Hawaiian Electric Industries, Inc. (HE): Business Model Canvas [10-2024 Updated]

Hawaiian Electric Industries, Inc. (HE) is at the forefront of transforming energy in the islands, with a business model that emphasizes sustainability and community engagement. This innovative utility company is dedicated to providing reliable and affordable electricity while pursuing an ambitious goal of 100% renewable energy by 2045. In this blog post, we will delve into the intricacies of HE's business model canvas, highlighting its key partnerships, activities, resources, and value propositions that drive its commitment to a sustainable future.

Hawaiian Electric Industries, Inc. (HE) - Business Model: Key Partnerships

Collaborations with independent power producers (IPPs)

As of June 30, 2024, Hawaiian Electric has engaged in multiple Power Purchase Agreements (PPAs) with independent power producers (IPPs). The summary of the agreements includes:

Utilities	Number of Contracts	Total Photovoltaic Size (MW)	BESS Size (MW/MWh)	Guaranteed Commercial Operation Dates	Contract Term (Years)	Total Projected Annual Payment (in millions)
Hawaiian Electric	4	139.5	139.5 / 558	7/31/22, 1/11/23, 3/28/24 & 10/31/24	20 & 25	$34.0
Hawaii Electric Light	2	60	60 / 240	4/21/23 & 1/28/25	25	$19.2
Maui Electric	1	60	60 / 240	5/31/24	25	$13.2
Total	7	259.5	259.5 / 1038	N/A	N/A	$66.4

Agreements with local governments and regulatory bodies

Hawaiian Electric actively collaborates with local governments and regulatory bodies, particularly the Public Utilities Commission (PUC) of Hawaii. The PUC has approved various PPAs and agreements, allowing Hawaiian Electric to recover projected payments through the Power Purchase Adjustment Clause (PPAC). For example, the Utilities received PUC approval for four remaining Stage 2 PPAs, leading to a total projected annual payment of $55.4 million, which is also recoverable through the PPAC.

Partnerships with renewable energy technology providers

Hawaiian Electric has formed partnerships with various renewable energy technology providers to enhance its energy portfolio. As of June 30, 2024, the Utilities have approximately 631 MW, 143 MW, and 151 MW of installed distributed renewable energy technologies across Hawaiian Electric, Hawaii Electric Light, and Maui Electric, respectively. These technologies are primarily focused on photovoltaic systems and are integral to achieving Hawaii's goal of 100% renewable energy by 2045.

Engagement with community stakeholders for sustainable projects

Hawaiian Electric's engagement with community stakeholders is critical for the development of sustainable projects. The Utilities have initiated community-based renewable energy programs and RFPs for various renewable projects to ensure alignment with community needs. This includes the Stage 3 RFPs aiming for significant renewable capacity across multiple islands, reflecting a commitment to sustainable energy solutions.

Hawaiian Electric Industries, Inc. (HE) - Business Model: Key Activities

Generation and distribution of electricity across multiple islands

Hawaiian Electric Industries, Inc. operates as the primary electricity provider across all major islands of Hawaii, except Kauai. As of June 30, 2024, the company served approximately 95% of Hawaii's population. The company operates five separate electric grids that cater to the distinct energy needs of each island. In the second quarter of 2024, Hawaiian Electric reported a total kilowatt-hour (kWh) sales volume of approximately 121.01 million kWh, a slight decrease from 131.48 million kWh in the same period of 2023.

Implementation of renewable energy initiatives

Hawaiian Electric is committed to transitioning towards renewable energy sources. As of June 30, 2024, the company had approximately 631 MW of installed distributed renewable energy technologies at Hawaiian Electric, 143 MW at Hawaii Electric Light, and 151 MW at Maui Electric. The company aims to achieve 100% renewable energy by 2045, with various projects in the pipeline, including four remaining Power Purchase Agreements (PPAs) totaling 259.5 MW and projected annual payments of $66.4 million. The forecasted Gross Domestic Product Price Index (GDPPI) for 2024 was 2.18%, which impacts the pricing of renewable projects.

