Aloha, dear readers. It’s quiet at the Energy Institute as most of us are out in the field. I just got to spend some time with a number of the world’s smartest economists on Oahu and some vacation time on Maui. Hawai’i is an awesome place. Not only because of its pristine beaches, balmy waters and glorious sunsets, but because of the energy challenges and opportunities it faces.
If you have ever flown to Hawai’i, you know it is far away from anywhere and does not have any significant local energy resources. Hence most inputs to electricity production are imported. This means mostly oil. Hawaiian Electric Industries Inc. (known as HECO) is the largest supplier of electricity, counting over 95% of Hawai’i’s population as its customers, with subsidiaries on all the major islands, with the exception of beautiful Kauai, which is served by a cooperative. And all the islands are separate grids; no transmission lines between them.
While I have pondered before what a world without coal would look like, Hawai’i provides an interesting case study. HECO serves 300,000 customers just on Oahu, where most of the population of Hawai’i lives. Coal accounts for 9% of generating capacity, rooftop solar for 10% and oil for 65%. On Maui, Moloka’i and Lana’i, HECO serves 70,000 customers with zero coal, 29% of renewable generating capacity and the remainder coming from oil. On the big island, it serves 82,000 customers with a bigger share of wind and geothermal which results in 48% of renewable generating capacity.
Generating electricity with oil is expensive, which is why Hawai’i is leading the scoreboard for most expensive electricity in the country. The EIA quotes an average price per kWh of 31 cents! That is almost thrice the price of California’s fancy average kWh sold.
So why do I get all giddy when thinking about Hawai’i? Yes, Mai-Tai’s on the beach at sunset; but even more importantly, this is a set of islands, each of which has ample sunshine, plentiful wind, and potentially significant geothermal resources. Each island has a significant share of commercial (think hotels and restaurants) and residential customers. And electricity is already expensive. What we have here ladies and gentlemen is a unique opportunity to study smart integration of renewables on the supply side and demand side programs that go hand in hand with the rapidly growing share of renewables.
At the Energy Institute we have an impressive array of demand side studies underway in collaboration with the investor-owned and municipal utilities in California, which are integrated into the Western grid. While Jerry Brown is looking for collaboration with China, I would like to see us pay attention to what is happening half-way to Beijing!
In California we have some of the most innovative utilities in the country (I am looking at you SMUD!). The islands of Hawai’i provide us with a setting that would allow us to push our understanding of renewables integration and pricing further in a field setting. Plus, the thought of field work in Hawai’i is an appealing idea!
Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.