RELATING TO RENEWABLE PORTFOLIO STANDARDS.

HB1023

HOUSE OF REPRESENTATIVES

H.B. NO.

1023

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO RENEWABLE PORTFOLIO STANDARDS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The
legislature finds that the climate crisis is the overriding challenge of the
twenty-first century, presenting significant threats to the environment, public
health, and economic stability of the State of Hawaii.

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Hawaii
first established a binding renewable portfolio standard twenty years ago.
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The renewable portfolio standard is a policy that
recognizes the need to avoid oil price volatility and the climate impacts of
our electricity needs by prioritizing the development of renewable energy
resources.
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The Hawaii natural energy institute
submits a report every five years on the effectiveness and achievability of the
renewable portfolio standard.
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The most
recent report released in December 2023 found that the utilities will likely
meet their 2030 renewable portfolio standard targets.

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As the renewable portfolio standard
continues to transform the State
'
s electricity system, it
requires modifications to address emerging trends.
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In 2015,
Hawaii set the nation's first one hundred per cent renewable portfolio
standard, in recognition of the importance of action to combat the climate
crisis.
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In 2022, the State amended the renewable
portfolio standard to be based on net electricity generation rather than sales
to better account for the climate impacts of grid operations.

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Biofuels
could provide a significant contribution to the State's clean energy goals, and
market certainty could incentivize biofuels refined locally using local
feedstock to achieve very low carbon footprints.
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By contrast, the current renewable portfolio
standard could allow biofuels with a very high carbon footprint to satisfy
clean energy requirements, which would be at odds with one foundation of the
renewable portfolio standard.
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For
example, the World Wildlife Fund estimates that eighty per cent of deforestation
in the Amazon region is caused by cattle ranching, which supplies beef tallow
to make biofuel that currently qualifies as "renewable" under the
renewable portfolio standard.

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Recent energy system studies by the Hawaii
natural energy institute, the Hawaiian Electric Company, and the Hawaii state
energy office all show the need for a diverse generation portfolio to
complement cost-effective solar and wind development.
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Investments in this complementary generation
capacity should incentivize the use of low- or no-carbon fuels, and the
renewable portfolio standard should address the procurement of this
decarbonized capacity.

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Capacity markets set prices for investment
in generation capacity to match supply and demand well into the future based on
rigorous studies.
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In a typical capacity
market, generators bid on the right to build a power plant in an auction
established by state or federal law.
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Capacity markets can be used in wholesale electricity markets to pay
generators to be available to produce electricity at peak demand several years
into the future.
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Capacity markets are an
important tool for limiting high carbon dioxide emitters from participating and
for incentivizing natural gas power plants to switch to hydrogen.
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These markets provide for diverse clean
generation portfolios needed to meet demand in an economical way.

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Grid operators in New York, New England,
the Midwest, and Mid-Atlantic all have capacity markets to ensure adequate
reliable capacity.
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Grid operators in New
York, New England, and the Midwest have been updating their capacity markets to
take into account the increasing quantities of renewable energy resources being
added to the grid.
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In addition, many
European countries have seen success with capacity markets through a central
annual auction and a fixed amount of capacity demanded by central
authority.
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For European countries,
capacity can be met by power plants, storage facilities, or through demand
response.
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The grid operator in the
Mid-Atlantic, known as PJM, allows capacity to be met by new and existing
generators, demand response, and energy efficiency and transmission updates.

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Capacity market pricing can vary greatly
across regions and seasons.
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The grid
operator in the Midwest, known as MISO, has established capacity prices that
vary by season that address significant changes in electricity demand over the
course of a year.
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In the Midwest, seasonal
clearing prices for the summer, fall, winter, and spring were $30/megawatts-day,
$15/megawatts-day, $0.75/megawatts-day, and $34.10/megawatts-day.
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In the Mid-Atlantic, PJM, the largest power
grid operator in the U.S., assigns values based on the type and costs of
generators, with prices for the 2026 market ranging from $52 for a combustion
turbine, $64 for steam oil and gas, $70 for solar photovoltaic, $113 for
combined cycle, and $147 for onshore wind.

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The renewable portfolio standard should
increase the incentive for capacity that commits to using low- or no-carbon
fuels, based on a lifecycle greenhouse gas assessment of the plant and the
fuel.
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One key benchmark has been set by
the U.S. Department of Energy Clean Hydrogen Production Standard Guidance,
which establishes a target of four kilograms of carbon dioxide equivalent per
kilogram of hydrogen for life cycle (defined here as "well-to-gate")
greenhouse emissions associated with hydrogen production.

