Ka`u News Briefs May 19, 2013

“THERE IS NO LONGER A NEED TO RUSH any renewable fuels project that comes along,” according to a response from the County of Hawai`i to a question posed by the state Consumer Advocate regarding the county’s testimony on the proposed contract for `Aina Koa Pono to sell biofuel refined above Pahala from biomass grown in Ka`u to Hawai`i Electric Light Co. The Consumer Advocate asked the county “what (price) premium might be reasonable to consider for approval in order to further the state’s migration away from imported petroleum.” 

      “At a 40 percent and higher level of renewable energy generation, the Big Island has met and exceeded its stated obligations for renewable energy,” the county responded. “This provides an opportunity to provide great service to the rest of the state as well as to the nation by shifting focus to concentrate on good biofuels projects that deliver economic advantages to Hawai`i’s people.
      “The Big Island can move sanely forward to demonstrate a high level of sophistication in the renewable energy field by being selective and insisting that all future projects demonstrate improved economics for the ratepayers through lower electricity costs.

      “In fact, the Big Island is ready to be the proving ground for both renewable and cost-effective transportation and power generation – if given enough time and proper breathing-room. Only through strict adherence to this requirement will economically sustainable projects be developed. Demonstrating that costs can be reduced in the current, high-priced utility markets of Hawai`i is but the first step in demonstrating that such projects will also be economically sustainable in much bigger, lower cost markets – whether on the mainland or elsewhere. Projects that perpetuate or increase costs in the current Hawai`i environment will not be competitive elsewhere – and hence will fail. They will fail as businesses and as enterprises that seek to meaningfully address global energy concerns such as greenhouse gas emissions and climate change. A project that increases costs for Hawai`i ratepayers therefore serves no one: it neither lowers rates for Hawai`i’s long-suffering ratepayers, nor does it demonstrate economically useful technology for other markets and for global improvement. 

      “As a result, the appropriate (price) premium for this, or any other project, is negative. The respectful request is made that the state consider, as a matter of policy, that new projects benefit Hawaiian ratepayers by meeting the following criteria:

1. They provide real discounts in electricity prices; 
2. They are priced according to underlying economic fundamentals (rather than avoided petroleum costs); and 
3. They seek to continually reduce underlying marginal production costs – and hence consumer prices – through ‘experience curve’ effects and other continuing efficiencies to production. 

      According to Hawai`i County, “the Consumer Advocate’s question does raise an important strategic policy issue for the state – one that continues to be widely accepted as a matter of faith based on understandable concerns and well-intentioned policy. State law, the Hawai`i Clean Energy Initiative, the Hawai`i Bioenergy Master Plan, federal agency determinations and other stated policies declare that energy ‘security’ and ‘self-sufficiency’ are the highest priority objectives for state policy, and that these concerns justify consumer price premiums.

      “These are understandable and legitimate concerns for an island that is as far removed from large continents as any population center on the planet, especially when people are subject to risks of natural disasters (hurricanes, tsunamis, earthquakes) and political shocks (war, volatility in petroleum prices). Development of biofuels and renewable energy has made great strides on the islands and globally, and many talented and intelligent people have devoted significant brainpower and investment to energy policies as they pertain to the Islands. Given the tremendous progress that has been made, it is a good time to re-evaluate implications of these policy objectives based on what has been learned. Should it choose to do so, the Commission is in an excellent position to consider such a re-examination as it evaluates this docket. 

      “The first question is: what are the implications of self-sufficiency and energy independence as primary policy objectives, and do they make sense at the state level, considering their vast economic ramifications. Security issues are indeed of concern.
      In the event of a natural disaster, what goods and services are most important to the people and what will be most at risk? One might consider that food, water and medical supplies are probably the highest priority. Fuel and energy are also important, yet which of these will be of foremost importance in an emergency? If a natural disaster wipes out major fuel importation ports, what is the likelihood that on-island feedstocks, biofuel generation plants, and/or electricity generation stations will also be wiped out? Does on-island fuel self-sufficiency really produce greater security? In the event of such an on-islands catastrophe, will it be faster to restore a damaged port or the multiple facilities that are each critical links for an on-island fuel supply chain? Must each island be self-sufficient in energy in the event that ports are damaged? If the repair of disrupted ports is the gating factor to restoring fuels supplies, then does it matter whether the fuels that are subsequently brought in come from another island or the mainland? What is at greater risk in the event of a catastrophe: on-island crops and fuel/power generation facilities, or shipping lanes bringing fuel that can be sourced throughout the world? These questions deserve greater re-examination. The answer could be that ‘self-sufficiency’ is not necessarily and inextricably hard-wired to ‘security,’ and that a mixed supply approach (some on-island, some off) could be the optimal mix to minimize citizen risks from a major catastrophe.”
      More testimony will be covered in future Ka`u News Briefs. All testimony is available at puc.hawaii.gov.