Q: Why Now?

The pricing we have offered MECo is targeted to be below today’s cost of diesel generation. This price point has been achieved by combining the Investment Tax Credit (ITC) with a New Markets Tax Credit (NMTC) in concert with both (a) low solar panel prices - a result from current industry overcapacity and (b) lower battery prices - a result of the electric vehicle demand driving volume in the Lithium battery industry.

The ITC will phase out over the next five years and is at its maximum benefit until 2019, when we expect to commission this project.

The NMTC is not available every year, and can only be applied to projects that are ready to build. We are very fortunate that we can combine these tax credits and that the project can be built in time to use the NMTC funding

Currently battery prices at the lowest point we have seen, and in fact their prices are now starting to rise. Also, there is excess capacity in solar panels allowing solar panels prices are being sold at a low price.  Combining the New Markets Tax Credit with the Investment Tax Credit in concert with low battery and solar panel prices gives Molokai an opportunity to move towards 100% renewables, while at the same time lowering costs. 

 

Q:   Why would this project be beneficial to residents of Molokai?

A: In 2014, residents paid $0.46 cents per kWh when oil was at $100 per barrel and when oil priced dropped, it became as low as 32.7 cents per kWh. With solar a portion of the bill, the power cost from solar power will is not volatile – saving the residents money as oil goes up.

A second major benefit is this is the first major step to 100% renewables and Molokai becoming energy independent. 

 

Q: What does this project mean for the solar at my home?

A: The Molokai Island Energy Project will install a large battery for storage and will not affect existing rooftop solar.

 

Q: How does this project affect more rooftop solar being installed?

A: The ability of the battery to shift peak solar production to the evening is designed so as  not to interfere with current rooftop solar. Additional batteries capacity is planned in the event that additional rooftop solar is permitted to assure no interference with rooftop solar.  

Q: What will happen to my electric bill?

A: Initially, the project should a small positive impact on your bill based on todays price of oil and MECO’s cost of generation on Molokai. The project will lock in a substantial portion of Molokai’s power generation costs below current low level. Since 41% to 43% of the power for Molokai will be generated by solar, this portion of the power generation will be stable and not susceptible to oil price increases.

 

Q: Will this system lower my cost and how will it do that?

A: 50% of the Molokai bill is a fixed charge and nothing to do with generation and today diesel is used for power generation - the other 50% of your bill.

We also looked a schedule Q avoided cost and looked back 4 years – and determined that for every 10-dollar increase in the cost of a barrel of oil, increase of the rate per kWh is 2.2 cents. So, for a 20-dollar increase in barrel of oil, your bill would go up 4.4 cents increase per kWh.

HMV’s current pricing offer is less than oil at todays historically lower price. Solar will remain at this lower level whereas we do not know where oil will be for the short or the long term.

Our expectation is that the pricing will allow a typical home to save $60 per year and more over time when oil prices rise.

Q: There are a lot of local people that do solar installations, Will they be a part of this?

A: HMV intends to use local labor and source locally for the project when possible.  Longer term, the project will need to be staffed by several local residents. 

Q: Out of state developers are taking money away from Molokai. HMV will be just like the oil companies.

A: While it is true that the project will be owned by Chicago-based Half Moon Ventures, one of the primary goals is to lock in generation prices at a lower level, and in so doing, will not be sending as much money to the oil companies. Instead, the majority of the prices charged for generation will be used to pay for these solar and battery assets that remain on Molokai.

Q: Big solar with battery storage is new. Is it reliable, will it work?

A: HMV and its construction partners have considerable experience at designing, building, and owning solar PV projects. PV plants are very reliable and the facility will generate power for over 20 years. Moreover, over the past few years, energy storage has become a very reliable technology and HMV is deploying the best of breed battery system for the island. The project has built in redundancy and if there ever were a critical failure, the existing diesel generators remain available as a back up energy supply. Note also the battery is also designed to back up the generators and will always have 13 minutes of energy or more available if a generator was to fail, allowing time to start up another generator. 

 

Q: How does the system and battery interact with the grid?

A: The system will be automatically managed from a MECO computer that gives signals, we use super high-speed inverters to respond

Q: Will water be allocated to support the project?

A: The project will not use water, except small amounts for washing solar panels.  

Q: Who will pay for the infrastructure and start-up costs?

A: HMV will arrange for 100% of the costs of the project and use both the investment tax credit and a New Markets Tax Credit to fund the project. 

Q: Who will act as the utility?

