My Op-Ed article on the Aina Koa Pono situation, and how it would raise electricity rates for O’ahu residents (though the project is on the Big Island), ran in yesterday’s Star-Advertiser. Here it is in full:
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The Public Utilities Commission (PUC) is considering approving
a contract between Hawai‘i Island’s HECO-owned utility (HELCO) and a partnership known as Aina Koa Pono (AKP). Its decision is expected within the next several weeks.
Why should rate payers on O‘ahu care about this proposed
contract?
Because if approved, O‘ahu residents would pay about 90
percent of the cost – even though the very expensive fuel would only be used on the Big Island.
The contract between HELCO and AKP calls for HELCO (and you) to purchase fuel from AKP at about $200/barrel. Today, a barrel of oil costs about half that: $107. If this contract is approved, there will be a surcharge, to cover the difference, on your monthly electricity bill.
Furthermore, note that whenever oil has reached about $120/barrel, world economies have slowed precipitously. Many have gone into recession. This tells us that there is a natural economic “stop” in place that keeps oil from getting anywhere near $200/barrel.
And yet HELCO/HECO is trying to guarantee AKP a fixed price
of $200/barrel.
While a discussion of using renewable energy, rather than
primarily buying foreign oil, is warranted, when the cost of those renewables is so unrealistically high that any buyer would look for other alternatives, then that discussion has reached the point of absurdity.
What lower-cost alternatives exist for the Island of Hawai‘i?
The Island has significant geothermal resources at the equivalent price of $57/barrel. Right now, HELCO purchases only about 70 percent of the geothermal power available, meaning there is more geothermal available at well below the equivalent of $200/barrel.
HELCO currently purchases power from biofuel and hydroelectric sources that make a reasonable profit at today’s prices, and don’t ask for $200/barrel. Additional power plants are asking to come on line at today’s prices.
HECO and HELCO currently buy solar power at prices well below the equivalent of $200/barrel (in fact, from what we can tell, at less than half that price).
HECO and HELCO buy wind-generated power for far less than $200/barrel, with more potential sellers lining up to sell to them.
AKP’s plan has technical issues, as well. The process AKP plans to use has never been proven at the scale they propose; the proposed
yield of source material is many times more than ever grown anywhere. There are also cultural and environmental issues.
Finally, you might ask why O‘ahu rate payers should pay for power consumed by rate payers on another island. GOOD QUESTION.
The simple answer is that if rate payers on the Island of
Hawai‘i had to bear the burden, there is no way this could be approved. That kind of tells the whole story right there, doesn’t it?
We suggest you write to the PUC if you oppose this contract: hawaii.puc@hawaii.gov. You can also contact your State and County legislators and your Mayor.
Richard Ha, owner of Hamakua Springs Country Farms,
submitted this on behalf of the Big Island Community Coalition, of which he is a founding member. Other founding members include Dave DeLuz Jr., John E.K. Dill, Rockne Freitas, Wallace Ishibashi, Ku‘ulei Kealoha Cooper, Noelani Kalipi, Ka‘iu Kimura, Robert Lindsey, H.M. “Monty” Richards, Marcia Sakai, Lehua Veincent and Bill Walter. All operate as individuals and do not represent others. The Big Island Community Coalition (BICC) works primarily with cost issues on the Island of Hawai‘i, where residents pay about 25 percent more for electricity than do O‘ahu rate payers.
More PUC testimony from a Big Island resident opposing the Aina Koa Pono biofuels project and the proposed 4.2 percent HECO rate increase.
See below where he charted the price of crude oil over the past two years, as well as how much his HELCO bill increased over the same period of time, and didn’t find much correlation.
Dear Chair Morita & Commissioners:
I want to express my most sincere opposition both to the Aina Koa Pono Biofuel project and the Helco 4.2% rate hike.
In today’s day and age it is inconceivable that while we are living in one of the most privileged locations on the planet with regards to renewable energy resources availability we still depend on a single utility company that holds a true monopoly on the power generation and that continues to ignore what would be the most efficient path towards energy independence.
