January 19, 2018
Hawaii

Blowing in the wind: Maui Electric Co. saves money by using fossil fuels

By HJ Mai, Web Editor/Energy Reporter | Pacific Business News | Jan 19, 2018 | www.bizjournals.com

Maui Electric Co. has been restricting the use of wind power on the Valley Isle in favor of cheaper fossil fuels in a move that seems to go against Hawaii’s goal of 100 percent renewable energy by 2045, but that’s only part of the story.

There are currently three wind farms operating on Maui – Kaheawa Wind Power I & II and Auwahi Wind Farm. Combined, they generated around 25 percent of the electricity used by MECO customers in 2016. Starting in 2015, falling fuel-oil prices made fossil-fuel power cheaper than wind power, meaning the utility has been saving money by restricting, or curtailing the wind energy it purchases from the wind farm developers.

“The single biggest reason for this change was MECO’s internal cost of production,” Doug McLeod, owner of Maui-based consulting firm DKK Energy Services LLC, told Pacific Business News. “What I think happened is the oil market that they buy out of saw a really significant drop in 2015.”

According to Maui Electric’s Monthly Curtailment Report, the average cost of wind energy on Maui has remained largely unchanged, from an average of 19.6 cent per kilowatt-hour in 2013 to 20.7 cents per kWh over the first 11 months of 2017.

The average cost of fossil-fuel generation on the other hand has decreased from an average 22.7 cents per kWh in 2013 to 12.5 cents per kWh from January through November last year.

Curtailing wind energy has resulted in savings of $769,000 in 2015, $1.3 million in 2016 and $930,000 through November of last year for MECO.

But this unexpected change in production cost is putting MECO in a bind. Should the utility accept more wind energy but at a higher cost, or use fossil generation, which is cheaper but has a negative environmental impact?

MECO, a subsidiary of Hawaiian Electric Cos., is trying to find a balance between both. Despite the falling cost of fossil generation, MECO has accepted more wind than ever before last year. Through November 2017, the utility curtailed 11.5 Gigawatt hours of wind power, down from 28.5 GWh in 2015.

“Maui Electric is now accepting 95 percent of the wind power produced on Maui, more than ever,” Shayna Decker, communications director at MECO, told PBN. “To accept more wind energy, the company modified other generating units last year to lower minimum operating levels to reduce the necessity to curtail wind power.”

To achieve the state’s energy goal, curtailment of renewables has to be kept at minimum, but due to the variability of wind power, firm power generation in the form of fossil fuels is necessary. The only way to resolve this issue would be by installing battery storage on the grid. “No question, if we had storage at the grid level on the system, we could choose to have no curtailment at all,” McLeod said.

The utility said the economics just aren’t there to justify such an investment. “Energy storage is always an option as part of our overall energy plans to achieve 100 percent renewable energy,” Decker said. “However, under existing contracts, if batteries were added at this time to use more wind power it would not result in lower costs to customers.”

Should oil prices remain stable, the use of wind energy on Maui will continue to result in “negative savings” for customers over the duration of the power-purchase agreements between MECO and the wind farm developers.

“The lesson of this situation on Maui is we should not sign contracts for solar or wind with price escalation,” McLeod said.

The Kauai Island Utility Cooperative has shown through its solar-plus-storage project that it is possible to install a cost-effective renewable energy system, which delivers firm power in Hawaii, Randall Iwase, chair of the state’s Public Utilities Commission, said.

“Utilities have an obligation, and it is our obligation to make sure they know that obligation is to pursue renewable energies to get to 100 percent by 2045,” he said.