding other ways to get renewables to fill the [KES] battery.”

One of those new approaches that the PUC fast-tracked is the Battery Bonus program. Hawaiian Electric will now pay customers for the use of their home battery systems during two hours of the evening demand peak. Participants will earn an upfront bonus of $4,250 if they enroll a typical battery for the duration of the 10-year program. That could pay for a large fraction of the battery system’s cost.

“After that meeting in March, we on the commission side all stepped back and looked at what other irons we needed to put in the fire,” Griffin said. ​“And that one immediately rose to the top.”

The PUC hopes to bring 50 megawatts of battery capacity online through this program. The concept of harnessing thousands of home batteries to act as a decentralized power plant, often referred to as a virtual power plant, has inspired panels at industry conferences for years, but it only recently started to become a reality.

Vermont’s largest utility, Green Mountain Power, now taps more than 16 megawatts of customer-hosted batteries to reduce its total demand during the most expensive hours of the year, and then shares the savings with all customers. This example proves it can be done, but other utilities still choose to prove that point for themselves in demonstrations that can drag on for years.

Virtual power plants rarely play a mission-critical role on par with traditional power plants as Oahu’s battery network will. And one would be hard-pressed to find an example that reaches a market share comparable to 50 megawatts out of Oahu’s peak demand of around 1,100 megawatts.

“These are the grid-edge solutions that Hawaii can really be an innovator on,” said Mikulina, the Hawaii clean energy advocate. ​“Hawaii is that perfect laboratory where we can de-risk some of these policies and programs so they can scale elsewhere.”

Any laboratory experiment carries the possibility of failure. But the Hawaii PUC’s willingness to iterate quickly in the face of a grid challenge distinguishes it from slower-moving regulators elsewhere.

California ran out of power in the summer of 2020. The state has more residential solar and battery capacity installed than any other state. But to fix the supply shortfall, the California PUC largely ignored distributed energy, instead asking for large power plants to be constructed in an improbably short span of time. Those efforts didn’t perform as hoped, and California entered the 2021 summer season with a bigger power supply shortfall than agencies had expected to face.

Rooftop solar: From public enemy to public servant

Hawaii used to push homeowners to produce only as much solar power as they could consume and to avoid exporting any extra to the grid. Too much uncoordinated solar production was considered a nuisance for grid operations. Hawaiian Electric also argued that paying for surplus rooftop solar (through the earlier policy known as net metering) amounted to all utility customers subsidizing solar for those households that could afford it.

So in recent years, homeowners who installed rooftop solar almost all added batteries because they were disincentivized from sharing their surplus production. 

Now, the Battery Bonus program that the PUC approved will reward households for producing more solar power and sharing it with the grid. The policy even lets old net-metering customers add 5 kilowatts of new solar on their roofs. The giant KES battery will store excess production from rooftops and community-scale solar fields, and Oahu needs all the electricity they can make.

“We’ve got to think of a paradigm shift here, that we have a great need for power, a great need for clean power, [at] all times of the day.” Griffin said. ​“Because again, it’s going to displace oil, pretty much guaranteed, until we backstop the rest of the replacement of this plant.”

While Oahu waits for the large solar projects to emerge from their thickets of permitting and grid studies, new residential solar and batteries can be up and running in just a day or two. That flexibility and responsiveness to customer desire is something distributed energy advocates tout as a contrast to a utility-driven approach that rests on fewer, larger projects getting across the finish line.

For Hawaii’s rooftop solar industry, this feels like vindication after years of policies limiting the payback they could offer their customers.

“This is also largely about a utility overreaching on their response to a healthy solar industry, and now recognizing that they went too far,” said Blake Briddell, who runs Hawaii sales for Sunrun, the biggest rooftop solar installer in the U.S. ​“That’s a big part of the story here.”

The next wave

If you ask people who are steeped in Oahu’s energy transition what they think will happen when coal goes away, nobody has the same answer. But they all tend to be fascinating, in the slightly macabre manner of California grid wonks speculating on the odds of another power shortage during this year’s fire season.

Some Hawaii grid prognosticators maintain a dour outlook: All new large-scale solar plants will remain mired in delays, Battery Bonus fails to rally anywhere near the hoped-for 50 megawatts, disarray ensues.

