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
HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1883
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
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
 
20 State.  By increasing the required amount over time, the standard
 

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

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

 
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 1      (3)  The certainty and stability of the renewables market
 
 2           created by properly-designed renewables portfolio
 
 3           standards will enable long-term contracts and financing
 
 4           for the renewable power industry, which will, in turn,
 
 5           lower renewable power costs;
 
 6      (4)  Least-cost compliance is encouraged through the
 
 7           flexibility provided to generators who are subject to
 
 8           the standard; they can compare the cost of owning a
 
 9           renewables facility to the cost of a credit and
 
10           renewable power purchase package and to secondary-
 
11           market credits.  Those who are most efficient at
 
12           generating renewable power will end up producing it,
 
13           and those who cannot efficiently produce it will
 
14           purchase credits on the competitive market; and
 
15      (5)  Since large generation companies will be looking to
 
16           improve their competitive position in the market, they
 
17           will have an interest in driving down the cost of
 
18           renewables to reduce their renewables portfolio
 
19           standards compliance costs.  They may do this by
 
20           lending their own financial resources to a renewables
 
21           project, by seeking out least-cost renewables
 
22           applications, or by entering into long-term purchasing
 
23           commitments.  This fosters a "competitive dynamic" that
 

 
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 1           is not achieved with policies that involve direct
 
 2           subsidies to renewable generators without involving the
 
 3           rest of the electric industry.
 
 4      The purpose of this Act is therefore to require qualified
 
 5 electric utility companies to implement renewables portfolio
 
 6 standards, thereby requiring these utilities to possess a minimum
 
 7 percentage of renewable energy resources within their overall
 
 8 resource portfolios, and require the public utilities commission
 
 9 to establish a program to issue renewable credits to renewable
 
10 energy generators.
 
11      SECTION 2.  For the purposes of this Act:
 
12      "Biomass" means organic residues or crops that are grown for
 
13 energy production.
 
14      "Qualified electric utility company" means a distributor of
 
15 electricity to customers in the State that has sales of more than
 
16 350,000 kilowatt-hours of electricity per year.
 
17      "Renewable energy" means energy from wind, solar energy
 
18 systems, biomass, landfill gas, geothermal resources, ocean
 
19 thermal energy conversion, hydropower, and organic wastes,
 
20 including refuse-derived fuel.
 
21      "Renewable energy credit" means a tradable certification of
 
22 proof that one kilowatt-hour of electricity from renewable energy
 
23 was either:
 

 
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 1      (1)  Generated by a qualified electric utility company and
 
 2           sold to Hawaii consumers;
 
 3      (2)  Purchased by a qualified electric utility company from
 
 4           a renewable energy generator in Hawaii and sold to
 
 5           Hawaii consumers; or
 
 6      (3)  Purchased by a qualified electric utility company from
 
 7           one or more Hawaii renewable energy generators.
 
 8      "Renewable energy generator" means a person owning a
 
 9 facility that produces electricity from renewable energy.
 
10      "Renewables portfolio standard" means the percentage of
 
11 electric power consumed in Hawaii that must be derived from
 
12 renewable energy.
 
13      SECTION 3.  (a)  Each qualified electric utility company
 
14 which sells electricity for consumption in the State shall
 
15 implement a ___ per cent renewables portfolio standard effective
 
16 January 1, 2002, and shall increase this percentage by ____
 
17 percentage points each succeeding year up to a minimum of ___ per
 
18 cent on January 1, 2010.  Beginning on January 1, 2010, the
 
19 renewables portfolio shall be increased to a minimum of ______
 
20 per cent by January 1, 2020.  Any utility company that is not
 
21 included in the term "qualified electric utility company" may
 
22 participate voluntarily.
 

 
 
 
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 1      (b)  The percentages specified in section 6(a) with respect
 
 2 to on-grid solar photovoltaic electric energy production shall be
 
 3 counted toward the overall renewables portfolio standard
 
 4 percentages specified in subsection (a) of this section.
 
