SB2604.DOC

SECTION 1. The legislature finds that the nature of electricity production and generation is evolving rapidly in light of technical, market, and public policy changes that are occurring globally, nationally, and in Hawaii.

The legislature finds that Hawaii's electricity customers continue to endure the highest electricity prices in the country, and the high cost of this essential service imposes substantial burdens on Hawaii's households and businesses.

The legislature further finds that the department of education is also burdened with the high cost of electricity for electricity usage at its schools. The department of education's energy requirements and electricity bills are expected to increase as a result of, among other things, volatile oil prices, and the need to install heat abatement and air conditioning equipment in some schools to preserve and promote the health and safety of students and teachers and to foster a better and more comfortable and productive learning environment in public schools.

The legislature additionally finds that the State has established an important policy goal of achieving a renewable portfolio standard of one hundred per cent by 2045 pursuant to Act 97, Session Laws of Hawaii 2015.

The legislature finds that the department of education has established a sustainability policy of achieving a clean energy goal of ninety per cent clean energy by 2040.

The legislature also finds that as Hawaii's electric systems evolve, energy districts and microgrids, can serve as an essential building block for Hawaii's utility of the future. Microgrids provide many benefits, including but not limited to being a secure and reliable power source when the main electrical grid is down, facilitating the integration of clean and renewable energy, helping institutions enhance their environmental standing and contributions, reducing grid congestion, balancing the electrical load, and localizing energy production.

The legislature further finds that schools are suitable environments for microgrids as the implementation of microgrids will further improve the reliability and resiliency of schools throughout the State. Microgrid systems will allow schools to serve communities by also acting as potential disaster response centers for civil defense, providing independent and secure facility power during extreme weather events that may cause grid-wide power outages, as two hundred fifteen out of two hundred fifty-six public schools are designated as possible hurricane shelters. Microgrids will also help to alleviate the high cost of electricity to department of education schools.

The legislature also finds that the department of education's Ka Hei program will integrate innovative energy technology with meaningful learning experiences, all while reducing energy costs. As a comprehensive energy and sustainability program, Ka Hei will transform the learning environment, reduce operational expenses, and provide engaging educational opportunities for our students and community. Through a combination of energy efficiency measures, clean energy generation, and a comprehensive sustainability program, Ka Hei will improve the learning environment so students and teachers can perform at their best.

The legislature also finds that Ka Hei is a department of education program designed to boost student success through the implementation of renewable energy sources, campus modernization, and increased real-world educational opportunities in science, technology, engineering, and math (STEM). The Ka Hei educational enrichment program gives students the opportunity to develop twenty-first century STEM skills, which are a pre-requisite for a global economy, using construction projects as the springboard for learning. The robust Ka Hei program integrates construction projects into the existing curriculum and utilizes best practices to enhance STEM pedagogy including inquiry, hands-on, and project-based learning, while addressing existing standards in innovative ways. The Ka Hei program fosters students' intellectual curiosity and exposes them to future career opportunities. Hands-on, project-based learning experiences will engage students and provide real-world contexts for students' understanding through the existing work being done at their school, their region, and the State.

The department of education is implementing its Ka Hei program in a public-private partnership with OpTerra Energy Services, which provides its technical design and integration expertise and utilizes existing procurement mechanisms and innovative financing to help reduce energy costs for the department of education by using a portion of energy cost savings to fund the Ka Hei program.

The legislature further finds that section 196-21(a), Hawaii Revised Statutes, requires state agencies to maximize their use of available alternative financing contracting mechanisms, including energy-savings contracts, when life-cycle cost-effective, to reduce energy use and cost in their facilities and operations.

The legislature also finds that section 196-21(b), Hawaii Revised Statutes, provides that state agencies that perform energy efficiency and renewable energy system retrofitting may continue to receive budget appropriations for energy expenditures at an amount that will not fall below the pre-retrofitting energy budget but will rise in proportion to any increase in the agency's overall budget for the duration of the performance contract or project payment term. A portion of the moneys saved through efficiency and renewable energy system retrofitting shall be set aside to pay for any costs directly associated with administering energy efficiency and renewable energy system retrofitting programs incurred by the agency.

The legislature finds that a pilot microgrid project should be implemented to demonstrate the viability of such a project at a department of education school. Costs for similar future microgrid projects at other schools will likely decrease with the increased scale and advances in technology.

The legislature further finds that the department of education, through its Ka Hei program, should be authorized and required to implement an off-grid microgrid pilot project that is detached from any electric utility company's grid at a department of education school.

The purpose of this Act is to require the department of education to implement an off-grid, microgrid pilot program at a school of the department of education's choosing through its Ka Hei program.

SECTION 2. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§302A- Off-grid microgrid pilot project. (a) Notwithstanding any other law to the contrary, the department, through its Ka Hei program, shall establish and implement an off-grid microgrid pilot project at an appropriate school selected by the department in its discretion.

(b) No later than December 31, 2016, the department shall prepare plans for the off-grid microgrid pilot project, including the school selected, the schedule for implementation and installation, and any other relevant information required for the off-grid microgrid pilot project.

(c) Provided sufficient funding is made available by August 1, 2017, the department shall complete the installation and commence the operations and utilization of the off-grid microgrid pilot project by December 31, 2017.

(d) For purposes of this section, an "off-grid microgrid pilot project" means a group of interconnected loads and distributed energy resources and backup energy generation resources within clearly defined electrical boundaries and within a department school that may operate as a contained controllable entity, is not inter-connected with the grid of an electric utility company or of any other party that is designed, and is intended to be operated by the department for a minimum of five years.

(e) Nothing in this section shall preclude the department from working with and receiving assistance from any other department or agency in carrying out the purposes of this section.

(f) Notwithstanding any law to the contrary, no electric utility company shall be allowed to assess a charge, fee, or penalty of any kind to the department for disconnecting from the grid of an electric public utility company.

(g) The department shall report on the status of the implementation of the off-grid microgrid pilot project, along with any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2017, and every regular session thereafter until completion of the pilot program."

SECTION 3. The department shall be required to maximize its use of available public and private alternative financing contracting mechanisms and available grants to fund the off-grid pilot microgrid project, including but not limited to, financing through green infrastructure bonds as provided in part X, chapter 269, Hawaii Revised Statutes, and from the United States Department of Energy and the United States Department of Education; provided that if the department of education determines that such funding is not adequate or feasible, the department shall include in its report to the legislature prior to the regular session of 2017 the department's funding requirements for the off-grid microgrid pilot project and submit an appropriate request for funding.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2016.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2604
TWENTY-EIGHTH LEGISLATURE, 2016
STATE OF HAWAII