Griffin, when asked how confident he was that the transition would go smoothly, said, ​“It’s not a panic time.”

“We’re in a better position than we were back in March — we’ve got more irons in the fire,” Griffin said in August. But, he added, ​“There’s not a single one of these [large-scale solar and battery] projects that are online yet. […] At this point, we’ve got to stay vigilant and disciplined, and there’s stuff out there that can still set us back.”

On a more positive note, in early October the PUC approved a plan to speed up completion of two solar-plus-storage projects developed by Clearway Energy, Griffin noted in a recent email. Those plants should be operational around the time the AES plant shuts down, and analysis indicates that their capacity, plus forthcoming distributed energy installations, should be sufficient to maintain grid reliability.

But, Griffin noted, there’s still uncertainty around just how much distributed energy will be built by then. And unexpected circumstances can still delay the bigger projects — for instance, one called Kupehau Solar is facing a major redesign after the discovery of cultural resources at its planned location.

Mikulina, whose nonprofit helped rally support for the 100 percent renewable law, thinks the impending transition is manageable with a bit of hustle.

“Thanks to the bold leadership at the PUC, I think we’ll be OK,” he said, adding, ​“It will require deploying resources at a speed and scale beyond what we’re accustomed to.”

A ​“looming” concern is constrained battery supply, Griffin noted. The Covid-19 pandemic has unsettled global supply chains. Meanwhile, the grid battery sector has suffered from its own success: Surging demand for high-quality batteries outstripped manufacturing capacity this year, and that imbalance seems unlikely to resolve itself anytime soon. Meanwhile, the solar industry is struggling with its own supply-chain issues, from polysilicon price spikes to shortages of essential materials.

Surviving the coal shutdown is just the most imminent test, like an outrigger canoe cresting the first breaker on its way out to sea. Getting past one wave just means another is coming. For Oahu, the next wave will be the closure of decades-old oil-burning plants Waiau 3 and 4, slated for 2024.

“Longer term, I think one of our big challenges is how do we keep our grid reliable and resilient for all of our customers,” Ching said.

Maintaining reliability with onshore renewables entails competing for land with other uses, like locally produced food or affordable housing, he added. 

“Do we want to make the policy decision to double or triple the land needed for energy to provide you that reliability and resilience, and trade off even more land for ag and housing?” he asked.

Onshore wind is now ​“a real third-rail conversation” on Oahu, Mikulina noted, after a wind farm in the North Shore community of Kahuku failed to heed the input of local residents. More than 160 people were arrested in 2019 for attempting to block delivery of wind farm equipment.

One way to escape those constraints, and secure stronger gusts, would be building offshore. Several developers are scoping the viability of offshore wind for Hawaii, Ching said, but given the deep seas surrounding the volcanic island chain, the turbines would need to float rather than be affixed to the seafloor. Floating wind projects have emerged in the North Sea but have yet to appear in the U.S.

Floating wind installations off Hawaii would need clearance from the Defense Department certifying that turbines wouldn’t interfere with military operations, Progression Energy’s Kalipi noted. Then the Interior Department would have to open up those areas for wind development. And developers would need to see technology costs fall into competitive territory.

Kalipi said she’s worked on a Hawaii offshore development for the last eight years, but she expects the earliest online date for such a project would be the early 2030s — ​“and that’s if everything goes well.”

Offshore wind and onshore plants will also need to survive the kinds of extreme weather events that are becoming more frequent and destructive due to climate change.

“In an age where the climate and environment which your grid is exposed to today is going to be different from what it is going to be exposed to 20 years from now, we need to factor those things in,” Ching said.

Hawaii’s experience thus far has shown that it’s unwise to assume a wholesale shift from coal to clean power will proceed exactly as planned. The transition can’t be set in motion and then left unattended. It requires ongoing scrutiny and timely course corrections, until the old plants are gone and the new ones are pumping out a steady stream of pollution-free power. 

***

Canary Media thanks videographer Lucas Assenmacher for his work on this project. Getty photographs featured in the video are by Ron Jenkins and Mark Felix.