THE BLOG
09/10/2013 06:05 pm ET Updated Nov 10, 2013

How Renewable Portfolio Standards Can Subvert Your Economy

A strange thing happened on our way to a "clean energy" future in the U.S.: we've been hijacked by private developers whose primary interest is cashing in on state and federal subsidies and the guaranteed payback of a hefty return on investment, spawned by each state's need to meet self-imposed renewable portfolio standards (RPS).

Sales propaganda aside, many of these developers could care less if their pet projects lower greenhouse gases or otherwise help the planet; they are simply capitalizing on the potential riches guaranteed by us, the rate and taxpayers.

Hawaii is the poster child for how a stiff RPS can spawn a developer frenzy, especially in the absence of a coherent, community-based energy policy.

Hawaii's Legislature first established a renewable portfolio "goal" in 2001. In 2004 it acted to mandate 20 percent renewable generation by 2020, and amendments adopted in 2006 allowed solar hot water and seawater air conditioning savings to count toward the RPS. Good moves, we all agreed we needed to reduce our dependence on imported oil.

Then, on June 6, 2007, LA billionaire and real estate developer David Murdock, through his privately owned Castle & Cooke Resorts (C&C), announced plans to develop a $750 million industrial wind power plant on the island of Lana`i (98% of which he owned at the time), capable of producing 300-400 MW. This intermittent wind power would be shipped one-way to O`ahu, Hawaii's energy-hungry (and some say energy-wasteful) population center through an undersea cable that he would also build. Despite knowing precisely where the development would be, no environmental studies were done.

Shortly thereafter, Boston-based First Wind got into the mix by announcing it would develop a similarly sized wind power plant on the island of Molokai, relying on a large Singapore-based land owner to eventually provide the needed space.

It wasn't until over a year later, on October 28, 2008, that then Governor Linda Lingle signed the Hawaii Clean Energy Agreement with the state's monopoly utility, Hawaiian Electric ("HECO"). This Agreement became, by default, Hawaii's energy policy: its primary focus was HECO's commitment "to integrate, with the assistance of the State, up to 400 MW of wind power into the Oahu electrical system, produced by one or more wind farms located on either the island of Lanai or Molokai and transmitted to O`ahu via undersea cable systems (the "Big Wind" projects)." The U.S. Department of Energy (DOE) witnessed the Agreement.

A few months after this, on December 19th, Hawaii's regulatory agency (the PUC) quietly ordered that the HECO companies' failure to meet the RPS could be penalized by a fine of $20 per MWh of deficiency. This would come out of shareholder pockets, though, not ratepayers; the stakes for HECO to pursue Big Wind went way up. (HECO claimed only 12% renewable penetration on O`ahu in 2011.)

Then Hawai`i's Legislature increased the state's RPS, requiring HECO to acquire 40% of its net electricity sales from renewables by 2030, thereby making Big Wind all but a done deal in many minds. By March, 2009, HECO's Executive VP Robbie Alm was claiming, "These two wind projects are absolutely essential to meeting our Hawaii Clean Energy commitments." (Read: RPS).

Four years later, after many, many millions of rate and tax payer dollars had been spent on "studying" Big Wind, it all began to unravel.

In May, 2012 C&C's Murdock sold all his Lana`i assets to Oracle billionaire Larry Ellison, while retaining vague and undefined "rights" to pursue developing 200-400 MW of Big Wind on Lana`i.

On February 7, 2013, Molokai's major land owner, GuocoLeisure Limited, changed its mind: it announced it would not renew a lease with San Francisco-based Pattern Energy (a subsidiary of Riverstone Holdings), the corporation succeeding First Wind as a potential wind/cable developer on Moloka`i.

So today, 50% of the 400 MW wind energy expected from Big Wind in Hawai`i has evaporated, and last month, citing uncertainty with C&C's ability to perform on land it no longer owned, the PUC ordered a review of C&C's progress on the remaining 50% on Lana`i. Many believe it will soon disappear as well, leaving the state without the "silver bullet" it banked on to meet its RPS.

But a new target has emerged here in Hawai`i: Maui.

Twenty-five developers filed applications with the Department of Hawaiian Home Lands (DHHL) in early February, eyeing a range of renewable resources each wanted to build on homestead land; they come from as far away as Australia and Minnesota. Some will require an undersea cable to deliver energy Maui cannot use to O`ahu. Sound familiar?

Although there are currently 29 states/territories with mandated RPS, many legislators in those states are considering - if not actively trying - to roll them back. They are doing this not because they are anti-renewable, or disbelievers in climate change, or are in the pocket of Big Oil and Big Gas. They are doing this because they recognize the price-gouging, rent-seeking opportunities developers - some with no experience at all in building renewables - are relentlessly pursuing. States like Hawai`i will remain a prime target, so long as it lacks a cohesive, coherent long-term energy plan.

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