A: Residents will continue to receive their electricity bills from MECo.  

Q: When will the project start and be completed?

A: Molokai New Energy Partners LLC has asked MECo for a commercial agreement in time to begin construction in 2018.  agreement in time to complete construction in 2019. This will enable the project to utilize the 30% federal tax credit and an additional new markets tax credit.

Q: What is the role of the Molokai Ranch in the Molokai Island Energy Project?

A: The Molokai Ranch is the landowner only.  Molokai New Energy Partners LLC is  has leased the land from them.

Q: Will large ships be transporting large equipment into our harbor?

A: Large ships will not be transporting large equipment into the harbor.  The equipment will be transported via the barges that are currently used to bring containers into the Molokai port.

Q: How can I show support for the Molokai Island Energy Project?

A: If you want to, you can voice your support at community meetings that the project sponsors will be holding.  You can also talk to your family and friends. If you wish, you can let your county and state representatives know that you support the project.  You can also contact HMV by emailing Michael Hastings at mhastings@hm-ventures.com.

Q: What aren't you showing us? Are all these decisions being done behind closed doors?

A: The HMV team has made and will continue to make every attempt to engage with the local community to with the goal of sharing information about the project and its impact on Molokai residents. 

 

Q: KIUC was able to able to find two developers for two projects offering 14 and 11 cents per kWh respectively and Tucson Electric in Arizona offered 4.5 cents per kWh, is this project comparable?

A: a) Maui Electric and HECO are insistent on the best price that can be achieved and a lower price than current generation or other options.

b) While the cost of PV panels are extremely low, the cost of battery storage does add costs and this is why the Kauai projects are so much more than a low cost project in Tucson. So, a pure solar project will be lower than a combined solar battery project.

c) The KIUC projects are much larger  and enjoy cost advantages not available on Molokai. These cost advantage include much cost land, much larger scale, no need for the grid forming BESS inverters, and lower technical requirements. However, with the new Markets Tax credit, our average cost, with batteries included, without inflation is expected to be near the 14-cent Kauai project cost. 

d) In addition, just as the residents experience a higher cost of living due to the cost of shipping, scarce materials and labor, we are forecasting that it will also cost more to build on Molokai than, for instance in Tucson.

e) Also because the project is small by industry standards as well as other projects around the islands we cannot take advantage of economies of scale. In spite of this we are able to achieve costs below todays costs.

 

Q: Will our electricity rates be lower?

A: The total rate charged by Maui Electric is dependent on the combined costs of (a) diesel generation (b) the cost of this solar PPA and (c) the cost of infrastructure and overhead.

As this PPA is only part of the driver that makes up the total monthly utility bill, we can only speak to the effect that solar will have on part of the bill.

Both Molokai New Energy Partners and Maui Electric agree that relative to Diesel only power generation, once operational, this project will produce power at a lower cost than diesel, such that the average homeowners bill will be $60 to $100 less per year than if this project was not built.   

 

Q: Will locking into a 22 year PPA will increase prices in the long run

A.    For this to be true, diesel prices have to drop a lot. It should be noted that in our October 2nd meeting, the cost per barrel of oil was $41. Today, as of May 11, 2018 the cost of a barrel of oil is just over $71. No one has a crystal ball on oil prices, however the long-term trend has been historically going up. Our long-term view is that this project will save Molokai residents cash for most, if not all, of the PPA term. If Oil Prices drop, as we have seen before, it will be for a moment in time, but not the duration of the PPA. We do not expect these momentary drops in oil prices will cause this solar power to be more expensive in the long term.  Beyond the 22-year PPA term, we expect this project to continue to produce low priced power for a very long time.

Q: What is the risk of fire with a battery? How is that risk to be mitigated by MNEP?

A: a) Poor quality lithium batteries and older batteries were made out of materials such as lead acid. Earlier systems designs with older battery technology have resulted in fires.

b) The MNEP system reduces this risk by using high quality batteries, installing an air-cooling system within the container that stores the batteries, monitoring, fire suppression systems, independent controllers within the battery container.

c) The battery manufacturer will often be responsible for insuring that all monitoring and controllers are done to the highest standards, so as to minimize their risk of tainted reputation and replacement due to catastrophic incident.

 

 

Q: How large (size) is it? Will it provide most of the islands power?

A: a) The project will take up about 37 acres and provide between 41% to 43% of the islands power.

    b) The solar panels will be designed to feed the batteries, which are initially 15 MW and will    be increased to 20 MW in year 11.

