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MECO says customers will not pay for unused power from solar farms

Credits from construction delays will offset costs in 2018

Maui Electric Co.’s request to the state Public Utilities Commission to recover $155,000 in payments made to Maui’s two solar farms for unused power will not cost customers anything this year, the utility said.

MECO plans to apply nearly $300,000 in credits from South Maui Renewable Resources and Ku’ia Solar in Lahaina for delays in coming online, MECO spokeswoman Sayble Bissen said last week.

Had MECO’s request been approved by the PUC without the application of the credits, the cost to typical MECO customers would have been 90 cents spread over three months, she said.

The utility clarified comments made in February to The Maui News about MECO’s Jan. 31 request to the PUC to pass on the payments made to the two 2.87-megawatt solar projects that came online last year for “compensable curtailed energy.” Curtailed energy is power supplied but not used by the utility.

MECO said it paid South Maui Renewable Resources, located near the Maui Research and Technology Park, $110,359.33 for 997.8 megawatt-hours of curtailed energy, according to the PUC filings.

Ku’ia Solar, located near Lahainaluna High School, billed MECO for $44,803.80 for 405.1 MWh of curtailed energy. The amount is less than SMRR’s because Ku’ia came online in October; SMRR, the island’s first utility-scale solar project, came online in May.

A total of about 1.5 gigawatt-hours was curtailed by the two solar farms, and MECO compensated the projects per their power purchase agreements.

Bissen said that MECO accepted about 85 percent of SMRR’s power and 94 percent of Ku’ia’s power.

Ku’ia and SMRR are both operated by Kenyon Energy and are paid 11.06 cents per kilowatt-hour for energy fed into MECO’s grid, which is lower than the cost of fossil-fuel produced power.

“Even with the projected curtailment payments, these are the least expensive utility-scale renewable projects on Maui,” said Bissen.

The contracts negotiated in 2015 with Kenyon are widely used in the industry, she said. The utility, knowing curtailment may be needed, agreed to pay for energy that could have been produced but wasn’t, she said.

The alternative would have been to build in the curtailed energy risk into the price, which would have been “a lot more than 11 cents all the time,” Bissen said.

“And even if we liberally curtail and have to make payments, which we hope we don’t have to very much, it will still be way below the cost of oil,” she said.

Bissen noted that the two new proposed solar projects, which are much larger than SMRR and Ku’ia — the 60-MW Kuihelani Solar in Central Maui and the 15-MW Paeahu Solar in Ulupalakua — have energy storage capacity, which will significantly reduce the need for curtailment, she said.

SMRR and Ku’ia do not have battery storage.

MECO was required by the PUC to file a report quantifying payments it seeks to recover from ratepayers for compensable curtailed energy and its rationale by Jan. 31.

State Consumer Advocate Dean Nishina had “questions and concerns” about applying the credits from the delayed construction of the solar farms to the curtailed energy bills.

Both solar projects were slated by agreement with MECO to go online in December 2016 with penalties for missing the deadline. The projects negotiated to have have penalties or “liquidated damages” — $111,200 for SMRR and $187,000 for Ku’ia — paid in credits to MECO in their billings.

Because of the credits, Nishina said in his Feb. 22 PUC filing that there is “no need to recover any payment from customers” by MECO.

In fact, “the Consumer Advocate questions whether the liquidated damages should offset any compensable curtailed energy payments,” he said in the filing.

The Consumer Advocate is requesting more information from MECO “to address the concern that the curtailed energy was not wasteful,” the filing said. He pointed out that state law says that wastefulness would be grounds for the PUC to deny recovery of those costs from consumers.

MECO uses its ability to curtail power from the solar farms, wind farms and rooftop PV solar installations through new MECO programs to keep the grid stable. Older rooftop PV installations flow into the grid unchecked.

The uneven energy production of renewables forces MECO to use its fossil-fuel-powered generators and curtailment of renewable projects it can regulate to maintain the equilibrium of power used and produced at any moment in time.

In its filing, MECO explained that SMRR and Ku’ia currently hold “the highest curtailment priority and are the first to be curtailed.”

The introduction of controllable rooftop solar programs, such as Customer Grid Supply and Community-Based Renewable Energy, will increase the possibility of curtailment of the utility-scale solar power sources, MECO told the PUC. These new programs hold a lower curtailment priority than SMRR and Ku’ia.

In addition, increasing popularity of those programs will decrease available space on the grid to accept SMRR and Ku’ia power, the filing said.

* Lee Imada can be reached at leeimada@mauinews.com.

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