Ige shares new vision for state’s energy goals

For the second time this summer, Gov. David Ige shook up Hawaii’s energy establishment when he announced Monday he is opposed to importing liquefied natural gas as a source of electric power.

That followed his statement last month that he won’t support Florida-based NextEra Energy Inc.’s $4.3 billion proposed purchase of Hawaiian Electric Industries Inc.

In a nearly one-hour interview Friday with the Honolulu Star-Advertiser, Ige explained his reasons for the two potentially game-changing announcements.

Hawaii needs an electrical utility with a new business model to get the state to its goal of 100 percent electrical generation from renewable energy resources by 2045, Ige said.

"We are looking for a partner in the electric utility that really embraces 100 percent renewable and, I think, more importantly, changing the business model from the traditional electric utility to what would work in a fully distributed generation renewable future."

Ige, a former electrical engineer, envisions a future where the electrical utility doesn’t generate power, but only distributes it. The power will be generated from renewable sources distributed throughout the community, such as the rooftops of Hawaii residents or solar farms developed by parties other than the state’s utility.

The typical utility model Hawaiian Electric Co. grew up with has to retire along with the utility’s fossil fuel plants, Ige said.

"I think the utility of the future that we would want to see supports 100 percent renewable. It is about distributed generation," he said.

That partner needs to share the state’s renewable-energy vision, Ige said. It must embrace the idea that Hawaii is a test bed for renewable-energy research opportunities, help photovoltaic penetration as well as help the state get business and investment partners that will help build research and development.

"I’m not anti-HECO. I’m pro-partner," Ige said. "This environment, with the state setting aggressive policy, we would like to find a utility partner that wants to be part of that environment."

A utility that generates, distributes and sells electricity is not part of that vision. LNG is not part of that vision.

"I definitely would not support, at this point in time, LNG for electricity generation," Ige said, repeating his proclamation from Monday at the Asia Pacific Resilience Innovation Summits & Expo.

The statement caused a stir at the three-day conference on energy strategy. It was praised by environmentalists but criticized by those who argue LNG would serve the state well as a cheaper and cleaner alternative to the oil and coal currently used to generate 80 percent of the state’s electricity. Supporters of LNG have said it can serve as a "bridge fuel" as the state shifts to renewable energy.

Ige’s opposition to LNG could also cause problems as the state looks for a partner in energy, according to former state Public Utilities Chairwoman Mina Morita.

"The Governor’s pronouncement, which appears to have no basis in technology or economic analysis, just damaged Hawaii’s credibility in energy and financial markets. The big question now is how big and deep is the damage," Morita said in her blog "Energy Dynamics."

HECO said it would cost roughly $187 million to modify its generation units for natural gas, and Hawaii Gas estimated the cost of its LNG infrastructure to be $150 million to $250 million.

Ige said the major capital investments involved to build LNG infrastructure, the fuel’s distraction from the state’s 100 percent renewable goal and the impact the regulatory review process would have on residents were the reasons behind his opposition.

It would be a major effort to shift from oil and coal to LNG, and that would be followed by a major transition to renewables, Ige said. Why not just go directly to renewables? he said.

"We could find a way to defer unnecessary investment in existing oil-based power plants and refineries and really focus investments and new investments in renewables," Ige said. "That is a better course to take than transitioning over and then transitioning again."

"There may be a fuel savings, but by bringing in LNG we are bringing in capital investment that would have to be recovered," Ige said. The capital investments required were too high, and the regulatory permitting process would take years, he said.

"It makes the window for LNG serving as a transitional fuel shorter and smaller as we move forward," Ige said.

LNG proponents have said HECO is facing major costs to bring its generating plants into compliance with federal environmental rules, so why not spend that money instead on converting the plants to LNG?

Ige said in meetings with the U.S. Environmental Protection Agency, he was told the agency would be flexible on its emissions requirements for the state’s power plants.

"I have been meeting with the EPA and regulators and talking about flexibility for Hawaii as we look at regulation of the oil refineries and the power plants," Ige said. "We anticipate we will get more flexibility from EPA in how we manage emissions."

Using LNG as a bridge fuel to get the state off oil dependence has been part of utility discussions since 2012, when Gov. Neil Abercrombie asked the utilities to look into the feasibility of using gas.

In a March interview with the Star-Advertiser, Ige held a similar stance to his predecessor when he said LNG "offers the opportunity to reduce costs in the near term."

After discussions with federal and local government agencies, Ige said he changed his mind.

LNG advocates said the fuel is cheaper than the oil Hawaii is using now.

"We can guarantee a discount to petroleum products," said Joe Boivin, senior vice president of Business Development & Corporate Affairs at Hawaii Gas. Hawaii Gas estimated a savings of $100 million per year based on Brent Crude oil at $50 per barrel. With Brent Crude currently at $40 per barrel, savings would be approximately $60 million per year.

Ige acknowledged that LNG would be cheaper than oil but said the cost rises when all the infrastructure investment is added to the price. Also, LNG doesn’t move the state any closer to its 100 percent renewable goal.

Ige said one of the state’s leading renewable options that will help the state lose its dependency on oil sits on the rooftops of its citizens. The problem is making sure the energy flow is consistent.

"I think that right now it is a large part of that. We do expect the prices of PV panels to continue to fall," Ige said. "The challenge now is how do we store it."

Firm power, usually fossil fuel like oil or coal, is kept on reserve to ramp up when the renewable energy cuts out suddenly.

Batteries could fill in that role, storing the energy when it is in excess and releasing it when sunlight or wind is low. But prices are still high.

Ige’s hope is that Hawaii will become a center for research and development into energy storage. He wants to "position Hawaii as the renewable capital of the world."

LNG doesn’t fit with that goal, and neither does NextEra’s current proposal for taking over HEI, Ige said.

Ige said he made his decision that NextEra’s proposal to buy HEI should be denied after asking several state agencies to do independent reviews of the application.

"I was surprised that, consistently, every agency came to the same conclusion (not to support it)."

As NextEra’s rebuttal to the opposition from the state is due to be filed Monday with the Public Utilities Commission, Ige said he looks forward to see whether the company can fit the role of the partner for Hawaii’s energy goals.

"We’re less than a third through the process," Ige said. "I look forward to NextEra’s response."