Maintenance of electric grid infrastructure

As of June 30, 2024, Hawaiian Electric's net book value of utility property, plant, and equipment (PPE) amounted to approximately $5.6 billion. This includes 20% related to generation PPE, 65% related to transmission and distribution PPE, and 15% related to other PPE. The increase in operation and maintenance expenses was approximately $291 million for the first half of 2024, driven by wildfire mitigation program expenditures, inspections, and higher property insurance costs. This infrastructure is crucial for ensuring reliable electricity supply and supporting the integration of renewable energy sources.

Customer service and support for utility needs

Hawaiian Electric places a strong emphasis on customer service, managing 470,532 customer accounts as of June 30, 2024. The company has reported a decrease in customer accounts receivable by 14% due to improved collection efforts and government assistance programs. In the second quarter of 2024, the company incurred a net loss of approximately $1.23 billion, which was partly attributed to increased operational costs and the impact of the Maui windstorm and wildfires. Customer service initiatives are essential for maintaining customer satisfaction and addressing utility needs effectively.

Key Activity	Details	Financial Impact
Generation & Distribution	Operates five grids serving 95% of Hawaii's population	121.01 million kWh sold in Q2 2024
Renewable Initiatives	631 MW of installed renewable energy technologies	Projected annual payments of $66.4 million for PPAs
Infrastructure Maintenance	Net book value of PPE: $5.6 billion	Operation and maintenance expenses: $291 million (H1 2024)
Customer Support	Managed 470,532 customer accounts	Decrease in accounts receivable by 14%

Hawaiian Electric Industries, Inc. (HE) - Business Model: Key Resources

Extensive electric grid infrastructure

The net book value of Hawaiian Electric's utility property, plant, and equipment (PPE) as of June 30, 2024, was approximately $5.6 billion, comprising 20% for generation, 65% for transmission and distribution, and 15% for other PPE.

Diverse energy generation assets (solar, wind, biofuels)

Hawaiian Electric operates various renewable energy projects, including:

• Hamakua Energy's 60 MW combined cycle power plant
• Biomass facility at Mahipapa with a capacity of 7.5 MW
• Solar-plus-storage projects totaling 8.6 MW across five University of Hawaii campuses.

Skilled workforce in energy management

The company employs a skilled workforce dedicated to managing energy resources effectively, ensuring operational efficiency, and maintaining regulatory compliance. The workforce is supported by ongoing training and development initiatives, although specific workforce numbers are not disclosed in the financial statements.

Financial resources for capital projects and operations

As of June 30, 2024, Hawaiian Electric had cash and cash equivalents of $88.6 million. The total liabilities stood at approximately $15.9 billion, with long-term debt net—other than bank at $2.8 billion.

In addition, the company had accrued estimated wildfire liabilities of $1.71 billion related to the Maui windstorm and wildfire tort-related claims.

Resource Type	Description	Value/Capacity
Electric Grid Infrastructure	Net book value of utility PPE	$5.6 billion
Energy Generation Assets	Combined cycle power plant at Hamakua	60 MW
Energy Generation Assets	Biomass facility at Mahipapa	7.5 MW
Financial Resources	Cash and cash equivalents	$88.6 million
Financial Resources	Total liabilities	$15.9 billion
Financial Resources	Long-term debt, net	$2.8 billion
Financial Resources	Accrued wildfire liabilities	$1.71 billion

Hawaiian Electric Industries, Inc. (HE) - Business Model: Value Propositions

Reliable and affordable electricity supply

Hawaiian Electric Industries (HEI) provides electricity to approximately 95% of Hawaii's population, operating five separate grids across the islands. In 2024, the company reported revenues of $1.58 billion from its electric utility segment. The average residential electricity rate in Hawaii as of mid-2024 was approximately $0.37 per kilowatt-hour, which is among the highest in the United States, but HEI aims to balance cost and reliability through efficient operations.

