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Hawaii sees vital need for energy storage in OK of AES contract with Kauai co-op

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Essential Energy Insights - February 2021

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Hawaii sees vital need for energy storage in OK of AES contract with Kauai co-op

With approval of a storage-plus-solar contract between Hawaii's only electric cooperative and an AES Corp. subsidiary, state regulators emphasized the importance they place on energy storage in Hawaii's quest for 100% renewable energy.

The state Public Utilities Commission approved a 25-year power purchase agreement between Kauai Island Utility Cooperative and AES Distributed Energy Inc. AES will construct a 28-MW solar photovoltaic system coupled with a 100 MWh battery energy storage system to reach full-scale commercial production by the end of October 2018, according to the PUC's July 28 order.

The energy storage system will have a 20-MW, five-hour durability, according to a press release AES issued on Jan. 10 announcing the agreement.

Technically the agreement is with AES Lawai Solar LLC. The system will be located on a former sugar cane field between Lawai and Koloa on Kauai's south shore. It will be the largest solar-plus-utility-scale-battery system in the state, according to the press release.

The co-op also has a 13-MW PV plus battery energy storage contract with Tesla Inc. That project with a 52 MWh Tesla Powerpack lithium-ion battery system was energized on March 8.

In a July 27 order approving solar contracts with Hawaii's investor-owned utilities, the PUC pointed to the Kauai projects as examples of how it wants Hawaii's utilities to pursue energy storage.

"Recent actions by Kauai Island Utility Cooperative illustrate that this new tool — competitively priced solar-plus-storage — is now a viable option for supporting the integration of low-cost renewables onto the grid, with the capacity to provide fully dispatchable renewable energy," the commission said.

PUC to HECO: Kauai is doing it, so why can't you?

In that order the commission approved Hawaiian Electric Industries Inc. subsidiary Hawaiian Electric Co. Inc.'s, or HECO's, three solar power purchase agreements with NRG Energy Inc. without associated storage facilities. While approving the solar agreements, the commission told HECO it views storage as essential to achieving the goal of integrating increased levels of renewable energy generation into the state's island grids and scolded the utility for not implementing the technology.

"HECO does not appear to have fully assessed the potential value, for both the short- and long-term, of utilizing energy storage systems," the PUC said.

The commission noted renewable generation plus storage projects have been implemented cost-effectively in Kauai and other jurisdictions. HECO companies serve 95% of the islands, while Kauai serves just 5%.

"In future applications, the commission expects that HECO will fully consider energy storage systems in proposing new utility-scale renewable energy projects," the commission said.

As for what will be Hawaii's largest solar-plus-storage system, Kauai intends to use 71% of the solar output to charge the storage, with the remainder to be delivered during morning and afternoon shoulder periods and other times to displace oil-fired generation. The stored energy will be dispatched for Kauai's afternoon and evening peak.

The contract price is $110.80 per MWh, but Kauai said the system will reduce its oil consumption for generation by 2.9 million gallons per year and save the co-op's customers more than $97 million over the 25-year term of the contract, according to the PUC's approval order.

"Furthermore, the pricing in the PPA [power purchase agreement] is completely independent from the price of fossil fuel. This insulates KIUC members/customers from the volatile fossil fuel market," the PUC said. "The commission finds and concludes that the PPA will help the state to achieve its RPS goals, and reduce the state's reliance on fossil fuels."