REPORT TITLE:
Renewables Portfolio Standards


DESCRIPTION:
Requires qualified electric utility companies to implement
renewables portfolio standards, which requires these utilities to
possess a minimum percentage of renewable energy resources within
their overall resource portfolio.  Provides for the issuance of
renewable energy credits to renewable energy generators.  (HB1883
HD1)

 
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                                                        1883
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO RENEWABLE ENERGY RESOURCES.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1              PART I.  RENEWABLES PORTFOLIO STANDARDS
 
 2      SECTION 1.  It is the intent of the legislature to recognize
 
 3 the economic, environmental, and fuel diversity benefits of
 
 4 renewable energy resources and to establish a market for
 
 5 renewable energy in Hawaii using the State's significant
 
 6 renewable energy resources and to drive down the cost of
 
 7 renewable energy to consumers.  The legislature finds that the
 
 8 benefit of electricity from renewable energy resources accrues to
 
 9 the public at large, thus consumers and electric utilities share
 
10 an obligation to develop a minimum level of these resources in
 
11 the State's electric supply portfolio.
 
12      The legislature finds that one way to achieve this objective
 
13 is through the implementation of "renewables portfolio
 
14 standards" -- a flexible, market-driven policy that seeks to
 
15 ensure that the public benefits of wind, solar, biomass,
 
16 geothermal energy, and other renewable energies continue to be
 
17 recognized as electricity markets become more competitive.  The
 
18 policy ensures that a minimum amount of renewable energy is
 
19 included in the portfolio of electricity resources serving the
 

 
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 1 State.  By increasing the required amount over time, the standard
 
 2 seeks to increase the sustainability of the electricity industry.
 
 3 Because it is a market standard, renewables portfolio standards
 
 4 rely almost entirely on the private market for its
 
 5 implementation.  Market implementation will result in
 
 6 competition, efficiency, and innovation that seeks to deliver
 
 7 renewable energy at the lowest possible cost.
 
 8      Renewables portfolio standards work through the
 
 9 establishment of renewable energy credits, which are tradable
 
10 certificates of proof that one kilowatt-hour of electricity has
 
11 been generated by a renewable-fueled source.  Credits are
 
12 denominated in kilowatt-hours (kWh) and are a separate commodity
 
13 from the power itself.  Renewables portfolio standards require
 
14 all qualified electric utility companies to demonstrate, through
 
15 ownership of credits, that they have supported an amount of
 
16 renewable energy generation equivalent to some percentage of
 
17 their total annual kilowatt-hour sales.  For example, if
 
18 renewables portfolio standards are set at five per cent, and a
 
19 generator sells one hundred thousand kilowatt-hours in a given
 
20 year, the generator would need to possess five thousand credits
 
21 at the end of that year.
 
22      Investors and generators make all decisions about how to
 

 
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 1 comply with this requirement, including the type of renewable
 
 2 energy to acquire, which technologies to use, what renewable
 
 3 developers to do business with, what price to pay, and which
 
 4 contract terms to agree to.  Generators decide for themselves
 
 5 whether to invest in renewable energy projects and generate their
 
 6 own credits, enter into long-term contracts to purchase credits
 
 7 or renewable power along with credits, or simply to purchase
 
 8 credits on the spot market.  The credit system provides
 
 9 compliance flexibility and avoids the need to "track electrons".
 
10 Because renewables portfolio standards apply equally to all
 
11 generators, it is competitively neutral.
 
12      The legislature finds that the renewables portfolio
 
13 standards approach has several efficiency advantages, including
 
14 the following:
 
15      (1)  Renewables portfolio standards avoid the administrative
 
16           dissemination of funds by government agencies, which
 
17           can be bureaucratic and inefficient.  In addition,
 
18           government-administered programs almost always impose
 
19           artificial constraints of various types, which
 
20           increases costs;
 
21      (2)  Under renewables portfolio standards, no renewable
 
22           energy project is guaranteed a place in the market.
 