Commitment to 100% renewable energy by 2045

HEI has committed to achieving a 100% renewable energy supply by 2045. As of June 2024, the company had approximately 631 MW of installed distributed renewable energy technologies, mainly photovoltaic systems. This commitment is supported by various renewable power purchase agreements (PPAs), including four approved Stage 2 PPAs with a total photovoltaic size of 79 MW, which are projected to incur a total annual payment of $55.4 million. The company currently sources about 23% of its total energy from solar systems installed by customers.

Innovative solutions for energy efficiency and sustainability

HEI is focused on innovative solutions to enhance energy efficiency and sustainability. The company has implemented various programs aimed at reducing energy consumption, including demand response initiatives and energy efficiency programs that resulted in a decrease of kilowatt-hour sales by 10.47 million kWh in 2024 compared to the previous year. Additionally, HEI's net book value of property, plant, and equipment related to renewable energy investments reached approximately $5.6 billion as of June 30, 2024.

Community engagement in energy transition efforts

HEI actively engages with local communities to facilitate the energy transition. As of June 2024, roughly 41% of single-family homes in Hawaii had installed private rooftop solar systems, demonstrating substantial community involvement in renewable energy initiatives. The company has also faced challenges, such as the $1.71 billion in wildfire-related claims that have necessitated community support and engagement in safety measures.

Value Proposition	Details
Reliable Electricity Supply	Serves 95% of Hawaii's population with $1.58 billion in electric utility revenues in 2024
Renewable Energy Commitment	Targeting 100% renewable energy by 2045; 631 MW of installed renewable capacity
Innovative Solutions	Energy efficiency programs led to a decrease in kilowatt-hour sales; $5.6 billion in renewable investments
Community Engagement	41% of homes with rooftop solar; addressing $1.71 billion in wildfire claims through community involvement

Hawaiian Electric Industries, Inc. (HE) - Business Model: Customer Relationships

Direct communication through customer service channels

Hawaiian Electric Industries (HE) maintains robust customer service channels to facilitate direct communication with its customers. As of June 30, 2024, the total number of customer accounts reached approximately 470,532. The company has implemented a customer service strategy that includes phone support, online chat options, and a comprehensive FAQ section on its website to address customer inquiries and issues efficiently.

Incentive programs for energy conservation and renewable adoption

HE has launched various incentive programs aimed at promoting energy conservation and the adoption of renewable energy sources. These programs include rebates for energy-efficient appliances and incentives for customers who install solar panels. As of June 30, 2024, approximately 23% of HE's total customers had installed solar systems. The company also reported that 41% of single-family homes on the islands of Oahu, Hawaii, and Maui have private rooftop solar systems installed.

Program Type	Details	Impact (as of June 2024)
Rebates for Energy-Efficient Appliances	Cash rebates for qualifying appliances	Increased energy efficiency among participating households
Solar Incentive Program	Financial incentives for solar panel installation	23% of customers have solar systems
Energy Conservation Programs	Educational resources and workshops	Significant reduction in energy consumption reported

Community outreach and education initiatives

HE is actively involved in community outreach and educational initiatives aimed at fostering a culture of energy conservation and sustainability among its customers. The company conducts workshops and information sessions to educate customers about energy-saving practices and renewable energy options. In 2024, HE invested approximately $2.2 million in community education programs.

Customer feedback mechanisms for service improvement

HE has established various mechanisms for collecting customer feedback to enhance service quality. These include customer satisfaction surveys, feedback forms on their website, and regular community forums. In 2024, customer feedback indicated a 15% increase in overall satisfaction compared to the previous year. Additionally, the company has implemented a structured process for addressing customer complaints and suggestions, ensuring continuous improvement in service delivery.

Hawaiian Electric Industries, Inc. (HE) - Business Model: Channels

Direct billing and customer service portals

Hawaiian Electric Industries utilizes a direct billing system that allows customers to manage their accounts through an online customer service portal. As of June 30, 2024, the total number of customer accounts was approximately 476,148. The company reported revenues of $1,580,909 thousand for the first six months of 2024, with a significant portion attributed to direct customer billing.

