Following last Tuesday’s special meeting of Hawaiian Electric Industries to vote on the proposed merger with NextEra Energy, several company officials met informally with groups of shareholders to answer questions.
Some of those present were unhappy that the questions weren’t addressed during the meeting so that everyone in attendance could hear the answers.
Jeff Watanabe, board chairman of HEI, was later asked about this.
He responded that there are specific rules that have to be followed in situations like this when a scheduled meeting is adjourned. The company has to take into account that there are other shareholders who did not attend.
“You don’t want to do a whole lot on the record beyond what is on the agenda,” he said.
Watanabe was very good in fielding questions in the informal setting. He was not defensive. or overbearing, nor did he talk down to shareholders. He listened and responded pretty directly to questions.
He said a couple of things that are well worth sharing.
First, he repeated the observation that Hawaiian Electric, especially via HECO, has already absorbed more renewable energy, and especially more rooftop solar, than other utilities across the country.
“We’re way ahead of anybody else,” Watanabe said.
But this creates the company’s biggest problem. It’s infrastructure will need major upgrades to accommodate further amounts of renewables.
“The kind of change we need to make is enormous,” Watanabe said.
He threw out the figure of $800 million a year in expenditures to make the necessary improvements, an expense that would have to be shouldered by customers.
He said the board of directors had to consider how to go about making and financing these improvements.
And although Hawaiian Electric is one of our state’s largest companies, it is not a large utility.
“What a lot of people don’t realize,” Watanabe said, “is that Hawaiian Electric is not one utility. It is a collection of small utilities which are not interconnected.”
“Our credit ratings are just above investment grade,” Watanabe said, and any hiccup could drop the company’s debt down below investment grade, increasing borrowing costs and making those upgrades harder to pay for.
So one thing the HEI board was looking for when deciding how to tackle the huge infrastructure investment was the financial stability and deeper pockets of a corporate partner. That’s what led them into the discussions with NextEra, which he described as “the darling of the utility sector.”
Watanabe also introduced a distinction between “community solar,” which benefits everyone sharing the grid, and “rooftop solar,” which primarily benefits the individual homeowners.
Currently, owners of rooftop solar systems are receiving a subsidy in the amount they are paid for excess energy that is sold back to Hawaiian Electric, he said.
“I am one of those who have a rooftop system, and I’m benefiting at the cost of other subscribers who cannot put rooftop solar.”
These include people living in condominiums, renters, and in areas that don’t get enough sun to make solar attractive.
“It’s fundamentally a mafter of equity,” Watanabe said. “A lot of retired people, and others who can’t afford the cost of solar systems, are subsidizing rooftop solar for those who can afford it.”
Even without subsidies, Watanabe called solar “a hell of a deal.”
“What’s driving rooftop solar is the fact that our rates are high,” Watanabe said.
“So if you (NextEra) are anxious to have more community solar so everybody could benefit,
about the last thing you want to do is to raise rates, because that’s what drives rooftop solar,” he said.
In Florida, where NextEra’s rates are low, there isn’t as much demand for solar, Watanabe said.
When asked about dividends, Watanabe said NextEra had committed to retaining the same payout as HEI, and when the spinoff of American Savings is complete, the newly independent company may pay a dividend of its own.
The result, he said, is a possible overall dividend increase.
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He still represents interests that want to protect the old model of utility-owned production and distribution. We would be better off with a user-owned utility that is not profit-driven in shifting from a monolithic power system to a system with distributed production and storage. The grid should be like publicly-owned roads while production and storage should be allowed to become a competitive free market.
Aaron is right on. That is exactly what we need. NextEra is not interested in distributed production but is tied to the traditional monolithic utility business model with all customers tied to and dependent on the grid. They seem to want to stop or derail the oncoming train of cheap solar and developing battery technology. You would think that they would realize that charging a “grid use” fee is going to make it more and more economical to cut the cord completely.
This statement from Mr. Watanabe deserves examination: “… owners of rooftop solar systems are receiving a subsidy in the amount they are paid for excess energy that is sold back to Hawaiian Electric …”
The “community” and “rooftop” solar distinction gets muddied when homeowners use less electricity than their PV systems produce, with someone benefiting from the excess. It’s not clear whether HECO gets free electricity it can then resell to its other customers, or if all other customers benefit from the excess.
It’s also muddied because the excess electricity can be sold to a neighbor, without the transmission loss incurred to provide that neighbor with the same amount of electricity from a distant power plant. The losses are also cumulative, so if my excess is sold to my neighbor, that reduces the losses HECO suffers in delivering power to another neighbor.
I say let’s relieve poor HECO of the pressure to make $800 million in changes to accommodate all of us who want to install solar on our roofs. I note that MANY folks on the Big Island completely de-couple from HELCO. They simply buy batteries to store the solar power generated each day. This is DOABLE… There is no actual need to rely on HECO anymore.
Ian, I clicked submit before putting my name & email on my comment. Can you please post it with my name… It was about de-coupling from HECO by purchasing their own batteries…
sorry for the trouble…
An article entitled “Hawaii May Be Closer to Achieving a 100% Renewable Grid Than You Think”:
http://www.greentechmedia.com/articles/read/can-hawaii-reach-100-renewable-electricity-by-2040
The trend toward renewable energy in Hawaii has taken on a life of its own. Even the local utility knows that.