 
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 1           Unlike a one-time competition for funds, each project
 
 2           must continually compete to keep its place in the
 
 3           market created by the standard;
 
 4      (3)  The certainty and stability of the renewables market
 
 5           created by properly-designed renewables portfolio
 
 6           standards will enable long-term contracts and financing
 
 7           for the renewable power industry, which will, in turn,
 
 8           lower renewable power costs;
 
 9      (4)  Least-cost compliance is encouraged through the
 
10           flexibility provided to generators who are subject to
 
11           the standard; they can compare the cost of owning a
 
12           renewables facility to the cost of a credit and
 
13           renewable power purchase package and to secondary-
 
14           market credits.  Those who are most efficient at
 
15           generating renewable power will end up producing it,
 
16           and those who cannot efficiently produce it will
 
17           purchase credits on the competitive market; and
 
18      (5)  Since large generation companies will be looking to
 
19           improve their competitive position in the market, they
 
20           will have an interest in driving down the cost of
 
21           renewables to reduce their renewables portfolio
 
22           standards compliance costs.  They may do this by
 

 
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 1           lending their own financial resources to a renewables
 
 2           project, by seeking out least-cost renewables
 
 3           applications, or by entering into long-term purchasing
 
 4           commitments.  This fosters a "competitive dynamic" that
 
 5           is not achieved with policies that involve direct
 
 6           subsidies to renewable generators without involving the
 
 7           rest of the electric industry.
 
 8      The purpose of this Act is therefore to require qualified
 
 9 electric utility companies to implement renewables portfolio
 
10 standards, thereby requiring these utilities to possess a minimum
 
11 percentage of renewable energy resources within their overall
 
12 resource portfolios, and require the public utilities commission
 
13 to establish a program to issue renewable credits to renewable
 
14 energy generators.
 
15      SECTION 2.  For the purposes of this Act:
 
16      "Biomass" means organic residues or crops that are grown for
 
17 energy production.
 
18      "Qualified electric utility company" means a distributor of
 
19 electricity to customers in the State that has sales of more than
 
20 350,000 kilowatt-hours of electricity per year.
 
21      "Renewable energy" means energy from wind, solar energy
 
22 systems, biomass, landfill gas, geothermal resources, ocean
 

 
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 1 thermal energy conversion, hydropower, and organic wastes,
 
 2 including refuse-derived fuel.
 
 3      "Renewable energy credit" means a tradable certification of
 
 4 proof that one kilowatt-hour of electricity from renewable energy
 
 5 was either:
 
 6      (1)  Generated by a qualified electric utility company and
 
 7           sold to Hawaii consumers;
 
 8      (2)  Purchased by a qualified electric utility company from
 
 9           a renewable energy generator in Hawaii and sold to
 
10           Hawaii consumers; or
 
11      (3)  Purchased by a qualified electric utility company from
 
12           one or more Hawaii renewable energy generators.
 
13      "Renewable energy generator" means a person owning a
 
14 facility that produces electricity from renewable energy.
 
15      "Renewables portfolio standard" means the percentage of
 
16 electric power consumed in Hawaii that must be derived from
 
17 renewable energy.
 
18      SECTION 3.  (a)  Each qualified electric utility company
 
19 which sells electricity for consumption in the State shall
 
20 implement a 7.5 per cent renewables portfolio standard effective
 
21 January 1, 2002, and shall increase this percentage by 0.35
 
22 percentage points each succeeding year up to a minimum of ten per
 

 
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 1 cent on January 1, 2010.  Beginning on January 1, 2010, the
 
 2 renewables portfolio shall be increased to a minimum of twenty
 
 3 per cent by January 1, 2020.  Any utility company which is not
 
 4 included in the term "qualified electric utility company" may
 
 5 participate voluntarily.
 
 6      (b)  The percentages specified in section 6(a) with respect
 
 7 to on-grid solar photovoltaic electric energy production shall be
 
 8 counted toward the overall renewables portfolio standard
 
 9 percentages specified in subsection (a) of this section.
 