Online platforms for energy management tools

The company offers various online platforms aimed at energy management, including tools for monitoring energy usage and optimizing consumption. In response to customer demand for renewable energy solutions, Hawaiian Electric is enhancing its online offerings to facilitate easier access to energy efficiency programs. The average fuel oil cost per barrel for the first half of 2024 was $470.532, influencing customers' energy management strategies.

Public forums and community meetings for engagement

Hawaiian Electric engages with its customers through public forums and community meetings. These events are crucial for discussing renewable energy initiatives and addressing customer concerns, particularly in light of recent challenges such as the Maui windstorm and wildfires. The company has implemented a set of interim wildfire safety measures, which were communicated in these forums, focusing on community safety and resilience.

Marketing campaigns to promote renewable energy programs

In 2024, Hawaiian Electric has intensified its marketing campaigns to promote renewable energy programs, aiming to meet the statutory goal of 100% renewable energy by 2045. The campaigns emphasize the benefits of solar energy and other renewable resources, targeting both residential and commercial customers. The company faced an operating loss of $1,581,085 thousand in the second quarter of 2024, partly due to increased operational costs associated with these marketing efforts.

Channel	Details	Impact on Revenue
Direct Billing	Online customer service portal for account management	$1,580,909 thousand (H1 2024)
Energy Management Tools	Platforms for monitoring and optimizing energy usage	Influences customer engagement and retention
Community Engagement	Public forums and meetings for discussing initiatives	Enhances customer trust and brand loyalty
Marketing Campaigns	Promoting renewable energy programs	Contributes to long-term revenue growth

Hawaiian Electric Industries, Inc. (HE) - Business Model: Customer Segments

Residential customers across the islands

Hawaiian Electric Industries serves approximately 95% of Hawaii's population, focusing heavily on residential customers across the islands. As of June 30, 2024, the total number of customer accounts was approximately 1,100,000. The average residential electricity consumption is influenced by weather patterns, with kilowatt-hour (kWh) sales totaling around 121 million kWh for the quarter ended June 30, 2024. The company aims to provide affordable, reliable, and clean energy to households, aligning with Hawaii's decarbonization goals of 100% renewable energy by 2045.

Commercial enterprises and large power users

Hawaiian Electric also caters to commercial enterprises, which constitute a significant segment of their customer base. The commercial sector's electricity consumption has been impacted by various factors, including economic conditions and energy efficiency measures. In the second quarter of 2024, Hawaiian Electric reported operating revenues of $792.3 million, with a notable portion derived from commercial users. The average fuel oil cost per barrel was approximately $470.53 during this period, affecting operational costs and pricing strategies for large power users.

Government and public sector entities

Government and public sector entities are key customers for Hawaiian Electric, as they require stable and sustainable energy solutions. The company has established partnerships with state and local governments to support renewable energy initiatives. The impact of these collaborations is evident in the increased adoption of distributed energy resources. Hawaiian Electric's regulatory framework allows for adjustments to rates based on changes in fuel oil prices, which directly affects public sector energy costs.

Community organizations focused on sustainability

Hawaiian Electric actively engages with community organizations that prioritize sustainability and renewable energy initiatives. These partnerships facilitate the implementation of energy efficiency programs and renewable energy projects. The company has reported significant investments in clean energy infrastructure, with a net book value of utility property, plant, and equipment amounting to $5.6 billion as of June 30, 2024. This investment supports community goals for sustainable energy use and aligns with state mandates for clean energy development.

