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Good Public Policy Drives Innovation at First Wind's Kahuku Project

By Paul Gaynor, CEO, First Wind

Later this month, Hawaii will be home to what could be the nation's most innovative wind project to date. While it seems that "innovation" has of late become the catchphrase for how Americans are going to dig out of the economic slump, we can't allow innovation to become a cliche. 

Making innovation a reality requires creativity and risk. The newest clean energy project on Hawaii's island of Oahu, First Wind's Kahuku project, is a case in point. In developing Kahuku, we at First Wind learned that a truly innovative project requires a cocktail of policy, market structure, grid integration, environmental protection, and financing to get steel in the ground and power to homes.

Let's start with policy. Hawaii is the most oil-dependent state in the nation, shipping in diesel fuel to burn in power plants. It's not only dirty, but expensive. State leaders decided to find a better way, agreeing to get 70 percent of the state's electricity from renewable sources by 2030.

To meet that goal, Oahu's only utility, Hawaii Electric Company, sought long-term contracts for renewable electricity. Doing so would not only help reach the policy goal, but also provide clean, affordable power for customers. This combination of supportive policy and market demand lead First Wind to begin development of the Kahuku project. But that was just the beginning.

While the trade winds at Kahuku are mostly steady, the tiny size of Oahu's grid means the grid is very sensitive to fluctuations in energy output. This unique situation on Oahu called for innovation, and that came in the form of a 15 megawatt battery built by Texas-based XtremePower. Fifteen megawatts of power, dispatchable in seconds, provides never before seen options for wind integration on such a small grid. To facilitate the fast dispatch, the Kakuhu project also has a cutting edge communications system, with a direct microwave link to the Electric Company.

With the integration issue solved, the project was starting to look like a reality. But still of concern was the issue of the fragile Hawaiian landscape with its dozens of endangered bird species that exist nowhere else on earth. Luckily, First Wind had already innovated in this area, creating the nation's first Habitat Conservation Plan for our first Hawaiian wind project, on Maui, where we successfully implemented bird protection plans that saved and even grew endangered flocks. That innovation worked so well that Hawaiian officials trusted us to do it again.

With innovative plans for integrating our wind energy and protecting birds while doing it, we turned to the challenge of project financing. And while being the "first" to try something sounds great to many people, Wall Street typically takes a dim view of the unproven. Fortunately, the XtremePower battery allowed us to qualify for a Department of Energy loan guarantee originally funded under the 2005 Energy Policy Act specifically for innovative technology.

But such a loan had never been granted for a utility-scale wind project. There's a first time for everything. We applied, and after careful evaluation by the DOE, DOE granted us a $117 million loan guarantee last July. Much of the project was financed despite the challenging economic environment and cutting edge technology integration.

In moving from concept to construction, we employed about 200 workers on-site, and engaged with more than 100 contractors and suppliers in 20 states. Now we're ready to provide power to the community.

To get a project like Kahuku built, it took some risks, creativity and innovation to fit all the pieces together. But it worked. Building wind projects is challenging, and it's not for the faint of heart, but the industry should be able to benefit from these innovations. The problem is that there is a wildly different climate for renewables based on state, region, market and utility boundaries --not to mention the fits and starts of short term federal tax credits and the loss of most of the funding for DOE loan guarantees.

We know what it takes to build projects. But until those elements are predictable and consistent, many projects will remain Herculean efforts, even in communities which want and need them the most. The Kahuku story started with policy-- it's what started the ball rolling. Good public policy sparks innovation, and that's something government officials should remember when they call on innovation to get our economy back on track.

Paul Gaynor has been CEO of First Wind since 2004. He has more than 20 years of experience in the energy field, encompassing leadership and finance roles in the energy, power, and pipeline sectors. In addition, he has been engaged in several landmark energy and power financings across the globe.


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