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Tuesday, September 1, 2015

NEXTERA CONTINUES TO WANT HAWAIIAN ELECTRIC INDUSTRIES

Nine months ago NextEra, headquartered in Florida, indicated an intent to purchase Hawaiian Electric Industries for $4.3 billion.


HEI stock initially jumped, but like the rest of the stock market, has recently dropped.  The market cap of HEI is $3 billion, while that of NextEra is $43 billion, where only Duke Energy is larger.  HEI has a production capacity of around 1800 MW, while NextEra is close to 50,000 MW.

Consumer Advocate Jeff Ono and Governor David Ige have both expressed opposition to the sale.  The Public Utilities Commission will soon pass judgement, where public rejection was almost universal.  Of course, the PUC takes signals from the Governor, so the outcome seems obvious, unless some significant back-door discussions are occurring to work out a compromise...which no doubt are occurring, for today NextEra provided 50 new commitments.

Renewable energy advocates from Florida, who are not particularly happy about the attitude of this major utility, have been sending me regular reports about this company.  The issue is actually debatable.  I am among the few in the state sympathetic to the views of NextEra.  The cost of solar photovoltaic electricity depends on the scale.  NextEra believes it can do it cheaper with solar farms, while the media and masses want independence with rooftop panels.  The fact of the matter is that NextEra has a good point.  The following was published by investment bank Lazard last year:
Plant Type ( USD/MWh)LowHigh
Solar PV-Rooftop Residential180265
Solar PV-Rooftop C&I126177
Solar PV-Crystalline Utility Scale7286
Solar PV-Thin Film Utility Scale7286
Clearly, utility-scale PV is a lot more cost effective than residential PV.

I think Hawaii needs NextEra more than the reverse.  They have deep utility pockets and can take more chances with riskier sustainable energy ventures.  Clearly, they see an advantage in being part of our state.  It will not be easy, for many just won't want anything like this 250 MW PV farm from California in their backyard, but I see the following occurring or not over the next decade or two:
  • Undersea electricity cables linking all the Hawaiian Islands, except for Kauai.
  • Large wind and solar farms on Lanai, Molokai and the Big Island.
  • More than 100 MW of geothermal power from the Big Island, and, maybe even Maui.
  • Perhaps a 10 MW OTEC plantship off Honolulu, if not 100 MW.
  • I don't think we will get close to 100% renewable electricity by 2030.
However, if most of the above occur, Hawaii will be well on our way to energy independence, and NextEra can take credit for being a progressive utility.  Why this can work here is that our electricity  rates are three times the national average.  Thus, all of these renewable options can best be commercialized here first.  No other state can make that claim.  The process of getting there will take people working together to make it happen.

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Hurricane Ignacio is methodically moving away from Hawaii, while Hurricane Jimena, with wind gusts up to 150 MPH, is also expected to move north and miss the state:


I must bring up Hurricane Kilo again, located west of Hawaii, and continuing to move further west.  While only a Category 2 today, all signs show Kilo strengthening into a Category 4 and heading in the general direction of Japan.  I don't ever recall a hurricane from Hawaii becoming a typhoon and striking Japan:


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