10 people changing the way Hawaii Electric does business
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From left: Lynne Unemori, Darcy Endo-Omoto,
“You can’t run an operational company like this without leadership that’s experienced in operational issues,” says Robbie Alm, executive vice president for Hawaiian Electric Co. “That’s not me. That was never going to be me.”
Alm isn’t being modest. He’s trying to explain the origins of the Clean Energy Team, a small cadre of company engineers, planners and policy wonks who are behind the greatest corporate transformation the Islands have seen in decades. The changes began two years ago, Alm says. That’s when the utility signed the historic Hawaii Clean Energy Initiative (HCEI) with the governor, and agreed to some audacious goals, including a legal commitment that, by 2030, 40 percent of its power generation would come from renewable energy.
It was the technological, structural and regulatory challenges of meeting these goals that gave birth to the Clean Energy Team. But Alm believes that the leaders of this group, 10 mid-level managers and young vice presidents, will lead the company far into the future. He also believes one of them is likely to be its next CEO.
A Top 250 Leader
Hawaiian Electric Industries – parent company of the electric utilities HECO, MECO and HELCO, and American Savings Bank – has been in the first, second or third spot on the Top 250 since 1990. In the 1980s, the parent company always ranked fourth or fifth.
How it Started
In the years leading up to the Clean Energy Initiative, HECO (along with its Neighbor Island partners, MECO and HELCO) found itself increasingly beleaguered. Its public image had been battered by a series of highly publicized conflicts over issues like the construction of transmission lines on Waahila Ridge and the expansion of power plants at Kahe and Keahole. There was also a sense among the public that the company’s existing clean-energy programs were just empty gestures. “The company found itself in fairly unhappy straits,” Alm says. “The editorial writers were against us, the Legislature wasn’t happy about us, and the environmental and historic preservation groups were against us.”
The company also had built-in financial problems. As HECO chair Connie Lau points out, the company’s efficiency programs and changes in technology meant that even when the economy was expanding, and costs increasing, sales declined steadily. In fact, net revenues have declined in each of the last six years. And, as Lau notes, although the company is allowed by statute to earn 10 percent profits, by 2008 they had fallen below 4 percent.
“If you look at the late 1990s,” says Alm, “we were kind of booming. By the 2000s, though, the economy’s not doing so well. The stock market took that tech dive, interest rates went way down, and we hadn’t been in for a rate case in quite awhile. Financially, the company was challenged. And we weren’t helped at all by being so unpopular with the public. People used words like ‘arrogant,’ ‘monolithic’ and ‘oil-addicted’ to describe us.
“And then, Linda Lingle comes in,” Alm adds, “and she clearly doesn’t like us. If you go back and read her speeches, particularly those leading up to the 2006 legislative session, we were sort of public enemy No. 1. Again, it was our addiction to oil and unwillingness to change.” It wasn’t just idle complaining; the Lingle administration was clearly taking Hawaii’s dependence on fossil fuels seriously. “So, in the 2006 legislative session,” Alm says, “she had those big bills to alter the playing field. And a lot of it passed.”
Maurice Kaya, the former state energy administrator and one of the original authors of the HCEI, points out that some of those laws were transformational. “One,” he says, “was the recognition that the efficiency programs, which were run by the electric utility, were sort of the fox guarding the henhouse. So that was taken away from them. In that same context, we were able to convince the Legislature that there was really no business motivation for the utility to change their ways and get off oil.” In short, Kaya paints a picture of a company financially and structurally unprepared for a clean energy future. It was hard to avoid the perception that the 109-year-old utility was in decline.
So in 2007, when Kaya and Bill Parks, the Department of Energy official who helped write the HCEI, came to Alm with a proposal to radically transform the state’s energy system, it’s not surprising that the utility was interested. In the fall of 2008, after its due diligence, Hawaiian Electric signed on. All that was left was the execution.
Dan Giovanni (left) and Robert Young
The nuts and bolts of utility work are in operations. That’s what happens in the big power plants, on the vast networks of transmission lines, on the distribution grids that feed electricity to the customer, and in the master control room that oversees it all. Operations is also usually the lair of the most conservative, risk-averse engineers.
At HECO, though, operations is a hotbed of experimentation. It’s the crucible for the schemes and analyses of planners. It’s where the formulations of policy makers and regulators are put to the test. It’s also the site of a remarkable little research and development program into the use of biofuels in traditional steam generators. It’s a good thing, too, because renewable biofuels are a critical part of the company’s clean-energy plans, and it’s hard to see any of those plans without the strong support of operations.
Title: Manager, Generation Department
Clean-Energy Responsibilities: Conducting R&D and developing operational plans to convert HECO’s existing fleet of generators to use biofuels.
“The devil’s in the details,” says Giovanni, explaining some of the difficulties of converting from fossil fuels to biofuel. “It means a lot more than asking: ‘What’s the price?’ ‘Does it meet sustainability criteria?’ ‘Can we get it here in time and in volume?’ Those are the simple questions.” The more important questions, at least for an operations guy like Giovanni, are the technical ones. “ ‘How will it behave once we commit to it operationally within our infrastructure?’ ”
Giovanni is leading the utility’s own little R&D program into that question. “We’re going to take one of our largest and most important generating units and operate it for a month on biofuels – 30 days, 24/7. It’s a $12 million test: $5 million worth of equipment, $5 million worth of biofuel, and about $2 million worth of experts from around the world to do the testing and analysis. They’ll look at the environmental impacts, the combustion impacts, the thermal and performance impacts, and the fuel stability question. There’s no shortage of technical questions. But I can tell you this: Six months from now, our team will be the most informed people in the world on how to use biofuels in a conventional steam power plant.”
Title: Manager, Systems Operations
Clean-Energy Responsibilities: Run the operations center so the grid can reliably incorporate the most renewable energy possible.
Part of the idea of the Clean Energy Team is the inclusion of operations guys like Young and Giovanni in the mix. Like all the engineers on the team, they have a fundamental grasp of the tension inherent between adding more and more intermittent energy sources, like wind and solar, and maintaining inexpensive, reliable power for customers.
“There’s this conflict,” Young says. “We have to protect the system, but we know that if we don’t do anything, eventually we’ll be subject to higher and higher fuel prices that will drive the cost of electricity up.” He points out that this tension chaffs the fundamental conservatism of engineers.
“Being in operations, I’d like to see more stable resources,” he says. Like Giovanni, he sees biofuels as a critical part of dealing with the intermittency of most renewables. “The fallback really is that some generation sources have to burn some form of fuel. Biofuel is a way to get off crude oil.” And Giovanni’s research program has provided him some hope for clean energy.
“In the beginning, there was a pretty high level of anxiety for us engineers,” he says. “The unknown is always daunting. But, from the operating side, as we’re working through things, the comfort level is getting better.”
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