Natural gas viewed as way to cut electricity costs

Switching from oil to natural gas for some of Hawaii’s electricity production could lower power bills "for many years to come," an East-West Center energy expert said.

Several initiatives have begun to ship liquified natural gas to the islands to take advantage of a glut on the mainland that has driven prices to historic lows in recent months.

"Hawaii has no choice but to go to natural gas. It’s just the speed that is in question. You can go fast or slow, but you have to go," Fereidun Fesharaki, an East-West Center senior fellow, said last week.

Hawaii is the most petroleum-dependent state in the nation. Oil accounts for about 90 percent of the state’s energy requirements and 75 percent of its electricity production, according to the U.S. Energy Information Administration.

The natural gas option has been discussed in Hawaii in the past during periods of high oil prices, Fesharaki said at a seminar sponsored by the Hawaii Energy Policy Forum and HAWAI‘IGAS, the state’s only gas utility. But enthusiasm waned when oil prices would eventually retreat, he added.

"This time I see oil staying in the $80-to-$120-a-barrel range for many years to come," said Fesharaki, who also heads an international energy consulting firm.

The benchmark oil futures contract closed at $96.01 a barrel Friday on the New York Mercantile Exchange, the highest closing price since May 11.

Natural gas futures, meanwhile, fell for the fourth straight week to settle at $2.719 per million British thermal units. Natural gas futures have fallen 9 percent so far this year.

"The gap between natural gas and oil prices will continue into the future," Fesharaki said.

HAWAI‘IGAS last week applied with the Federal Energy Regulatory Commission to ship liquefied natural gas to Hawaii from the West Coast in refrigerated tanks mounted inside shipping containers starting later this year.

The quantities of LNG would be relatively limited in the first phase of the proj­ect, but the company said it plans to eventually use specialized tankers to bring in larger quantities of LNG that could be used for electricity generation.

HAWAI‘IGAS estimates that it could provide LNG for electricity generation at a price ranging from $44 to $64 less than the equivalent price of a barrel of oil.

Thomas Sheets, a former general counsel for FERC, said public forums discussing the pros and cons of bringing LNG to Hawaii are important to the process.

"There needs to be a collaborative discussion addressing all questions and comments," said Sheets, now a partner at a Las Vegas-based law firm where he specializes in energy issues.

"Natural gas is a safe, plentiful and affordable resource, but at the same time you have to consider whether it is compatible with renewables. My belief is that it is entirely consistent with our stated energy goals. There are many solutions, among them wind, solar and ocean thermal. Each has its strengths and weaknesses."

Adding natural gas to Hawaii’s energy mix would offer "real, tangible benefits," he said.