South Puna seats on a rich geothermal zone that could provide enough power for the entire Big Island. South Kona & Kohala areas have enough sun radiation to produce a significant supplement to the grid, and South Point and Saddle Road areas provide some of the most reliable wind patterns for wind generation. Yet, here we are debating on whether we should lock in a $200/barrel deal with a biofuel company. Who in its right mind would opt for this option!?
As for the rate hike, the following graph shows my cost per kWh at my home for the past two year (since Jan 2010)
As you can see from the graph, my price has increased from $0.36/kWh to $0.42/kWh, that is a 16.7% increase in just two years. Now they want an additional 4% increase? under what justification? meanwhile, HELCO continues to report record profits year after year.
Notice any discrepancy between the two graphs? In Jan 2010 the price per barrel of crude oil was $82.00, in November 2012 the price is $87.50 an increase of 6.7%. Helco has increased their rates 2.5 times the net increase of the price of oil, and now they want another increase.
For example, the ads say HECO has increased geothermal energy on the Big Island by 25 percent. That sounds wonderful – but that is from a base of only 30 MW. It also says that Aina Koa Pono will only result in $1 per month difference to a typical rate payer.
The big picture is that HECO has resisted closing down its oil-fired plants for years. But now, people are saying enough is enough.
Here is another concerned community member’s testimony against Aina Koa Pono and the proposed 4.2 percent rate increase. Send yours to hawaii.puc@hawaii.gov by tomorrow.
To: ‘Hawaii.PUC@hawaii.gov’
Subject: Dockets Docket # 2012-0185 & 2012-0099
Aloha Chair Morita and commissioners:
I am strongly against the AKP biofuel supply contract and the increase in the Helco electricity rates.
I have lived here on the Big Island in Puna, close to Pahoa for the last 14 years and am the owner of a bed & breakfast operation in Leilani Estates. I have a family with two children and two acres of property. If any of the two dockets go through it will increase the cost of doing business for me and infringe on the viability of my operation. The nature of my business requires for electricity to be available to our guests and there are many times, when I cannot control the use of it, because guests staying at my B&B may not be as conscientious in preserving energy as I am: fans, lights, radios or TVs are left on even though the visitors are not in their rooms. In order to cover additional operational cost my only option would be to increase our B&B rates, however, with the current economy this will result in a decrease of bookings, as people traveling always look for bargains and are not willing to pay higher accommodation rates, if they can get a “beat-the-price” online offer for some of the hotels as package deal with much better conditions.
On the Big Island, electricity rates have been 25 percent higher than Oahu’s rate for as long as people can remember. It has contributed to the Big Island having one of the lowest median family incomes in the state and the attendant social problems that come with a struggling economy. As a family this affects our children and the way we are able to give back into the economy and our communities.
Rising electricity rates act like a regressive tax – people at the bottom of the economic ladder suffer the most. But it is worse; as electricity prices rise, folks that can afford to leave the grid will do so, leaving the folks unable to leave to assume more of the grid infrastructure cost. It is a catch 22. For me with my business depending on consistent electricity supply, it would be impossible to leave the grid and I would be directly impacted by the increased rates and future consumer decisions.
1. Aina Koa Pono Biofuel Project – Docket 2012-0185: Rate payers will subsidize the difference between the actual oil price and the $200 that AKP will be guaranteed for 20 years. It is more than possible that actual oil prices would be substantially below $200 for the whole contract period. That will result in a heavy subsidy that rate payers must bear. The $200 per barrel rate is much too high. And the cost differential that is anticipated to be passed through to the rate payer is unconscionable. The PUC should not approve as just and reasonable that the utility should be allowed to establish a Biofuel Surcharge provision that will allow the pass through of the cost differential to the consumer as well as the actual cost pass through itself.