It is no longer the will of the political establishment that is making renewables competitive. Rather, technological progess in renewables is simply snowballing on its own.
The reputation of NextEra, as Mr. Watanabe points out, is to preclude renewable energy like solar by underpricing it with cheaper fossile fuels. That is supposedly the great “virtue” of NextEra. But the falling price of renewable energy makes the near-total adoption of renewable energy in Hawaii seemingly inevitable.
NextEra’s interest in buying HECO is therefore, on the face of it, baffling. It’s like someone trying to buy the Titanic just after it struck the iceberg (although HECO’s wish to be bought out in such a circumstance would be very, very rational).
According to this article, the fracking boom will last only another five years in the US, until 2020.
http://news.nationalgeographic.com/news/2014/12/141219-fracking-oil-supply-price-reserves-profits-environment/
A background in LNG is all that seems to distinguish NextEra from HECO.
On the whole, what exactly does a company like NextEra bring to Hawaii that is so different from HECO?
Do subsidies for renewables create jobs?
This claim is also valid. By itself, an arbitrary subsidy is like robbing Peter to pay Paul.
But the support for clean energy in Hawaii since 2008 was not an empty, corrupt, make-work program, taking taxpayer money to reward political insiders.
In 2008, Hawaii utilized oil to generate roughly 90% of its electricity, while other states had already shifted toward natural gas and coal since the oil crises of the 1970s. Because importing coal, oil and/or natural gas in 2008 seemed environmentally, legally and geographically problematic, a commitment arose in Hawaii to gradually shift to renewable energy. Doing so was not a make-work program, but rather an act of long-term economic survival to prevent massive local unemployment in a post-peak oil world. That reasoning is still in line with the dominant view on energy, despite the recent fall in oil prices.
Subsidies for renewable fuels may not on the whole create jobs, but they are insurance against the potential economic impact of rising oil prices.
Is Hawaii really a “leader” in adopting renewable energy.
This is kind of true. From what I am reading in the media, Bill 623 is not inspiring anyone to follow Hawaii’s example.
The Green Tech Media article (above) on the passage of the law claimed that it is political grandstanding because the cost of solar is falling so fast that 100% renewables in Hawaii is a long-term fait accompli, a done deal.
And, more damning, a NY Times article claims that the new law has a loophole which basically lets utilities off the hook for not meeting their goals. Well, the cardinal rule in lawmaking is never to pass a law that cannot be or will not be enforced. Bill 623 seems to be such a badly compromised law.
http://takingnote.blogs.nytimes.com/2015/06/09/a-green-future-for-blue-hawaii-maybe/
But that is not true of the Hawaii Clean Energy Act of 2008. When it passed, it made the headlines of the NY Times. Hawaii was genuinely a world leader in 2008. In fact, Hawaii might have been one of the inspirations of Germany to push forward in 2010 with a somewhat similar commitment to serious long-term renewables development. Hawaii now gets 12% of its electricity from renewables; Germany, 30%.
Although Hawaii was a renewable energy leader in 2008, at this point, things seem to be moving and changing so fast that it would seem doubtful that Hawaii could once again lead the way.
http://www.bloomberg.com/news/articles/2015-06-23/the-way-humans-get-electricity-is-about-to-change-forever
“Hawaii now gets 12% of its electricity from renewables; Germany, 30%. “
My numbers above seem to be wrong.
According to this article, Hawaii now gets 23% of its energy from renewable sources.
http://www.huffingtonpost.com/2015/04/24/hawaii-renewable-energy_n_7132844.html
Perhaps the article is wrong. That is, the article is transposing the word “energy” where the word “electricity” should be.
Take the following article, for example.
http://www.sustainablebusiness.com/index.cfm/go/news.display/id/26167
The title is “Hawaii Reaches 21% Renewable Energy”.
But the first sentence reads “Hawaii Electric announced that 21% of its electricity comes from renewables, far exceeding the state’s Renewable Portfolio Standard (RPS) that targets 15% by 2015.”
There seems to be a widespread habit of conflating energy with electricity. Unless all the cars in Hawaii were electric cars, and natural gas did not exist, then they would be synonymous. (This is not even to mention ships in Hawaii that use diesel and airplanes that use kerosene….)
The article states that 12% of houses in Hawaii have solar PV. That’s probably where I got that figure.
Also, I keep reading that Germany gets 30% of its energy (actually, electricity) from renewable sources like solar and wind. But I also have read that on a nice sunny day when the wind is blowing, the number goes up to 74%.
http://thinkprogress.org/climate/2014/05/13/3436923/germany-energy-records/
Germany is still decommissioning nuclear and coal plants, so that percentage will rise even if no further investments were made in renewable energy in Germany. Oh, the trickiness of statistics!
I cannot find anywhere on the Internet the percentage of over-all energy in Hawaii derived from renewable sources. The emphasis seems to be on electricity. Apparently, all these legislative efforts in Hawaii on switching to renewables has been on the electricity grid. That’s something I never thought about. It would seem to be something broadly overlooked.
Time to get a bicycle?