Gov. David Ige’s unexpected and firm rejection of liquefied natural gas (LNG) for electricity generation has elated clean-energy advocates, who want fossil fuels purged from Hawaii — the sooner the better.
For more cautious observers, Ige’s brusque announcement was a head- scratcher.
In a speech Monday before the Asia Pacific Resilience Innovation Summit & Expo, Ige declared his opposition to Hawaiian Electric Co.’s plans to replace expensive fuel oil with LNG to generate electricity. Ige wants HECO to keep its eye — and its investments — on the ultimate prize: 100 percent renewable energy by 2045, a goal established by law.
Ige is right to question HECO’s plans for LNG, which would require investing hundreds of millions of dollars on a technology that, in theory at least, could be obsolete by 2045 — assuming that HECO and its suitor, NextEra Energy, are true to their pledges to meet the state’s goals.
Even so, drawing a line in the sand against LNG seems imprudent, especially with Hawaii’s extraordarily high electricity costs.
Ige ignored the real possibility that LNG can be a cheaper, cleaner alternative to oil, resulting in substantial savings for Hawaii ratepayers, who endure the highest retail electric costs in the nation. These costs ripple through the economy, affecting everything from the price of goods to schoolchildren sweltering in 90-degree classrooms with no air conditioning. Keeping electric bills down should be as important to the governor as advancing renewable energy.
He rejected the use of LNG as a firm “bridge” fuel that can keep electricity costs and service stable while the state works toward its unprecedented renewable-energy goal.
He didn’t account for updated Environmental Protection Agency standards requiring HECO to adjust emissions from its power plants — which HECO estimates could cost customers $100 million a year using a different mix of fuel oils rather than LNG.
And he glossed over the substantial economic and technical uncertainties that still exist around renewables. Just last week, Moody’s downgraded Hawaiian Electric Industries’ and HECO’s ratings outlook from stable to negative “due to concerns about the execution risk inherent in transforming its oil-dominated generation base to renewables.”
Nonetheless, one can’t blame Ige for harboring doubts; the track record isn’t encouraging. HECO’s efforts to incorporate renewable energy have been reluctant and halting. Most progress has come in the last few years and with considerable prodding from the renewable-energy industry and the state Public Utilities Commission. Even today, 80 percent of electricity statewide and 90 percent on Oahu come from fossil fuels. As for NextEra, the utility it owns, Florida Power & Light, relies mostly on natural gas and nuclear power.
Also, a major investment in LNG is something of a gamble. A study released by the Hawaii Natural Energy Institute in 2013 warned that “major LNG imports should not be undertaken unless the expected savings are substantial. Expected savings of, say, 10-15 percent, are probably not enough to warrant the large investments and long-term commitments required for bulk LNG imports; such savings could easily be wiped away by market fluctuations.”
The study, while generally supportive of LNG as a fuel source for Hawaii, cautioned that savings would depend on where and how LNG is procured. For example, potential savings from buying LNG from the Lower 48 states “are cut roughly in half if LNG is sourced from Canada,” the study said. HECO is exploring the possibility of buying LNG from Canada through FortisBC, a British Columbia company.
Simply eliminating LNG as an option — and betting the farm on clean energy — would make sense if renewable energy was truly cost-competitive against stable, reliable fossil fuels. But it’s not, at least not yet.
The solar PV industry in Hawaii still relies on tax credits; and even with creative financing, PV panels remain prohibitively expensive for many Hawaii consumers. Moreover, the PUC has rejected several clean-energy projects proposed by HECO, citing the unacceptable cost to ratepayers.
Rather than rule out any particular source of energy, it would be more prudent for Ige to insist on strict oversight of HECO’s transition plans, particularly its contracts with LNG suppliers, to ensure that the utility’s deals will truly lower electric costs, and that it isn’t just laying the groundwork for a permanent dependence on LNG.
HECO has committed to the state’s 100 percent renewable energy goal, and spokesman Darren Pai promised that its LNG plans “should not result in development of major costly infrastructure that will impede our renewable energy progress.”
HECO should be held to its word, and make binding commitments to that end. For that matter, so should NextEra.