2. HELCO Rate Increase – Docket 2012-0099: HELCO states in its full page newspaper advertisement that only 3% of its revenue goes to profits. In 2011 HELCO reported $138.2 million in net earnings. Most small businesses in Hawaii do not have a 3% profit margin, most net earnings are much lower and that includes my Bed & Breakfast business. Increased electricity rates would narrow this margin even more. I am entirely opposed to an increase in electricity rates. As a business owner it is HELCO’s responsibility to keep the grid in operating condition. This is not the responsibility of the end users nor should we be charged for it. It is a crucial part of the operating expenses and investments in the future, that a business has to strategically make. It is the same for my business, if I let my rooms fall into disrepair or do not invest in new mattresses every few years, people will stop coming. It is in my best interest to make these investments as I am wanting to stay in business. It is the same for a utility company. Not all investments can be directly compensated by increased rates. The market and consumers will only bare so much – and as consumers, we are saying – no more! Profits will go up and down, depending on what investments have to be made – and that is true for all businesses. But as a business owner we all know that these investments are long term and also mean decreases in the company’s corporate taxes. Also, how much do you think the HELCO advertising campaign costs? Without knowing exact figures I am sure it is in the millions. As end consumers, we are paying for that, too! What a waste of good money…
You can send an email opposing this project. Email it by this Friday, November 30, 2012, to hawaii.puc@hawaii.gov.
To: hawaii.puc@hawaii.gov Subject: AINA KOA PONO CONTRACT
Please consider my testimony on : DOCKET # 2012-0185 (Aina Koa Pono supply Contract)
AINA KOA PONO, LLC Docket # 2012-0185
In this docket, HELCO is asking you to validate its proposed contract with AKP, passing on the expected additional cost of the project in the form of a surcharge to rate payers on both Oahu and the Island of Hawaii.
It is difficult, sometimes, to imagine a decision of this nature on the basis of the economics of the case itself.
To help us with this, AKP’s PR firm has reduced the numbers to minimize the apparent impact of the decision – simply add $1 per month to your power bill for 20 years or a total of $240. Seems pretty small, not much of a decision or even much of a risk when put in these terms. Of course this picture does not paint the costs as they apply to thousands of businesses, non profits, government entities or other organizations. Neither does this demonstrate how those costs ripple through the economy to increase costs of goods and services while reducing the supply of the same. So, lets look at this from three other perspectives before we get further into the discussion. Those three perspectives are of a family barely making ends meeting (and actually not making it accept with government and family help); a family that makes ends meet but with some sacrifices and finally a family that has plentiful resources and buys whatever luxuries they desire. But lets change the terms – to the cost of fuel for these three families.
•Ask yourself, if you were the first family if someone offered to sell you gas for the next 20 years – starting in 2015 at twice today’s average rate or about $8/gallon and at today’s usage – would you buy this package? Probably not – they are not assured that gas will cost $8/gallon over that period and can see that rather than trade a known (but apparently very high) cost of fuel they would anticipate that they would make yet more lifestyle changes. They would increase car pooling, bus riding, volume grocery buying (if possible), growing more of their own food, etc. THE POINT IS that they truly cannot and would not be able to afford the higher costs and so would take other steps to make ends meet. In the same way, to families at the bottom of the economic ladder the AKP deal is something that they cannot afford and never would select.
•If you were in the second group the situation may present itself differently, but in this case you may have more options. For instance, rather than locking into $8/gallon and at today’s usage you may decide to buy a more fuel efficient car; combine trips; consider other transportation (bikes, walking, carpooling, bus trips, etc.) reducing steps. The point is that you would have more means of reducing usage so that the $8/gallon could take you further. It is not likely that you would take the deal as presented. You have too many assured usage reducing options and too little assurance that the price will actually reach $8/gallon.
•If you were in the third group you still might not buy into the proposition. Your ability to purchase more efficient transportation -or even ignore the problem because fuel may not reach that level – is greater, the impact less.
So then, the point is that very few would even consider the option being proposed by AKP if it were put to them in terms that they work with every day. Neither should the PUC.