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Distributed
solar is the State's largest source of renewable energy.
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Maximizing distributed solar will be critical
to meet the clean energy needs of Oahu, and can help avoid competition for land
use across the State.
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Further,
distributed solar provides energy security and resilience to residents across
the State.
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Recognizing the unique and
foundational role of distributed solar will strengthen the renewable portfolio
standard and align the successful transformation of the electricity sector with
resilience, equity, and food security goals.
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Similar to the market certainty for local biofuels and other low-carbon
fuels, the renewable portfolio standard should remove caps on investment in
distributed solar related to outdated policies, support equitable access to
distributed solar for low- and moderate-income households, and enable these
resources to provide dispatchable renewable energy in a modern grid.

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The
renewable portfolio standard can be improved to better mitigate oil price
volatility, which still provides nearly seventy per cent of the State's
electricity, and avoid high-carbon renewable energy.
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This Act will improve the effectiveness of the
renewable portfolio standard law, which stipulates the central role of Hawaii's
electric utility companies in complying with the State's renewable energy and
climate goals.

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SECTION 2.
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Section 269-27.2, Hawaii Revised Statutes, is
amended by amending subsection (c) to read as follows:

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"
(c)
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The rate payable by the public utility to the
producer for the nonfossil fuel generated electricity supplied to the public
utility shall be as agreed between the public utility and the supplier [
and
as approved by the public utilities commission; provided that in the event the
public utility and the supplier fail to reach an agreement for a rate, the rate
shall be as prescribed by the public utilities commission according to the
powers and procedures provided in this chapter.
]
in a manner similar to
qualifying cogeneration facilities under public utilities commission chapter
6-74, Hawaii Administrative Rules, related to the Federal Public Utility
Regulatory Policies Act and consistent with capacity incentives established
under section 269-92(b)(2); provided that the public utility shall have the
opportunity to review and comment on the rate.

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The commission's determination of the just
and reasonable rate shall be accomplished by establishing a methodology that
removes or significantly reduces any linkage between the price of fossil fuels
and the rate for the nonfossil fuel generated electricity to potentially enable
utility customers to share in the benefits of fuel cost savings resulting from
the use of nonfossil fuel generated electricity.
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As the commission deems appropriate, the just
and reasonable rate for nonfossil fuel generated electricity supplied to the
public utility by the producer may include mechanisms for reasonable and
appropriate incremental adjustments, such as adjustments linked to consumer
price indices for inflation or other acceptable adjustment mechanisms."

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SECTION 3.
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Section 269-91, Hawaii Revised Statutes, is amended to read as follows:

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"
�269-91
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[
[
]
Definitions.
[
]
]

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For the purposes of this [
[
]part[
]
]:

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"Anticipated reserve margin"
means the percentage by which expected generating capacity exceeds an electric
utility's peak demand, excluding the amount of capacity offset by
demand-response systems that are expected to be available during a peak demand
hour.

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"Biofuels" means [
liquid or
gaseous
] fuels
with lifecycle greenhouse gas emissions below one hundred
kilograms of carbon dioxide equivalent per million British thermal units of
power generated,
produced from organic sources such as biomass crops,
agricultural residues and oil crops, such as palm oil, canola oil, soybean oil,
waste cooking oil, grease, and food wastes, [
animal residues and wastes,
]
and sewage and landfill wastes.

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"Capacity factor" means the
electrical energy produced, or anticipated to be produced, by a generator
compared to the total electrical energy that would be produced at the generator's
continuous full power operation during each hour of the year.

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"Cost-effective" means the
ability to produce or purchase electric energy or firm capacity, or both, from
renewable energy resources at or below avoided costs or as the commission
otherwise determines to be just and reasonable consistent with the methodology
set by the public utilities commission in accordance with section 269-27.2.

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"Decarbonized electrical energy"
means electrical energy generated using fuels with lifecycle greenhouse gas
emissions below four kilograms carbon dioxide equivalent per million British
thermal units due to the avoidance or removal of climate pollutants during the
production of the fuel.

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"Electric utility company" means
a public utility as defined under section 269-1, for the production,
conveyance, transmission, delivery, or furnishing of power.

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"Emission factor" means the
weight of greenhouse gases released per British thermal unit.

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"Lifecycle greenhouse gas emission
intensity" means the total emissions expressed in carbon dioxide
equivalent per unit of energy generated as determined by a lifecycle emissions
assessment.

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"Local renewable biofuels"
means fuels with lifecycle greenhouse gas emissions below one hundred kilograms
carbon dioxide equivalent per million British thermal units of electricity
generated and refined within the State and produced from organic sources in the
State such as biomass crops, agricultural residues, and oil crops, such as palm
oil, canola oil, soybean oil, waste cooking oil, grease, and food wastes,
animal residues and wastes, and sewage and landfill waste.

