Hawaii Gas, the state’s only regulated gas utility, is looking to be the sole provider of liquefied natural gas to help the state reach renewable-energy goals.
The state’s Clean Energy Initiative seeks to wean Hawaii off of fossil fuels with a road map of 70 percent clean energy by 2030 with 30 percent from efficiency measures, and 40 percent coming from locally generated renewable sources.
Hawaii Gas said it can help the state diversify its energy mix by supplying LNG in bulk to Hawaii by 2019, said Joseph Boivin Jr., senior vice president of business development and corporate affairs at Hawaii Gas.
"We are Hawaii’s gas utility," Boivin said Monday in an editorial board meeting at the Honolulu Star-Advertiser office. "We have a tremendous amount of expertise to do this for Hawaii."
Hawaii Gas put out a request for proposals in November for LNG suppliers worldwide to submit a bid for providing LNG and operating an offshore floating storage regasification vessel that would serve the state’s demand for LNG. The vessel would regasify the LNG and deliver it to shore via a subsea pipeline. Hawaii Gas invited the suppliers to submit proposals before a Feb. 16 deadline.
"What we requested is we always want our LNG to be less expensive than the oil alternative in Hawaii," Boivin said. "That is the guiding principle. We asked the market how to do that, how to ensure that the equation always works out that way."
The gas utility estimated that LNG would be up to 40 percent less expensive than oil, equaling an annual savings of approximately $111 million per year.
The vessel where Hawaii Gas would regasify the LNG would cost $250 million to build and deploy for 15 years, Boivin said. Potential locations for the vessel include waters off Barbers Point and Pearl Harbor.
Having one vessel to convert LNG to gas for use in all sectors of Hawaii is the cheapest option for the state’s ratepayers, Boivin said.
"If you look at what is the best approach in Hawaii, it means one solution, it means aggregating volume, it means bringing it in with the least amount of environmental impact," he said.
The gas utility’s LNG plan focuses on the company’s evolution to serve its 70,000 customers and possibly the statewide demand for power generation, which includes Hawaiian Electric Co. power sources.
Hawaii Gas said it would have information about the bids by April from the 30 interested parties.
Well on its way to importing LNG to the state, Hawaii Gas filed an application in October with the state Public Utilities Commission to convert 30 percent of its synthetic natural gas production at its plant in Kapolei to LNG.
The filing limits the amount of LNG to approximately two containers per day, depending on demand. In April, Hawaii Gas became the first company to bring liquefied natural gas to the state after the PUC approved Hawaii Gas’ request to import LNG in containers as a backup fuel for its synthetic natural gas operations at Pier 38.
In the request for proposals, Hawaii Gas is looking for solutions for an LNG purchase agreement as well as the operations of the vessel that would convert the gas to fulfill two different demands — one that would accommodate Hawaii Gas’ current customer base and one to support Hawaii’s total gas demand, including in the electricity market, said Alicia Moy, president and chief executive officer of Hawaii Gas.
"Option one, we are looking to do what is best for our business," she said. "Option two (is) we are trying to look at the market to come back to us and tell us what pricing could look like. I think it is important that Hawaii has options to choose from when they are evaluating LNG for the state, and we will share that with stakeholders once we get it."
Hawaii Gas has been working with key stakeholders on developing an LNG plan that will help reduce energy costs. The stakeholders include the Department of Business, Economic Development and Tourism, the PUC, the state Legislature and HECO as well as other power generators.
HECO will work on supplying LNG to its electric generators separately from Hawaii Gas, questioning whether a bulk terminal would help bring prices down for customers, HECO spokesman Peter Rosegg said.
"Hawaiian Electric Cos. and Hawaii Gas have (a memorandum of understanding) still in effect to work together on a bulk LNG project in parallel with our container plans," he said.
"Our belief, supported by discussions with the Federal Energy Regulatory Commission, is that a bulk terminal will take at least six to eight years to achieve. Whether a bulk terminal is efficient and economically beneficial for our customers and other potential natural gas users here will depend on competitive pricing and assessing infrastructure costs, community input and other considerations."
Hawaiian Electric said it will soon announce the chosen bidder in response to the electric utility’s March 2014 request for proposals to supply liquefied natural gas delivered in containers for use in the utility’s electric generators, Rosegg said.
"We plan to begin importing natural gas for electricity generation no later than early 2018," he said. "Based on current use, we estimate 90 percent of natural gas imported to Hawaii will initially be used for electricity generation by the Hawaiian Electric Cos. and independent power producers. Our volumes will result in more favorable pricing levels that could then be available to other users, including Hawaii Gas."