 5          PART II.  SOLAR RENEWABLES PORTFOLIO STANDARDS
 
 6      SECTION 4.  The legislature finds that electricity
 
 7 production by the direct use of solar energy will be an important
 
 8 component of a diversified Hawaii electricity portfolio, but at
 
 9 present prices it cannot compete with other renewables within a
 
10 renewables portfolio standard.  The legislature finds, however,
 
11 that it is clearly in the best interest of Hawaii's economy,
 
12 economic development, and security to encourage a robust market
 
13 of on-grid solar electric applications.  These can be utility
 
14 scale solar thermal-electric energy production facilities,
 
15 utility scale solar photovoltaic energy production facilities,
 
16 and distributed, on-site, or building-integrated applications of
 
17 solar photovoltaic electric energy production.
 
18      The legislature further finds that the particular advantages
 
19 of on-site and on-grid solar electric production are not
 
20 reflected in their price, and yet have important value to
 
21 Hawaii's economy.  In addition to the environmental and oil-
 
22 reduction benefits of the use of indigenous energy resources, the
 
23 unquantified benefits of solar electric energy production can
 

 
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 1 include enhancing facility reliability, security of important
 
 2 telecommunications, financial data, and public health and safety
 
 3 functions, and job creation and economic development from
 
 4 potential in-state manufacturing or assembly facilities.  From
 
 5 the utility standpoint, these unquantified benefits can also
 
 6 include reduction of load on urban distribution and substation
 
 7 components, reduction of urban peak demand, enhanced reliability
 
 8 of feeder systems, voltage support, and an overall general gain
 
 9 in network reliability.  Off-grid applications of solar electric
 
10 energy production are already economically viable in the Hawaii
 
11 energy economy, and therefore do not need to be part of an
 
12 incentive package.
 
13      The legislature therefore finds that it is in the interest
 
14 of the State to capture the unquantified benefits of on-grid
 
15 solar electric energy production, and not have this emerging
 
16 technology be subject to market competition against other
 
17 renewable electric energy production facilities that have already
 
18 achieved lower production costs.
 
19      SECTION 5.  As used in this part:
 
20      "Solar photovoltaic electric energy production" means the
 
21 making of electricity by means of photovoltaic cells, panels, or
 
22 collectors in various configurations, arrays, or building
 
23 components.
 

 
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 1      "Solar thermal electric energy production" means the making
 
 2 of electricity by concentrating solar energy onto devices that
 
 3 convert the concentrated heat to electricity through either
 
 4 steam-electric energy production or heat-engine electric energy
 
 5 production.
 
 6      SECTION 6.  (a)  Each qualified electric utility company
 
 7 that sells electricity for consumption in the State shall
 
 8 implement the following percentages of gross Hawaii utility peak
 
 9 power production derived from on-grid solar photovoltaic electric
 
10 energy production by the following dates:
 
11      (1)  ______ per cent by January 1, 2010;
 
12      (2)  ______ per cent by January 1, 2015; and
 
13      (3)  ______ per cent by January 1, 2020.
 
14 Any utility company that is not included in the term "qualified
 
15 electric utility company" may participate voluntarily.
 
16      (b)  As an economic inducement to diversify the energy
 
17 resource portfolio for the State, induce additional technology
 
18 applications within the State, and improve the economics for
 
19 utility acquisition and application of in-state produced
 
20 photovoltaics:
 
21      (1)  Any qualified electric utility company that develops
 
22           utility-scale solar electric energy production, that
 
23           company shall be entitled to receive twice the
 

 
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 1           kilowatt-hours of electricity in renewable energy
 
 2           credits toward fulfilling the solar renewables
 
 3           portfolio standard requirements specified in subsection
 
 4           (a).  As used in this paragraph, "utility-scale solar
 
 5           electric energy production" means the generation of one
 
 6           megawatt of electricity per facility or higher,
 
 7           including the use of either solar photovoltaic electric
 
 8           energy production, solar thermal electric energy
 
 9           production, or both; and
 
10      (2)  Any manufacturer that agrees to build a photovoltaic
 
11           assembly or production plant in the State, where the
 
12           photovoltaic cells and components are produced and sold
 
13           for use in the State, shall be entitled to receive
 
14           twice the kilowatt-hours of electricity in renewable
 
15           energy credits toward fulfilling the solar renewables
 
16           portfolio standard requirements specified in subsection
 
17           (a).
 