These scenarios may have little impact on your decision, after all your decision is really on a macro level dealing with a large company, sophisticated planning and island wide demand. For this I ask you to consider the following:
IS THE PROPOSITION REASONABLE AND IN THE PUBLIC INTEREST:
•If there are other alternatives for providing power to the Island of Hawaii that are or are likely to be less expensive then the answer is clearly “no.” Why pay more to achieve the same result (power generation) when less expensive sources are or can with a similar degree of confidence be expected to be available. So the question, then, is – are there?
• AKP’s contract appears to call for fuel at $200/barrel vs. today’s rate that bounces somewhere between $80 and $120 (but generally near the mid point – $100).
• PGV is able to produce power at the equivalent of $57/barrel – 28.5% of the cost of AKP’s proposal. This is produced with reliable and proven technology here on the island of Hawaii. it produces less carbon in the process and is a known quantity.
• LNG is proposed as a possible alternative, In fact we are told that many mainland power producers are turning to this source from coal and petroleum products. They do so because of efficiencies and reduced dependance on foreign sources. Would it not make more sense to at least wait to see what studies show the impact of LNG would be on our power costs before committing to a 20 year contract based on much higher prices?
• Ho Honua proposes to sell to HELCO at market rates. Others are taking similar risks to produce fuel at market rates – whatever they may be – even at today’s rates (i.e. Big Island Bio-Diesel).
• Other technologies are coming on stream that promise reduced power generation costs as well – solar energy or various types, bio-fuels from algae, wave action, etc. Why lock in a supplier whose promise is similar fuel but at higher prices.
•HELCO/AKP counter that if the fuel does not end up being economical – they can sell it to transportation or to other islands for their power generation. But that assumption is based on the AKP created fuel being less expensive than fuels from other sources. If it is not – then HELCO sells those fuels at a loss which the rate payer must subsidize. In short – the risk remains
•This proposal is truly a gamble not simply on the cost of fuel over the proposed period (2015 – 2034) but on the cost of alternative fuels, alternative sources of power and even over whether the target plant (Keahole) will be economically viable throughout this period. We would ask: WHAT MITIGATING FACTORS WOULD DRIVE US TO MAKE THIS GAMBLE – particularly as we consider the impact on the lives of our residents and their businesses.
WHAT QUANTITATIVE OR QUALITATIVE VALUES SHOULD BE ASSIGNED TO SUCH A PRICE PREMIUM OR EXTERNALITIES
•This is a vital question. It needs to be evaluated in its full context which includes: individuals at the lower end of the scale who cannot make ends meet today; businesses that will have to increase prices further and reduce product and service offerings further; individuals and businesses who are trying to compete with Oahu and other locations with lower power costs; companies that are evaluating the Island of Hawaii as a location but must take into account the already unusually high cost of power here as one of the deciding factors.
• The end is that many will find that their survival at any reasonable level does not allow for such luxuries as taking the risks this contract proposes. These externalities for those who struggle are too high to pay and not worth the risk.
• For those who may point out jobs to be created in the production of these fuels do not account for the jobs lost throughout the island because of the additional costs of the AKP premium and there surely will be many.
WHAT RATE PAYER RISKS SHOULD THE COMMISSION CONSIDER IN EVALUATING THE BIODIESEL SUPPLY CONTRACT?
•The risk that the market price for fuel will not in the end justify this ($220/barrel) cost
•The risk that other power sources can be developed that will be less costly
•The risk that at each level higher those able to depart from the “grid” do depart from the grid making the remaining – less and less economically capable – rate payers pay a higher and higher proportion of the distribution and generation costs. (This thing steamrolls literally).
HOW ELSE MIGHT THE COMMISSION AND HELCO PROVIDE FUEL TO KEAHOLE
•Dr. Schumpeter more than four generations ago pointed out that market systems need to encourage “creative destruction.” By this he meant that ever more efficient technologies by their nature create higher living standards while making obsolete the technologies that they replace.