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"Renewable electrical energy"
means:

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(1)
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Electrical
energy generated using renewable energy as the source, and beginning January 1,
2015, includes customer-sited, grid-connected renewable energy generation; and

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(2)
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Electrical
energy savings brought about by:

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(A)
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The
use of renewable displacement or off-set technologies, including solar water
heating, sea-water

air-conditioning district cooling systems, solar
air-conditioning, and customer-sited, grid-connected renewable energy systems;
provided that, beginning January 1, 2015, electrical energy savings shall not
include customer-sited, grid-connected renewable-energy systems; or

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(B)
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The
use of energy efficiency technologies, including heat pump water heating, ice
storage, ratepayer-funded energy efficiency programs, and use of rejected heat
from co-generation and combined heat and power systems, excluding fossil-fueled
qualifying facilities that sell electricity to electric utility companies and
central station power projects.

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"Renewable energy" means energy
generated or produced using the following sources:

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(1)
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Wind;

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(2)
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The
sun;

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(3)
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Falling
water;

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(4)
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Biogas,
including landfill and sewage-based digester gas;

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(5)
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Geothermal;

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(6)
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Ocean
water, currents, and waves, including ocean thermal energy conversion;

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(7)
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Biomass,
including biomass crops, agricultural and animal residues and wastes, and
municipal solid waste and other solid waste;

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(8)
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Biofuels[
;
]
,
including local renewable biofuels
; and

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(9)
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Hydrogen
produced from renewable energy sources.

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"Renewable portfolio standard"
means the percentage of electrical energy generation that is represented by
renewable electrical energy, excluding customer-sited, grid connected
generation that does not produce renewable energy."

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SECTION 4.
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Section 269-92, Hawaii Revised Statutes, is amended by amending
subsection (b) to read as follows:

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"(b)
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The public utilities commission may establish standards for each
electric utility company that prescribe the portion of the renewable portfolio
standards that shall be met by specific types of renewable energy resources; provided
that:

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[
(1)
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Before
January 1, 2015, at least fifty per cent of
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the renewable portfolio standard shall be met by electrical energy
generated using renewable energy as the source, and after December 31, 2014,
the entire renewable portfolio standard shall be met by electrical generation
from renewable energy sources;

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(2)
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Beginning
January 1, 2015, electrical energy savings shall not count toward renewable
energy portfolio standards;
]

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(1)
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By
2045, the public utilities commission shall ensure the electric utility
purchases:

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(A)
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No less than 20,000,000 gallons of renewable
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biofuels per year to produce renewable
electrical energy, with additional incentives available for fuel contracts with
lower lifecycle greenhouse gas emissions;

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(B)
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The renewable electrical energy produced by no less than
2,000 megawatts of customer-sited, grid connected generation that can be
dispatched to the electric utility when needed; and

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(C)
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Demand
response services available to residential and commercial customers at a level
determined to be appropriate by the public utilities commission
;

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(2)
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The
public utilities commission shall establish capacity payments to ensure
anticipated reserve margins of no less than fifteen per cent will be met by
generators that can achieve an annual capacity factor exceeding sixty per cent
using renewable electrical energy or decarbonized electrical energy;

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(3)
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Where
electrical energy is generated or displaced by a combination of renewable and
nonrenewable means, the proportion attributable to the renewable means shall be
credited as renewable energy; and

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(4)
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Where
fossil and renewable fuels are co-fired in the same generating unit, the unit
shall be considered to generate renewable electrical energy (electricity) in
direct proportion to the percentage of the total heat input value represented
by the heat input value of the renewable fuels."

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SECTION 5.
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Section 269-93, Hawaii
Revised Statutes, is amended by amending subsection (a) to read as follows:

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"(a)
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An electric utility company and its electric utility affiliates may
aggregate their renewable portfolios to achieve the renewable portfolio
standard.
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However, the electric
utility shall report progress toward the renewable portfolio standard by
island.
"

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SECTION 6.
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Section 269-101.5, Hawaii Revised
Statutes, is repealed.

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["
[�269-101.5]
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Maximum capacity of eligible
customer-generator.
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The
eligible customer-generator shall have a capacity of not more than fifty
kilowatts; provided that the public utilities commission may increase the
maximum allowable capacity that eligible customer-generators may have to an
amount greater than fifty kilowatts by rule or order.
"]

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SECTION 7.
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Statutory material to be repealed is bracketed and stricken.
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New statutory material is underscored.

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SECTION 8.
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This Act, upon its approval, shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

BY REQUEST

Report Title:

Renewable Energy Portfolio Standards;
Department of Commerce and Consumer Affairs,
Public Utilities Commission; Department of Commerce and Consumer Affairs,
Division of Consumer Advocacy.

Description:

Modifies and improves
the effectiveness of the renewable portfolio standards law, which stipulates
the central role of Hawaii's electric utility companies in complying with the State's
renewable energy and climate goals to address emerging trends.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.