Customer Segment	Number of Accounts	Average Consumption (kWh)	Revenue Contribution (Q2 2024)
Residential Customers	~1,100,000	121 million (Q2 2024)	$792.3 million
Commercial Enterprises	N/A	N/A	Part of $792.3 million
Government Entities	N/A	N/A	Part of $792.3 million
Community Organizations	N/A	N/A	Part of sustainability investments

Hawaiian Electric Industries, Inc. (HE) - Business Model: Cost Structure

Operational costs for electricity generation and distribution

As of June 30, 2024, Hawaiian Electric reported total operational expenses amounting to approximately $2.44 billion for the second quarter, which included:

Cost Component	Amount (in thousands)
Fuel Oil	$258,652
Purchased Power	$181,328
Other Operation and Maintenance	$147,561
Wildfire Tort-Related Claims	$1,712,000
Depreciation	$62,812
Taxes, Other Than Income Taxes	$74,418
Total Expenses	$2,436,771

Investments in renewable energy infrastructure

Hawaiian Electric is actively investing in renewable energy projects, with a total projected annual payment of $55.4 million for Power Purchase Agreements (PPAs) related to renewable energy, specifically:

Project Type	Size (MW)	Total Projected Annual Payment (in millions)
Stage 2 PPAs	79	$31.4
Guaranteed Commercial Operation Dates	185	$24.0
Total	264	$55.4

Maintenance and repair of utility assets

The net book value of utility property, plant, and equipment (PPE) as of June 30, 2024, was approximately $5.6 billion. The breakdown of PPE is as follows:

PPE Category	Percentage of Total PPE
Generation	20%
Transmission and Distribution	65%
Other	15%

Regulatory compliance and environmental management costs

Hawaiian Electric has incurred significant costs associated with regulatory compliance and environmental management, particularly in the wake of the Maui windstorm and wildfires. As of June 30, 2024, the estimated wildfire liabilities accrued were approximately $1.71 billion. These costs are primarily related to:

• Legal expenditures: Ongoing costs associated with wildfire tort-related claims.
• Insurance recoveries: Certain costs are partially reimbursable under various insurance policies, with approximately $41 million remaining under excess liability insurance.
• Wildfire safety measures: Implementation of strategies to reduce wildfire risks associated with utility infrastructure.

Hawaiian Electric Industries, Inc. (HE) - Business Model: Revenue Streams

Electricity sales to residential and commercial customers

In the first six months of 2024, Hawaiian Electric generated total revenues of $1.58 billion, reflecting a decrease from $1.62 billion in the same period of 2023. The decrease was primarily attributed to lower kilowatt-hour (kWh) sales, which totaled approximately 1,971 million kWh for the six months ended June 30, 2024, down from 1,994 million kWh in the prior year. The average fuel oil cost per barrel was $470.53 during this period, compared to $472.48 in the previous year.

Fees from renewable energy programs and incentives

Hawaiian Electric has implemented several renewable energy programs, contributing to its revenue streams. For the six months ended June 30, 2024, the company reported $3 million in revenue from demand-side management (DSM) initiatives, which promote energy efficiency among customers. Additionally, Hawaiian Electric is actively involved in several power purchase agreements (PPAs) for renewable energy projects, with projected annual payments from these contracts expected to be approximately $66.4 million for seven projects.

Utility	Number of Contracts	Total Photovoltaic Size (MW)	Total Projected Annual Payment (in millions)
Hawaiian Electric	4	139.5	34.0
Hawaii Electric Light	2	60	19.2
Maui Electric	1	60	13.2
Total	7	259.5	66.4

Interest income from banking operations (ASB)

Hawaiian Electric Industries, through its subsidiary American Savings Bank (ASB), reported interest income of approximately $2.88 million for the six months ended June 30, 2024. The bank's total deposits were $3.36 billion, showing a slight increase compared to the previous year. ASB continues to play a crucial role in diversifying Hawaiian Electric's revenue streams beyond utility operations.

Regulatory revenues from approved rate adjustments

In 2024, Hawaiian Electric implemented several regulatory rate adjustments that are expected to enhance revenue stability. The Annual Rate Adjustment (ARA) formula includes a compounded component based on the estimated change in the Gross Domestic Product Price Index (GDPPI), which for 2024 was set at 2.18%. Additionally, the company accrued an estimated $1.71 billion in wildfire-related liabilities, which may impact future rate adjustments as the Utilities seek recovery through the Public Utilities Commission (PUC).