10          PART II.  SOLAR RENEWABLES PORTFOLIO STANDARDS
 
11      SECTION 4.  The legislature finds that electricity
 
12 production by the direct use of solar energy will be an important
 
13 component of a diversified Hawaii electricity portfolio, but at
 
14 present prices it cannot compete with other renewables within a
 
15 renewables portfolio standard.  The legislature finds, however,
 
16 that it is clearly in the best interest of Hawaii's economy,
 
17 economic development, and security to encourage a robust market
 
18 of on-grid solar electric applications.  These can be utility
 
19 scale solar thermal-electric energy production facilities,
 
20 utility scale solar photovoltaic energy production facilities,
 
21 and distributed, on-site, or building-integrated applications of
 
22 solar photovoltaic electric energy production.
 

 
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 1      The legislature further finds that the particular advantages
 
 2 of on-site and on-grid solar electric production are not
 
 3 reflected in their price, and yet have important value to
 
 4 Hawaii's economy.  In addition to the environmental and oil-
 
 5 reduction benefits of the use of indigenous energy resources, the
 
 6 unquantified benefits of solar electric energy production can
 
 7 include enhancing facility reliability, security of important
 
 8 telecommunications, financial data and public health and safety
 
 9 functions, and job creation and economic development from
 
10 potential in-state manufacturing or assembly facilities.  From
 
11 the utility standpoint, these unquantified benefits can also
 
12 include reduction of load on urban distribution and substation
 
13 components, reduction of urban peak demand, enhanced reliability
 
14 of feeder systems, voltage support, and an overall general gain
 
15 in network reliability.  Off-grid applications of solar electric
 
16 energy production are already economically viable in the Hawaii
 
17 energy economy, and therefore do not need to be part of an
 
18 incentive package.
 
19      The legislature therefore finds that it is in the interest
 
20 of the State to capture the unquantified benefits of on-grid
 
21 solar electric energy production, and not have this emerging
 
22 technology be subject to market competition against other
 

 
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 1 renewable electric energy production facilities that have already
 
 2 achieved lower production costs.
 
 3      SECTION 5.  As used in this part:
 
 4      "Solar photovoltaic electric energy production" means the
 
 5 making of electricity by means of photovoltaic cells, panels, or
 
 6 collectors in various configurations, arrays, or building
 
 7 components.
 
 8      "Solar thermal electric energy production" means the making
 
 9 of electricity by concentrating solar energy onto devices that
 
10 convert the concentrated heat to electricity through either
 
11 steam-electric energy production or heat-engine electric energy
 
12 production.
 
13      SECTION 6.  (a)  Each qualified electric utility company
 
14 which sells electricity for consumption in the State shall
 
15 implement the following percentages of gross Hawaii utility peak
 
16 power production derived from on-grid solar photovoltaic electric
 
17 energy production by the following dates:
 
18      (1)  One quarter of one per cent by January 1, 2010;
 
19      (2)  One half of one per cent by January 1, 2015; and
 
20      (3)  One per cent by January 1, 2020.
 
21 Any utility company which is not included in the term "qualified
 
22 electric utility company" may participate voluntarily.
 

 
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 1      (b)  As an economic inducement to diversify the energy
 
 2 resource portfolio for the State, induce additional technology
 
 3 applications within the State, and improve the economics for
 
 4 utility acquisition and application of in-state produced
 
 5 photovoltaics:
 
 6      (1)  Any qualified electric utility company that develops
 
 7           utility-scale solar electric energy production, that
 
 8           company shall be entitled to receive twice the
 
 9           kilowatt-hours of electricity in renewable energy
 
10           credits toward fulfilling the solar renewables
 
11           portfolio standard requirements specified in subsection
 
12           (a).  As used in this paragraph, "utility-scale solar
 
13           electric energy production" means the generation of one
 
14           megawatt of electricity per facility or higher,
 
15           including the use of either solar photovoltaic electric
 
16           energy production, Solar thermal electric energy
 
17           production, or both; and
 
18      (2)  Any manufacturer that agrees to build a photovoltaic
 
19           assembly or production plant in the State, where the
 
20           photovoltaic cells and components are produced and sold
 
21           for use in the State, shall be entitled to receive
 
22           twice the kilowatt-hours of electricity in renewable
 

 
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 1           energy credits toward fulfilling the solar renewables
 
 2           portfolio standard requirements specified in subsection
 
 3           (a).
 
