The source of power
by Jacky Leung | Nov. 5, 2019
Ever wonder where your electricity comes from? If you live in Hawaii, chances are that you’re a customer of the Hawaiian Electric Companies, which provides electrical service for 95 percent of the state’s residents on Oahu, Maui, Molokai, Lanai and Hawaii Island.
I always thought that all the power was generated by the utility. However, after I started working at Hawaiian Electric, I learned that our companies only generate a portion of the electricity that is served to customers. In fact, over 40 percent of the electricity distributed annually over the last few years was not generated by us, but by Independent Power Producers (IPPs).
As the name suggests, IPPs are independent, non-utility owned companies that sell the power they generate to us. IPPs became more common as a result of the Public Utility Regulatory Policies Act (PURPA) of 1978, which required utilities to purchase power from IPPs if it was cheaper than producing the power themselves. Before PURPA, utilities had monopolies over power production and generated all the power customers used.
Early IPPs in Hawaii include the Hawaiian Commercial & Sugar Company on Maui, which generated its electricity from bagasse, and Honolulu Program of Waste Energy Recovery (H-Power) on Oahu, which burns trash to produce power. You can view a list of the IPPs currently producing energy in Hawaii.
In order to help mitigate the risks of developing a completely new generating facility, IPPs usually enter contracts with us to ensure that they get a long-term price guarantee for the energy they generate. Through our recent competitive bidding request for proposals (RFPs), we were able to negotiate competitive pricing that benefits our customers and secure long-term contracts on a number of renewable energy projects. These contracts provide stable, long-term prices at about 10 cents per kilowatt-hour (kWh), which is significantly lower than the current cost of fossil fuel generation, which is about 15 cents per kWh.
It’s important to note the tremendous amount of effort it takes to complete a competitive bidding RFP. Our employees spend months working on the RFP alone, which easily spans thousands of pages and is full of highly technical specifications, legal documents, contracts, and more. The entire process takes well over a year from start to finish and includes the time it takes to review the proposals and get approvals from the Public Utilities Commission.
Despite the effort required, the results are well worth it. By getting proposals from various developers, the competitive bidding process allows us to find the best projects that will meet our future energy needs and stabilize costs.
As we work towards 100 percent renewable energy by 2045, IPPs will continue to be an important part in helping Hawaii reach its clean energy goals. We have issued two major requests for proposals to date in our search for additional grid-scale renewable energy projects from IPPs, totaling well over 1 GW of renewable generation.
Track the status of all new and upcoming renewable energy projects using our new Renewable Project Status Board. We may be the sole provider for electricity on five islands, but the source of power for our customers comes from many different sources.
Jacky Leung is a digital communications analyst at Hawaiian Electric Company.
