Hawai’i – The Next Frontier

hawaiian sunset

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!

About Maximilian Auffhammer

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.
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12 Responses to Hawai’i – The Next Frontier

  1. Gerry Bemis says:

    A former staffer of mine works at HECO as manager of their Environmental Office. He had come back to California to establish retirement benefits, and worked for me as he did so. Before he came back, he had been manager of HECO’s Engineering Office. He had a lot to tell me about the challenges HECO faced trying to incorporate a fairly large percentage of renewables into what truly is an “island”….. it may be good for you to get to know him, if you are really going to be doing some work there? He is approachable, by the way….

    Gerry Bemis
    Air Resources Supervisor
    California Energy Commission

  2. Angelo Festa says:

    Why are you so enthralled with a Utility charging 3X the mainland average? With all that wind and sun, electricity should be close to free. Apparently you are unaware of the conflict between home owners and their Hawaiian Utility companies over the issue of home solar generation. There is trouble in Paradise!

  3. Azmat Malik says:

    What really is the difference between coal and oil if both have to be imported. Coal is just a bit dirtier, and more expensive shipping I would think. So oil makes sense, perhaps even compressed gas might. It is too small for nuclear. Lost of sun – so ‘free’ solar, with batteries. Wind? If nothing else an almost-large-trial trial. Harness volcano-energy, i.e. geothermal.

  4. James Roumasset says:

    Thanks, Max, and let us know if there’s anything we can do to facilitate your Hawaii research! Stiglitz opined that the utility monopolies are one of the three worst things about the Hawaii economy (the others being artificial restraints on transportation). And it’s not just the high prices. Hawaii also grants what must be the most generous tax credit for PV (on top of the federal credit). Assuming the State credits will last until 2020, the excess burden of renewably-sourced electricity will have amounted to something like $4 billion in present value terms. And while the State is pushing distributed PV, the utility is putting on the brakes (withholding or delaying approval to put surplus electricity onto their distribution network). So there is a possibility of a win-win-win: lower prices, less excess burden, and cleaner energy. But how to do it? Unbundling the utilities from generation? Greater retail competition? Or a better regulatory framework?
    Since you are coming to Hawaii, you might as well continue on to the Philippines. They have “unbundled” generation, transmission, distribution, and retailing (to some extent) and have established a wholesale market. But they still have the highest prices in Asia, with the exception of Japan.
    P.S. The Stitch Jones quote (comment on your previous blog) was from Heartbreak Ridge.

    • You raise excellent questions. Hawaii can prove a good testing ground for integrating renewables in as economically efficient a manner an island setting can allow.

  5. Andy Frank says:

    Watson, Sterling and Andrew A. Frank (2012) A Fifteen Year Roadmap Toward Complete Energy Sustainability. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-12-35
    http://www.its.ucdavis.edu/research/publications/publication-detail/?pub_id=1848
    Max Have you seen this presentation and paper on exactly what you are talking about?? The study showed that the entire island can trasform into much lower cost energy if only plug-in hybrids with about 40 to 60 miles of electric range were to be sold by the car companies. and at the same time a wind or solar generator of 3 kw or so wer sold with the car. Then adding wind farms on the peaks the entire island can be transformed to renewable energy in a period of 15 years or one vehicle lifetime. This is an astounding result and no new technology will be needed.
    you can contact me at;
    prof Andy Frank
    aafrank@ucdavis.edu

  6. Paul D. Brooks says:

    One reason that electricity prices in Hawaii may be high is that the Jones act requires any shipment between two US ports to be carried in US built ships. This is one reason that Hawaii is expensive in general and may be affecting the price of electricity. Google “Jones act, Hawaii” for more information.

  7. Larry Dale says:

    Couldn’t agree more. I assume you’ve been in touch with Michael Roberts at UH about this.
    Weird to see solar just everywhere, new houses, old houses, shacks–any old platform. And once batteries get cheap enough…

  8. Note also that Hawaii has those lovely mountains on most of the islands. Pumped storage would be really helpful for integrating more variable renewables into those small grids, so that’s something that should be explored. It should be cost effective given that the displaced fossil electricity is so expensive.

    • mcubedecon says:

      A close alternative is to use the existing water distribution system to manage local loads. They may already have in-system storage, and they might be able to cost effectively expand that storage. They can shift their pumping loads, and they may find it cost effective to install variable speed pumps. They can install in-line turbines to recover energy when they release water. It just requires connecting the electric and water utilities.

      • Yes, that’s a terrific option. Depends on how much storage they need and the elevation of the various tanks, but some combination of using the existing system and adding some more targeted pumped storage capacity at strategic locations would pay dividends

        • Andy Frank says:

          You can use Plug In Hybrids with 50 to 60 miles of AER to store the energy without any transformation and at high efficiency for Solar and Wind. These vehicles are already available in Chevy Volts and new trucks from Eficient Drivetrains Inc. See the paper by MIT Student Sterling Watson listed in the comments and the new White paper by Frank and DeMauro. go to Green Car Congress–Frank

          prof Andy Frank
          aafrank@ucdavis.edu

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