 

Q: How would this project be protected against a major storm/hurricane?

A: a) The system will be built to county codes and standards and comply with all standard such as hurricane categories. Further, the containers with the batteries will be located on concrete pads. Do keep in mind, no solar fam can survive trees being hurled through a solar field, however.

 

Q: Is MNEP following all environmental review processes and permits?

A: a) In 2015 the project conducted Phase 1, Cultural, and Archeological studies.

b) We intend to refresh those studies if deemed beneficial.

c) We also intend to make sure we comply with all required reviews, studies, and permit activities.

d) Our intent is to follow best management practices in all areas enviro and cultural before during and after construction.

e) We feel that it is equally important to insure that the installation is done to plan and post monitoring and maintenance is just as important as the plan.

 

Q: What steps will be taken to protect native birds and their flight patterns over Molokai?

a) Wind and solar concentrators will not be part of this project. These have been found to be damaging to bird life. Solar panels have not.

b) Bird deaths from solar farms have been estimated to be relatively low, though — a U.S. Fish and Wildlife study in 2014 found only 233 bird deaths at three different solar farms in California over the course of two years. U.S. News notes that none of the bird deaths from energy production hold a candle to cats, which are estimated to kill 1.4 to 3.7 billion birds every year. See: http://www.nature.com/articles/ncomms2380

c) For a full discussion for the benefits of PV solar panels to birds, see: http://www.audubon.org/news/why-solar-power-good-birds

 

Q: Is MNEP going to follow cultural resources laws and related legal processes?

A: Yes we have had a preliminary report and intend to follow the recommendations of a cultural practitioner.

 

Q: Will a cultural monitor be assigned throughout all construction work planned for this project?

A: We will take the advice from our cultural and archeological consultants.

 

Q: How would MNEP select a cultural monitor?

A: WE are willing to take input from experts and the community.

 

Q: Will it accept input from community on cultural monitor and monitoring plan?

A: Yes, we welcome input.

Q:  What steps has Half Moon Ventures taken to communicate the project before it was finalized? Some of us feel that there was a lack of answers before the project was finalized.

A:

a.    Half Moon Venture’s community engagement started in late 2014, and involved individual and small group meetings, attending community events, getting to know people on an individual basis and discussing the project. In the past 12 months, the project design and costs were finalized. Prior to Half Moon Ventures taking over the project from Princeton Energy, Princeton began initial work and communication with the community in 2013.  At that time, Princeton reached out to several hundred residents for support on legislation to support a bond for this project, and even thought this project is too small to use a bond issue, the key finding was they found feedback on the project was in favor by 40 to 1. 

b.    To communicate answers to this project, Half Moon Venture’s organized a community meeting on October 2nd 2017. To communicate this meeting and create maximum attendance Molokai New Energy Partners performed the following:

 i.     Ran three weeks of advertisements in the Molokai Dispatch announcing the meeting.

ii.     4 weeks prior to the meeting, the Molokai dispatch included the October 2nd      meeting in the calendar of events section.

 iii.     Provided a website with information on the project as well as contact information for questions to be submitted. : https://molokai.solar

 iv.     Used television to run advertisements announcing the meeting. See: https://vimeo.com/234959981

v.     Posted a banner in town in high traffic areas.

 vi.     Sent e-mails to those we had e-mail addresses.

 vii.     Attended community events, such as a Business Forum and Career Day at Molokai High School and passed out fliers announcing the event.

 viii.     Posted flyers on bulletin boards at various bulletin boards around the island.

  ix.     Visited various offices and businesses to personally get the word out on the meeting.

 x.     Volunteered at the refrigerator exchange project and passed out information on the meeting.

xi.     Created a video describing the project that remains available on Vimeo. See: www.youtube.com/watch?time_continue=11&v=z2T2r3bPdvY

  xii.     Solicited questions on the project from our meetings and from Maui Electric and provided answers to these questions at the October 2nd meeting.

 xiii.     Offered a free meal to encourage attendance at the October 2nd community meeting.

xiv.     Recorded the meeting on Vimeo so that those who could not attend could watch and hear the questions and answers. See: Vimeo.com/236833747 

 xv.     Engaged various people active in the community with personal invitations and requests so that they could ask others to attend.

 

 

Q: Will the 17 million New Markets Tax Credit pay for most of the project?

A: The $17.0 million in New Markets Tax Credit is not a $17.0 million cash grant. The $17.0 million tax credit is a credit that sold to generate funds for this project. The buyer of the credit, then shields $17 million of income from taxes and the price the buyer pays determines the amount of finds the project will receive.

