HB3222 HD1

Report Title:

Energy Resources; Renewable Energy

Description:

(1) Establishes the Hawaii renewable hydrogen program to manage the State's transition to a renewable hydrogen economy; (2) establishes the hydrogen investment capital special fund to seed private and federal projects for the deployment of hydrogen systems; (3) directs DBEDT, Hawaii Natural Energy Institute, and NELHA to design a distributed energy storage microgrid to transport energy to NELHA; (4) directs PUC to regulate the microgrid; and (5) appropriates funds for the program and special fund. (HD1)

HOUSE OF REPRESENTATIVES	H.B. NO.	3222
TWENTY-THIRD LEGISLATURE, 2006		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

relating to energy.

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

Part I.

SECTION 1. The legislature finds that Hawaii became an early leader in the push to develop hydrogen as a fuel when, in 1980, United States Senator Spark Matsunaga introduced the first hydrogen legislation in Congress. In 1983, with a $50,000 appropriation from the legislature, the Hawaii natural energy institute at the University of Hawaii established the Hawaii hydrogen program. In September 1985, the Hawaii natural energy institute was awarded a contract from the Solar Energy Research Institute (now the National Renewable Energy Laboratory) to establish the Hawaii hydrogen from renewable resources program.

During operation of this program and other subsequent hydrogen projects, the efforts of the Hawaii natural energy institute have focused on developing core technologies for renewable hydrogen production, including direct solar and biological hydrogen production, gasification of biomass, and novel hydrogen storage technologies.

In 1990, Congress passed the Spark M. Matsunaga Hydrogen, Research, Development and Demonstration Act of 1990 that set forth for the first time a five-year management and implementation plan for hydrogen research and development in the United States. It created the Hydrogen Technical Advisory Panel that was charged with ensuring consultation and coordination regarding hydrogen research.

Also in 1990, the Hawaii natural energy institute hosted the World Hydrogen Energy Conference that drew five hundred fifty specialists from thirty-one nations. In 1996, the United States Department of Energy designated the Hawaii natural energy institute's program as a University Center of Excellence for Hydrogen Research and Education.

There has been significant progress in hydrogen research and development in Hawaii. For example, in 1999, University of Hawaii chemists discovered a new way to store hydrogen energy that may result in more economical, pollution-free vehicles. Tackling one of hydrogen's major challenges, the team found a catalyst that will release hydrogen from lightweight materials at a moderate temperature. This has major implications for developing effective fuel cells for vehicles. As a result of these accomplishments, the Hydrogen Technical Advisory Panel and the United States Department of Energy named the Hawaii team as the "1999 Research Success Story."

In addition, the 2000 legislature requested a study to recommend options that could result in hydrogen becoming a future ingredient in the State's energy economy. The Hawaii natural energy institute concluded that large-scale hydrogen use for transportation can be competitive. As a result of this study, the 2001 legislature appropriated $200,000 to establish a private/public partnership to implement the recommendations contained in the Hawaii natural energy institute study that resulted in a more comprehensive analysis entitled, "Nurturing a Clean Energy Future in Hawaii: Assessing the Feasibility of the Large-Scale Utilization of Hydrogen and Fuel Cells in Hawaii."

The legislature also finds that, in 2003, the Hawaii natural energy institute opened the Hawaii fuel cell test facility. This state of the art facility houses test equipment and hydrogen infrastructure valued at more than $2,500,000. Testing and development efforts at this facility are funded by the Office of Naval Research, the United States Department of Energy, and by private companies such as United Technologies, General Motors, Ballard Power Systems, and Arkema, Inc. These activities have helped to attract a major international conference to the Hawaii convention center scheduled for November 2006.

The legislature also finds that the Hawaii natural energy institute has also been successful in winning a United States Department of Energy competitively awarded program called the Hawaii Hydrogen Power Park, to demonstrate hydrogen technologies in a real-world environment. Other projects funded by the United States Department of Energy include the production of hydrogen from renewable sources like solar and biomass. Since 2000, United States Department of Energy funding to the Hawaii natural energy institute in these areas has exceeded $6,000,000 with more than $1,250,000 more in non-federal cost matching. Partners in this cost match include limited funding from the State, the City and County of Honolulu, Hawaiian Electric Company, The Gas Company, Stuart Energy Systems (now Hydrogenics), MV Systems, a photovoltaic development company, Worldwide Energy, LLC, and several universities.

However, the legislature finds that having world class facilities, a world class team, and a strong industrial partnership is not enough when other states that are willing to commit financial resources are aggressively competing against Hawaii for these types of projects. Accordingly, the purpose of this part is to establish:

(1) A Hawaii renewable hydrogen program to support research and development and deployment of renewable hydrogen technologies; and

(2) A hydrogen technologies capital special fund to provide seed capital and venture capital investments for the deployment of renewable hydrogen systems.