This applies as follows: WHEN KEAHOLE is no longer economically viable – it needs to simply cease to operate. This is fundamentally an owner (i.e. stockholder) risk and should not remain a risk of the populace as a whole. We should not be taking extraordinary steps to keep in operation a plant that may have become functionally and technologically obsolete. Whereas there may have been a time when ensuring the viability of the assets of a controlled monopoly made sense – they no longer do.
What happened in the communications industry (i.e. cell phones vs. land line phones) will and is happening in the power generation industry. The PUC must recognize this change or the number of “well healed” customers who depart the grid will overwhelm the entire system leaving only those least able to pay on the grid having to pay for an overwhelmingly burdensome grid.
•There is, nonetheless, more than one answer to this question and arguably all of the other options are less expensive and certainly less economically risky. Keahole may be converted to operate on LNG. AKP is essentially a hedge bet – it may well be that continuing to purchase fuel on the market (whether from local sources, or other sources) will be a less expensive option. We do not know at the moment which it will be, so should we be taking this hedging risk?
OTHER CONSIDERATIONS
•AKP is essentially a complex set of transactions designed to allow HELCO/HECO to meet the State’s goal of reducing dependance on foreign fuel sources while keeping alive Keahole and increasing spot employment among other benefits. This particular scheme appears to have many benefits but at no small risk. At its heart are assumptions about the future price of oil, the capabilities of technologies untested at anywhere near the size and configuration proposed. The commission must ask itself: IS IT APPROPRIATE to ask rate payers – many of whom are at the extreme low end of the economic scale – to participate in the risk? If the answer was that there are really no other viable options the answer may be clearly and easily “yes.” But this is not the reality – there are many other alternatives and most of them at significantly lower cost. Justification for this risk taking is, in fact, scant.
•In the 1970’s the Northwest Utilities made a series of judgements based on expected power requirements and power prices. Prices assumptions were driven at that point by dramatic increases in the price of fuel and by its apparent (but not actual) scarcity. Demand was based on charts showing post WWII growth and regional growth based on increasing industrialization of the area resulting from low power prices would continue on the same upwards trendline. These factors led WPPSS to develop a complex funding scheme to build nuclear power plants. All of this was well meaning and well intentioned. The coming debacle – a $2.25 Billion default – is a classic example of what happens when we add uncalled for complexity based on a future that is much more nuanced than any chart can demonstrate. (One summary of the adventure can be found at http://columbia.washingtonhistory.org/anthology/maturingstate/seduced.aspx) Frankly, although similarly well intentioned and actually less complex – the driving factors for AKP share several of the same characteristics. For a community that is paying 4X the national average for power, 25% more than Oahu for power – this is a risk that a fragile economy simply cannot bear and should not be asked to bear.
We have until Friday (November 30, 2012) to voice opposition to the Aina Koa Pono biofuel project and the 4.2 percent rate hike.
You can make a difference by submitting testimony to hawaii.puc@hawaii.gov before this Friday.
Wally Andrade is taking charge of his destiny:
Subject: CC: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono
Chair Morita and commissioners:
I am very much against the approval of the Aina Koa Pono project and the current biofuel agreement with HELCO. Please do not tie us to a 20 year contact @ $200/barrel. The AKP microwave technology is not proven on this scale, they have not tested their feedstock, their projections are not rational. What’s the true EROI?
We are depending on you to drive the utility to focus on ways to lower the rates and stop acting as a regulated monopoly with loyalties to their shareholders and not the customers.
We have an abundant low cost geothermal resource on this island that would serve to lower the rates, spur economic growth and provide security for the people. Drive Helco to this resource.
Regarding the Aina Koa Pono (AKP) biofuel project, and despite its full-page newspaper ads, Hawaii Electric Light Company (HECO) has clearly shown that it does not have the public interest at heart.
The utility kept secret how much AKP would be paid – $200 per barrel – and manipulated that information to estimate that the average rate payer would pay $1 per month and make us feel like this was a small thing.
