Oil — not renewables — touted as isles’ linchpin

Joseph Israel, president and CEO of the Houston-based company that bought Tesoro’s Hawaii operations in 2013 and the state’s 76-brand gas stations this year, said Thursday Hawaii’s renewable energy goals are unrealistic and that the cheapest energy source for the foreseeable future is oil.

"All of this discussion about clean energy, for me (is) categorized as nonsense," said Israel, head of Par Petroleum Corp., which operates Hawaii’s largest refinery as part of its Hawaii Independent Energy subsidiary.

Hawaii’s policymakers should stop trying to force the market’s hand by pushing for the use of more renewable energy when it is not the most economical solution, Israel said.

"Economy sets pricing and the right mix for every market around the world. Governments stay out of the way when it comes to the right solution," Israel said. "What governments all over the world don’t do is what is happening here. The business solution will find its way eventually."

"Let the economy do its magic," Israel said. "We have enough crude that can support relatively low prices for a long time."

State lawmakers are currently considering a bill in the Legislature to increase the state’s renewable-energy goal for electric power generation to 70 percent by 2040 and 100 percent by 2050.

"Seventy percent is a dream, and 100 percent … Maybe one day our grandkids will benefit from something like that one day," said the 43-year-old CEO. "Policy is a dream. Right now it is a very expensive dream. Dreams come true. Sometimes they don’t come true. But if it comes true, maybe it will be 15 years from now, and who knows what the cost will be. So, let’s be realistic."

Israel said he welcomes competition in energy like solar electricity and wind but that fossil fuels remain the most affordable solution.

"If there is a technology with low cost, (like) solar electricity, that can come here and connect to the grid and provide consumers with lower-cost energy than us burning fuel oil … sure, lets do it," he said. "The reason fossil fuel continues to lead the world is because it is not the case yet."

Renewable energy is costly, and only a few can afford to install rooftop solar, Israel said.

"Who has the luxury here in Hawaii to put all of this solar equipment on their house? Only the people with money. You don’t talk about the large (portion) of the public that can’t afford that," Israel said.

Even if 100 percent of Hawaii’s electric power came from renewable sources, Par Petroleum’s business would not take a big hit, Israel said. That’s because approximately 80 percent of what the company’s Hawaii refinery puts out is for transportation.

The Campbell Industrial Park refinery, which buys crude mostly from North America and Russia, can proc­ess up to 94,000 barrels per day. Jet fuel, diesel fuel and military fuels make up almost 50 percent of the yield. Gasoline makes up approximately 30 percent, and oil used for electricity almost 20 percent.

The goal to break Hawaii’s dependence on imported fossil fuels has been shared by lawmakers and the electrical utility. They see the high cost of imported oil as a key reason Hawaii electric bills are almost three times the national average and gasoline prices are often highest in the nation. Breaking the state’s imported-oil habit would also mean the roughly $5 billion currently shipped out of state each year to pay for oil could be spent here.

Israel said oil is still the most economical solution for Hawaii.

"For us, not only the refinery as a business, but the market here in Hawaii, now fossil fuels are economic. It would be very challenging to beat the economics of fossil fuels in the foreseeable future," Israel said. "Today’s environment and the future … hydrocarbon or fossil will continue to be the best solution in the energy mix, for sure."

Israel also dismissed the idea of using liquefied natural gas to lower Hawaii’s energy costs.

Hawaii Gas, the state’s only regulated gas utility, announced in December it was seeking proposals for the bulk supply of LNG as part of a plan to help lower the cost of energy for existing consumers and expand its service in the state. The capital investment needed to bring LNG to Hawaii in bulk would be $250 million, Hawaii Gas said.

The investment cannot be justified with the size of Hawaii’s market and location, Israel said.

"LNG is a much higher level of nonsense" than renewables, he said. "We are creating a monster that has to have at least 15 years of life to potentially provide the break-even return."

Hawaii Gas spokes­man Alan Tang said that even with the low prices of oil today, there would still be savings from switching to LNG.

"We initiated a proc­ess last November to examine the economics of LNG for Hawaii with real market information. We are currently towards the end of that proc­ess and reviewing the findings. Initial data indicates that the economics work even in the current low price oil environment and on a transitional basis," said Tang in an email. "Hawaii will benefit from not only the lower cost but also lower carbon emissions."