The head of the Florida company buying Hawaiian Electric Industries said Thursday he plans to lower electric bills in the islands by switching power plants to liquefied natural gas, adding large-scale solar and wind farms and making use of smart grid technology.
Jim Robo, CEO of NextEra Energy Inc., said he can leverage the experience and buying power of his company, which runs an electric utility 10 times the size of Hawaiian Electric, to bring down prices here.
ECONOMIES OF SCALE:
>> Utility customers in Florida: 4.7 million >> Residential rate in Florida: 12.31 cents per kilowatt-hour >> Utility customers in Hawaii: 450,000 >> Residental rate in Hawaii: 37.6 cents per kilowatt-hour
NEXTERA ENERGY FUEL MIX:
>> Natural gas: 52.3% >> Nuclear: 27.1% >> Wind: 16.3% >> Coal: 3.5% >> Solar: 0.4% >> Hydro: 0.2% >> Oil: 0.2%
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"It starts with the customers and wanting to do the right thing for the customer and making sure that solutions that we bring are both low-cost and clean," Robo said in an interview at the Honolulu Star-Advertiser offices.
Robo said his company can do better than HEI’s goal of lowering customer bills by 20 percent by 2030, but declined to say by how much. "It’s too soon to give you a number," Robo said.
The Juno Beach, Fla.-based energy company, the nation’s largest generator of wind and solar power, said Wednesday it plans to buy HEI for $4.3 billion and spin off its American Savings Bank subsidiary.
NextEra is likely to move the state toward more large-scale solar projects and place less emphasis on rooftop solar systems. Large-scale projects can generate more power cheaply, Robo said.
"This is a business where scale matters," he said. "A 25-megawatt project — given that it is several sizes larger than a distributed (rooftop) project — is going to be 30 or 40 percent more cost-effective than distributed solar."
That would be a shift for Hawaii where customer-sited solar is Oahu’s largest renewable energy source with the capacity of 210 megawatts.
By the end of 2014, Hawaii will have 50,000 rooftop solar system among its 450,000 customers. That contrasts with Florida where only 2,565 of NextEra’s 4.7 million utility customers have rooftop solar.
"Grid scale is more economic," Robo said.
"It’s basically wholesale verus retail," HEI President and CEO Connie Lau echoed. "You can build things a lot cheaper wholesale."
Hawaii is one of the few places in the nation where rooftop solar is economical, but grid scale is more economical, Robo said.
The majority, 70 percent, of Florida’s electricity comes from natural gas, and Robo hopes to use his company’s buying power in the natural-gas market to Hawaii’s benefit.
"We’re the largest consumer of natural gas in the country," Robo said.
Most of Hawaii’s power plants use low-sulfur fuel oil, but HEI plans to shift them to liquified natural gas, which can be cheaper and is considered a cleaner fuel.
Environmentalists have voiced concerns about investing in liquified natural gas.
"It is extremely dangerous to continue pursuing carbon technology," said Colin Yost, a principal at RevoluSun, a residential solar company. "Everything we can do to keep as much carbon in the ground as possible, we should do that."
Blue Planet Foundation, a clean-energy nonprofit, which supports NextEra’s purchase of HEI, has doubts about LNG. Jeff Mikulina, executive director, said, "I think the jury is still out on the economics of LNG. Particularly with oil prices dropping, we would hope that NextEra would look at Hawaii and Hawaii resources and put those to work instead of bringing mainland solutions to Hawaii."
A major focus by NextEra will be smart grids, which connect meters at homes to a network that monitors usage. NextEra Energy has implemented smart meters for all 4.7 million customers at its Florida utility, Florida Power and Light Co.
Hawaiian Electric Co., the HEI subsidiary on Oahu, just installed 5,200 smart meters in a pilot program launched in September.
"We’re spending a lot of time on smart grid and modernizing the grid, and it is an area that I think we can help accelerate things," Robo said.
Robo said he does not favor rebates as a way to encourage solar use.
"I think the solar investment tax credit should be phased out over time, and ultimately all energy sources have to be able to compete on a straight-up basis. I am a big believer that renewables are economic and they are getting more economic," Robo said. "I am not a giant fan of these incentives that distort the market."
Hawaii offers a 35 percent tax rebate on rooftop solar systems on top of a 30 percent federal tax rebate for photovoltaic owners.
The generous policy for rooftop solar resulted in the Hawaii going from 850 rooftop systems in 2008 to 50,000 by the end of this year.
The expectations the public has to access rooftop solar is something that the mainland company needs to consider, said Mark Duda, principal at Distributed Energy Properties, a Honolulu solar company.
"It is what the public wants," Duda said, referencing the 11 percent of HECO’s customers owning rooftop solar connected to the grid.
NextEra’s proposed purchase of HEI requires approval from state and federal regulators and shareholders. It’s expected to be completed within about 12 months.
Shares of HEI — which owns Hawaiian Electric Co. on Oahu, Maui Electric Co. and Hawai‘i Electric Light on the Big Island — rose 14 percent Thursday to close at $32.22. NextEra’s offer is for $33.50 per share.
Several law firms said Thursday they are investigating whether shareholders could have gotten a better deal in the $4.3 billion sale of the utility company.
Lau, the chief of HEI, owned 450,095 shares in HEI as of June. The $33.50 price per share offered by NextEra would make her holdings worth more than $15 million.
"Those shares I’ve already owned and I’ve accumulated over my 30 odd years with the utility," Lau said. "Almost everything I have earned has been put back into the company. That was something that I always felt was very important, was to have a very large stake that would align me with shareholders. I will benefit from the price going up just like any of the shareholders would."