This is grossly unfair. There are many different ways HECO could have informed the public without compromising proprietary information. Instead, behind our backs, it was applying to pass through the cost of $200 per barrel oil.
It’s unconscionable to do this to the “rubbah slippah” folks.
Now, week after week, HECO continues to run its full page newspaper ads to wash our brains and tell us how much it is trying to lower our rates. Hmmmm.
This Friday, November 30, 2012, is the deadline to submit testimony to the PUC opposing the Aina Koa Pono project.
Email your letter to: hawaii.puc@hawaii.gov and reference this in the subject line: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono.
Here’s the testimony I sent:
To: PUC <hawaii.puc@hawaii.gov> Subject: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono
Aloha Chair Morita and commissioners:
I am strongly against the AKP biofuel supply contract.
I am president of Hamakua Springs Country Farms, which is a family farming operation. We farm 600 fee simple acres of bananas and tomatoes at Pepe‘ekeo on the Big Island. We have more than 35 years of farming experience. I am a committee member of the Hawaii Clean Energy Steering Committee. I was co-chair of the Geothermal Working Group. I have attended four Association for the Study of Peak Oil conferences, so I have a fair understanding of energy issues.
My testimony relates to the effect that the AKP biofuel contract will have on my workers and on my farm, as well as on food security in general and the Big Island’s economy in particular.
The AKP/HECO fueling arrangement contemplates AKP being paid approximately $200 per barrel of biofuel. The $200 per barrel payment to AKP will begin in 2015, when AKP is anticipated to deliver the specified quality fuel. The contract will then last for 20 years. HECO points out that the rate subsidy will only begin when AKP delivers fuel, as if to say that there will be minimum economic effect on rate payers. Nothing could be further from the truth.
The AKP fuel purchase contract of 20 years precludes utilizing potentially lower cost alternatives. Geothermal, for example, is 11 cents per kilowatt hour less than oil for generating electricity. If geothermal were used instead of oil at the 60 MW Keahole plant, it would save $58 million annually compared to oil at today’s price. And oil today is nearly half the cost of AKP’s fuel oil at $200 per barrel.
It appears that the AKP contract tracks the AEO 2012 high price scenario instead of the reference case scenario. During the last few years, knowledgeable commentators such as Jeff Rubin point out that rising demand and rising oil prices contains the seed of its own destruction. The last four recessions, dating back to 1970, indicate that oil price spikes cause recessions. And recessions cause oil prices to fall back. Global economic growth is grinding to a halt when oil is close to $100 per barrel. So it is more prudent to follow the reference case of the EIA’s AEO 2012 oil price projection – instead of the high rate case oil price path that HECO chose.
The PUC should not approve as just and reasonable that the utility should be allowed to establish a Biofuel Surcharge provision that will allow the pass through of the cost differential to the consumer as well as the actual cost pass through itself.
Rate payers will subsidize the difference between the actual oil price and the $200 that AKP will be guaranteed for 20 years. It is more than possible that actual oil prices would be substantially below $200 for the whole contract period. That will result in a heavy subsidy that rate payers must bear. The $200 per barrel rate is much too high. And the cost differential that is anticipated to be passed through to the rate payer is unconscionable.
On the Big Island, electricity rates have been 25 percent higher than Oahu’s rate for as long as people can remember. It has contributed to the Big Island having one of the lowest median family incomes in the state and the attendant social problems that come with a struggling economy.
Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse; as electricity prices rise, folks that can afford to leave the grid will do so, leaving the folks unable to leave to assume more of the grid infrastructure cost.
Oil price has quadrupled in the last ten years. People and businesses have made necessary adjustments, but there is just no more to cut. Farmers have cut back on employee benefits, and they have cut back on capital improvements to survive. But this is false economy; sooner or later, maintenance foregone will catch up. Farmers are especially vulnerable because they are price takers rather than price makers. It is our food security that is at stake.