As the tax credit is sold as a discount to the $17 million tax credit value, the project will receive a net $3.2 million benefit. This net benefit is from the structure of New Markets Tax credit, whereby the initial funds  come into the project as a loan, and after 7 years, the debt is forgiven. Upon debt forgiveness, a tax liability occurs that needs to be paid, as debt forgiveness is treated as income. Hence, the net benefit we have calculated is the upfront payment, less the sum of (a) interest and fees plus (b) the income tax liability created by the debt forgiveness. For this reason a $17 million New Markets Tax Credit benefits this project by $3.2 million.

None of Investment Tax Credit of the new markets tax credit is used to enhance the profits of MNEP. All this capital support was planned to be able to offer a lower electricity rate. Note, that in November this New Markets Tax Credit was pulled due to a new census that included Maui with Molokai. This changed the economic rating for Molokai, eliminating the eligibility of Molokai projects for this type of grant. We are working to appeal this decision, and in spite of the loss of the NMTC, we will move forward with this project.

 

 

Q: The only community benefit seems to be the opportunity for the community to buy the project. Is it really a community benefit to offer to sell the plant to the community for more than it cost to build?

A.    We do not envision selling the project to the community for more than it costs to build. As each year passes, the value of the project is less, as the PPA life is shorter and the components do wear out over time. When determining community benefits, one needs to also consider:

i.     First, Molokai New Energy Partners was able to get this community purchase term included in the PPA where an offer from a Molokai non-profit has to be considered in good faith by both Molokai New Energy Partners and Maui Electric. This is the first time ever that a Hawaii PPA offers this term. With out this term, the community would never have a right to make an offer. MNEP was asked by community members to help on this point, and we delivered on this point.

  The specific language we were successful in adding to the PPA is as follows:

The Parties acknowledge that members of the Molokaʽi community have expressed interest in acquiring the Facility through a community-controlled not-for-profit corporation or similar entity.  In the event that Seller or Company receives a written proposal to acquire the Facility from such an entity at any time after the fifth (5th) anniversary of the Commercial Operations Date: (i) the Party receiving such proposal shall forward it to the other Party; (ii) Seller shall consider in good faith such proposal; and (iii) Company shall consider in good faith any related request to approve such proposed acquisition pursuant to Section 19.1 (Sale of the Facility) and/or Section 19.2 (Assignment by Seller), either prior to or subsequent to the exercise of Company’s Right of First Negotiation under Attachment P (Sale of Facility by Seller).

 Please note that no transfer of ownership can occur until 5 years after construction, as the Investment Tax Credit must vest. Should any transfer of ownership in full or partial, occur before the 5 year vesting period, the entire amount of the Investment Tax Credit must be repaid. 

 ii.     Second, as technology gains as well and time passing in the PPA term are likely to reduce the projects value over time, it is to the communities advantage to not agree to a price today. The clause in the PPA MNEP has negotiated on behalf of the Molokai community creates this advantage for the Molokai community.

iii. Third, additional community benefits include lower cost power, more jobs, and the simple fact that Molokai will burn less diesel fuel. Molokai relies on diesel, and this project is a safeguard against upsets in the oil marketplace

 

 

Q: What is the life of the project 

A:       The PPA we are discussing is for 22 years and a typical life for a solar project is 25 to 30 years.

At the end of the PPA the batteries will have been replaced, and the solar cells and inverters will need to be replaced sometime near the 30-year mark.

What is very interesting is that the components that wear out are the inverters and the solar panels. The costs for these items are less than 1/3 of the total project costs.

This means that while the cost for residents from the first 22 years are attractive; the next 20 to 30 years for the next generation will be really attractive.

 

 

Q:    What happens if MNEP goes belly up?

A:  We will not start the project without being fully funded, and MNEP is a stand-alone entity that does not hold any other assets. In the unlikely event that MNEP goes “Belly Up” the project will have been built, the project is on Molokai and cannot be moved, and the PPA will still be in place. Molokai will still have access to the power from this project.

 

 

Q: How will advancements in battery technology and panel technology affect the future of this project?

A:   If panel technology improves, subject to economics and the need for this technology, we can easily change the panels. Battery changes will only allow more time shifting of power or storage for off peak times, with the potential to send more low cost power to the Molokai grid.

Cane Road to Jaws 2" by James Brennan licensed under CC by 2.0