Since the time of former Gov. George Ariyoshi, Hawaii has looked toward renewable energy as a means of lessening our dependence on oil, a dirty fuel source that is subject to extreme price volatility.
While the state has made some progress to increase its use of renewables, Hawaii still relies heavily on oil; renewable energy sources today account for only about 10 percent of our primary energy mix while oil’s share is close to 90 percent. Recently, the Hawaii Clean Energy Initiative (HCEI) set goals and developed a roadmap for Hawaii "to achieve 70 percent clean energy by 2030 with 30 percent from efficiency measures, and 40 percent coming from locally generated renewable sources."
The HCEI’s plan is a step in the right direction. However, if history is any indication, there is a very real possibility that oil will still dominate our energy mix in 2030. Widespread adoption of renewables in Hawaii — as well as in the mainland U.S. — has been hindered by scalability issues, high costs and cheaper alternatives. Moreover, in Hawaii, local opposition — particularly from neighbor islands that don’t want to be a "battery for Oahu" — has prevented widespread adoption.
How can we lessen our dependence on oil and, at the same time, increase our share of renewable energy? If we can overcome some challenges, the answer may be natural gas. Liquefied natural gas or LNG — a form of natural gas used when pipelines do not exist — can act as a cheaper, cleaner and more-efficient bridge fuel than oil until the envisioned renewable energy system is in place.
Natural gas makes sense as a substitute for oil as we develop our renewable energy portfolio for several reasons. First, it is the cleanest and most efficient burning fossil fuel, requiring less BTUs (British thermal units, a measure of heat burned) per kilowatt hours than oil. Second, LNG offers a firm power source to complement the intermittent supply of wind and solar.
Third, by using natural gas, Hawaii can help support the U.S. economy and benefit from a less volatile domestic energy source. In 2010, Hawaii did not import one drop of domestic crude oil as it did not fit our refinery configurations and sulfur requirements. U.S.-produced natural gas, however, is ready to use and abundant. Within the last five years, the U.S. has undergone a natural gas supply revolution driven by shale gas production and new economic methods of extraction.
Finally, and perhaps most important, natural gas is cheaper than oil and is expected to remain low for years to come. The glut of natural gas on the mainland has driven prices to 10-year lows and increased the U.S. reserves-to-production ratio to over 50 years, if not longer. On the U.S. mainland, natural gas prices are now equivalent to $18 per barrel of oil and are expected to be $18/barrel to $45/barrel of oil equivalent through 2035. Crude oil prices are forecast to be more than $100/barrel.
To take advantage of the many benefits of LNG, Hawaii’s stakeholders will need to overcome some challenges. For example, since there are no U.S.-built LNG ships in operation, stakeholders will have to develop an agreement with the federal government concerning the Jones Act, which requires that any trade between U.S. ports use ships that are U.S. built, flagged and crewed.
In addition, they will have to site an LNG receiving facility given Hawaii’s limited harbor space. An offshore facility may be an option.
Finally, stakeholders will have to demonstrate to renewable energy advocates that LNG is a complement rather than a threat to renewables.
These challenges are neither unique nor insurmountable, and can be overcome by the respective stakeholders if we decide to pursue the LNG option.