SECTION 2. Chapter 196, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§196-A Hawaii renewable hydrogen program. (a) There is established, within the department of business, economic development, and tourism, a Hawaii renewable hydrogen program to manage the State's transition to a renewable hydrogen economy. The program shall design, implement, and administer activities that shall include:

(1) Strategic partnerships for the research, development, testing, and deployment of renewable hydrogen technologies;

(2) Engineering and economic evaluations of Hawaii's potential for renewable hydrogen use and near-term project opportunities for the State's renewable energy resources;

(3) Electric grid reliability and security projects that will enable the integration of a substantial increase of electricity from renewable energy resources on the island of Hawaii;

(4) Hydrogen demonstration projects, including infrastructure for the production, storage, and refueling of hydrogen vehicles;

(5) A statewide hydrogen economy public education and outreach plan focusing on the island of Hawaii, to be developed in coordination with Hawaii's public education institutions;

(6) Promotion of Hawaii's renewable hydrogen resources to potential partners and investors;

(7) A plan, for implementation during the years 2007 to 2010, to more fully deploy hydrogen technologies and infrastructure capable of supporting the island of Hawaii's energy needs, including:

(A) Expanded installation of hydrogen production facilities;

(B) Development of integrated energy systems, including hydrogen vehicles;

(D) Promotion of building design and construction that fully incorporates clean energy assets, including reliance on hydrogen-fueled energy generation;

(8) A plan, for implementation during the years 2010 to 2020, to transition the island of Hawaii to a hydrogen-fueled economy and to extend the application of the plan throughout the State; and

(9) Evaluation of policy recommendations to:

(A) Encourage the adoption of hydrogen-fueled vehicles;

(B) Continually fund the hydrogen technologies special fund; and

SECTION 3. Chapter 211F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§211F-A Hydrogen investment capital special fund. (a) There shall be established the hydrogen investment capital special fund into which shall be deposited:

(1) Appropriations made by the legislature to the fund;

(2) All contributions from public or private partners;

(3) All interest earned on or accrued to moneys deposited in the special fund; and

(4) Any other moneys made available to the special fund from other sources.

(b) Moneys in the fund shall be used to:

(1) Provide seed capital for and venture capital investments in private sector and federal projects for research, development, testing, and implementation of the Hawaii renewable hydrogen program, as set forth in section 196-A;

(2) For any other purpose deemed necessary to carry out the purposes of this section."

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as may be necessary for fiscal year 2006-2007, for the state program on renewable hydrogen, pursuant to section 196-A, Hawaii Revised Statutes.

The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this part.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $10,000,000, or so much thereof as may be necessary for fiscal year 2006-2007, to be paid into the hydrogen investment capital special fund.

The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this part.

SECTION 6. There is appropriated out of the hydrogen investment capital special fund the sum of $10,000,000, or so much thereof as may be necessary for fiscal year 2006-2007, to be used for the purposes of the hydrogen investment capital special fund, pursuant to section 211F-A, Hawaii Revised Statutes.

The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this part.

Part II.

SECTION 7. The legislature finds that renewable energy resources have the potential to be curtailed when the electric utility does not have sufficient demand to use the electricity. The legislature also finds that, on the island of Hawaii, geothermal resources are curtailed at night, when the electricity load is significantly reduced, to the detriment of the geothermal power facility.

The legislature also finds that rising energy costs at the natural energy laboratory of Hawaii authority at Keahole on the island of Hawaii is creating a financial strain on the authority and its tenants.

The purpose of this part is to establish a five-year demonstration project at the natural energy laboratory of Hawaii authority to use the under-utilized geothermal resource at night in a distributed energy storage microgrid system via electricity "wheeling" to service the operations of the natural energy laboratory Hawaii authority and its tenants.

SECTION 8. Chapter 227D, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"§227D- Energy storage microgrid. (a) The natural energy laboratory Hawaii authority, Hawaii natural energy institute, and the department of business, economic development, and tourism, in partnership, and in consultation with the public utilities commission and the applicable electric public utility on the island of Hawaii, shall evaluate and design a distributed energy storage microgrid demonstration project at the natural energy laboratory Hawaii authority, to be operable by July 1, 2007.

(b) The energy storage microgrid system shall:

(1) Be designed under an existing United States Department of Energy federally funded project;

(2) Include a large multi-megawatt-hour energy storage system;

(3) Be funded with moneys in the hydrogen special capital fund; provided that the funds are matched on a one-to-one basis with federal grants or private funding sources; and

(4) Use renewable energy sources as its primary source of energy.

§227D- Five-year distributed energy storage microgrid system; public utilities commission. (a) The public utilities commission, by order, shall establish a five-year distributed energy storage microgrid system demonstration project at the natural energy laboratory Hawaii authority, to commence on July 1, 2007.

(b) The public utilities commission shall:

(1) Allow the use of electricity wheeling, using the transmission system of the applicable electric public utility on the island of Hawaii to transmit electrical power from the Puna geothermal ventures facilities to the natural energy laboratory Hawaii authority during evening hours, as determined by the public utilities commission;

(2) Establish a special project rate to be charged by the applicable electric public utility on the island of Hawaii for the use of its transmission system;

(3) Ensure that the rate for the sale of the electrical power by the Puna geothermal venture to the natural energy laboratory Hawaii authority is just and reasonable;

(4) Allow the natural energy laboratory Hawaii authority to distribute electrical power to its tenants, as required to fulfill the objectives of the demonstration project; and

(5) Mitigate, to the extent practicable, any regulatory barriers that may impede the demonstration project."

SECTION 9. The department of business, economic development, and tourism in consultation with the Hawaii natural energy institute, natural energy laboratory Hawaii authority, public utilities commission, and the electrical public utility on the island of Hawaii, shall submit a report to the legislature on the operation of the five-year distributed energy storage microgrid system demonstration project developed pursuant to section 8 of this Act twenty days prior to the convening of each regular session beginning with 2008 through 2013.

Part III.

SECTION 10. In codifying the new sections added by sections 2 and 3 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 11. New statutory material is underscored.

SECTION 12. This Act shall take effect upon its approval; provided that sections 4, 5, and 6, of this Act shall take effect on July 1, 2006.