18             PART III.  IMPLEMENTATION AND ENFORCEMENT
 
19      SECTION 7.  The public utilities commission shall establish
 
20 a program to issue renewable energy credits to renewable energy
 
21 generators by January 1, 2001.  The commission, or its duly
 
22 authorized agent, shall:
 
23      (1)  Inspect, certify, and audit renewable energy credits;
 

 
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 1      (2)  Impose and collect a fee on renewable energy credit
 
 2           applicants to cover the administrative cost of issuing,
 
 3           recording, certifying, auditing, and monitoring the
 
 4           sale or exchange and tracking of renewable energy
 
 5           credits;
 
 6      (3)  Enforce this Act, including the imposition of
 
 7           administrative penalties; and
 
 8      (4)  Adopt rules pursuant to chapter 91 to carry out the
 
 9           purposes of this Act.
 
10      SECTION 8.  Before March 31, beginning in 2002 and each year
 
11 thereafter, each qualified electric utility company shall submit
 
12 an application to the public utilities commission that contains
 
13 evidence of ownership of sufficient renewable energy credits to
 
14 satisfy the renewables portfolio standard for the previous year.
 
15 An application fee shall be submitted at the time of filing the
 
16 application in an amount established by rule to be sufficient to
 
17 cover the cost to process, monitor, and review the application
 
18 and subsequent filings.  Evidence of sufficient renewable energy
 
19 credits shall be equal to the product of its total electricity
 
20 sales to Hawaii electricity customers in the previous calendar
 
21 year, denominated in kilowatt-hours, and the renewables portfolio
 
22 standard for the same year.  Renewable energy credits may only be
 
23 granted for renewable energy generators located within the State.
 

 
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 1      SECTION 9.  Renewable energy credits may be sold or
 
 2 exchanged by the person to whom the credits are issued or by any
 
 3 other person who acquires the credits.  A sale or exchange of
 
 4 credit shall not be valid unless recorded with the public
 
 5 utilities commission within ninety days after the conclusion of
 
 6 the transaction.
 
 7      SECTION 10.  The public utilities commission may impose an
 
 8 administrative penalty against a qualified electric utility
 
 9 company for violating sections 3 to 6 of this Act.  Failure to
 
10 produce and receive approval of the required number of renewable
 
11 energy credits shall result in a penalty which shall be equal to
 
12 three times the market value of a renewable energy credit for
 
13 each credit that is not produced.
 
14      SECTION 11.  Any person may commence a civil action on the
 
15 person's own behalf against any of the following:
 
16      (1)  Any person in violation of sections 3(a), 6(a), or 7 to
 
17           10 of this Act;
 
18      (2)  The public utilities commission or its duly authorized
 
19           agent for failure to perform any act or duty pursuant
 
20           to sections 7 to 10 of this Act that is not
 
21           discretionary; and
 
22      (3)  Any person applying for renewable energy credits who
 
23           provides false information.
 

 
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 1      SECTION 12.  The public utilities commission shall annually
 
 2 provide a report to the legislature that includes the activities
 
 3 of the commission under sections 7 to 10 of this Act, program
 
 4 results, data, and any recommendations to achieve increased use
 
 5 and availability of renewable energy in the State.
 
 6                      PART IV.  MISCELLANEOUS
 
 7      SECTION 13.  If any provision of this Act, or the
 
 8 application thereof to any person or circumstance is held
 
 9 invalid, the invalidity does not affect other provisions or
 
10 applications of the Act which can be given effect without the
 
11 invalid provision or application, and to this end the provisions
 
12 of this Act are severable.
 
13      SECTION 14.  This Act shall take effect __________.