 4             PART III.  IMPLEMENTATION AND ENFORCEMENT
 
 5      SECTION 7.  The public utilities commission shall establish
 
 6 a program to issue renewable energy credits to renewable energy
 
 7 generators by January 1, 2001.  The commission, or its duly
 
 8 authorized agent, shall:
 
 9      (1)  Inspect, certify, and audit renewable energy credits;
 
10      (2)  Impose and collect a fee on renewable energy credit
 
11           applicants to cover the administrative cost of issuing,
 
12           recording, certifying, auditing, and monitoring the
 
13           sale or exchange and tracking of renewable energy
 
14           credits;
 
15      (3)  Enforce this Act, including the imposition of
 
16           administrative penalties; and
 
17      (4)  Adopt rules pursuant to chapter 91 to carry out the
 
18           purposes of this Act.
 
19      SECTION 8.  Before March 31, beginning in 2002 and each year
 
20 thereafter, each qualified electric utility company shall submit
 
21 an application to the public utilities commission which contains
 
22 evidence of ownership of sufficient renewable energy credits to
 

 
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 1 satisfy the renewables portfolio standard for the previous year.
 
 2 An application fee shall be submitted at the time of filing the
 
 3 application in an amount established by rule to be sufficient to
 
 4 cover the cost to process, monitor, and review the application
 
 5 and subsequent filings.  Evidence of sufficient renewable energy
 
 6 credits shall be equal to the product of its total electricity
 
 7 sales to Hawaii electricity customers in the previous calendar
 
 8 year, denominated in kilowatt-hours, and the renewables portfolio
 
 9 standard for the same year.  Renewable energy credits may only be
 
10 granted for renewable energy generators located within the State.
 
11      SECTION 9.  Renewable energy credits may be sold or
 
12 exchanged by the person to whom the credits are issued or by any
 
13 other person who acquires the credits.  A sale or exchange of
 
14 credit shall not be valid unless recorded with the public
 
15 utilities commission within ninety days after the conclusion of
 
16 the transaction.
 
17      SECTION 10.  The public utilities commission may impose an
 
18 administrative penalty against a qualified electric utility
 
19 company for violating sections 3 to 6 of this Act.  Failure to
 
20 produce and receive approval of the required number of renewable
 
21 energy credits shall result in a penalty which shall be equal to
 
22 three times the market value of a renewable energy credit for
 

 
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 1 each credit that is not produced.
 
 2      SECTION 11.  Any person may commence a civil action on the
 
 3 person's own behalf against any of the following:
 
 4      (1)  Any person in violation of sections 3(a), 6(a), or 7 to
 
 5           10 of this Act;
 
 6      (2)  The public utilities commission or its duly authorized
 
 7           agent for failure to perform any act or duty pursuant
 
 8           to sections 7 to 10 of this Act that is not
 
 9           discretionary; and
 
10      (3)  Any person applying for renewable energy credits who
 
11           provides false information.
 
12      SECTION 12.  The public utilities commission shall annually
 
13 provide a report to the legislature that includes the activities
 
14 of the commission under sections 7 to 10 of this Act, program
 
15 results, data, and any recommendations to achieve increased use
 
16 and availability of renewable energy in the State.
 
17                      PART IV.  MISCELLANEOUS
 
18      SECTION 13.  If any provision of this Act, or the
 
19 application thereof to any person or circumstance is held
 
20 invalid, the invalidity does not affect other provisions or
 
21 applications of the Act which can be given effect without the
 
22 invalid provision or application, and to this end the provisions
 

 
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 1 of this Act are severable.
 
 2      SECTION 14.  This Act shall take effect upon its approval.
 

 
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