Hawaiian farmers’ and food manufacturers’ main competition is U.S. mainland producers. Oil costs make up less than 2 percent of the electricity costs on the mainland. Oil is more than 70 percent of the cost of electricity in Hawa‘ii. Any mainland food product that has substantial cheap electricity costs imbedded in it becomes relatively more competitive to Hawai‘i products as oil prices rise. AKP’s price subsidy will make Hawai‘i food producers even less competitive to their mainland counterparts. Allowing cost differential pass through will threaten our food security.
Higher electricity costs from the AKP project will affect fresh food costs. Farmers, wholesalers and customers of locally gown food all pay for the electricity that it takes to maintain the “cold chain.” That raises food cost and takes away discretionary income from consumers. Consumer spending makes up two thirds of our economy. Allowing cost differential pass through threatens our economy.
Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse: As electricity prices rise, folks that can afford to leave the grid will do so. This leaves the folks unable to leave to assume more of the grid infrastructure cost. These are the very people who are most affected by rising electricity rates. Allowing cost differential pass through is not in the public interest.
In this particular project, HECO has shown that it does not have the public interest at heart. Worse, it kept secret the $200 per barrel amount that AKP would be paid and then manipulated that information to come up with an estimate of $1 per month for the average rate payer. That was grossly unfair. Passing on the high biofuel cost to the rubbah slippah folks while making it seem that there would hardly be an effect is unconscionable. There were many different ways they could have informed the public without compromising proprietary information. Instead they chose this way. It speaks for itself.
HECO and Aina Koa Pono (AKP) both issued glowing press releases
about the AKP project. But neither would say how much AKP would be paid for its
biofuels. They said it was a secret – to protect other bidders.
They said that the average ratepayer would only pay about $1
more per month, and that this would only go into effect if AKP was successful
in producing biofuel. They said it would mean several hundred new jobs, and
lots of money would be saved by not importing oil.
The project anticipated supplying HELCO’s Keahole 80MW plant
with most of its liquid fuel needs. That would be roughly 16 million gallons
annually, plus another 8 million gallons for transportation fuel.
HECO was not being fair when it would not give price
information and yet did predict that this would be very inexpensive to rate payers
– basing all this on assumptions and secret information.
The cost of the biofuel the rate payer would subsidize, it
turns out, is around $200/barrel. This is not a small amount. By assuming that
the price of oil would be close to $200, HECO could then say that this project would
not cost the ratepayers substantially more than what they would be paying
anyway.
Try wait! No amount of public relations will earn back the
credibility lost because of this unfair assumption.
Also, AKP says, the microwave technology they plan to use has
been successfully and safely used in the herbal extraction and pharmaceutical
industries for decades.
People who know tell me that this statement is like someone
with a Piper Cub pilot’s license offering to fly you to the moon sometime in
the future. But at least this one is a claim we can research.
Both the Hilo and Kona PUC hearings made clear that the
people are vehemently against the Aina Koa Pono project. At the Kona hearing,
the Consumer Advocate asked whether people would be in favor of this project if
all the costs were paid by O‘ahu rate payers. I think the logic was that O‘ahu
residents should pay for this, because it helps O‘ahu fulfill its part of the
Hawaii Clean Energy Initiative mandate for renewable energy.
Doesn’t each island’s contribution apply to the whole state?
Try wait!
AKP claims that it’s a fact that Keahole will be using
liquid fuel far into the future.
We don’t agree that we should favor AKP’s 20-year contract,
because it precludes using lower-cost alternatives; for example, natural gas
and other technologies that are being fast tracked, such as ocean energy.
Take geothermal as an example. Generating electricity at today’s
prices using geothermal costs 11 cents/kilowatt hour less than oil. Output at
the 80MW Keahole plant (which is equivalent to 80,000 kilowatts) times 11
cents/kilowatt hour is equal to saving $8,800/hour, $211,000/day and $77
million/year. That amount of savings could pay off the potential stranded asset
and also save the rate payer money.
The barrel equivalent of geothermal is $57. Why would we
want to tie ourselves to a $200/barrel and a 20-year contract?
Aina Koa Pono says it will, on its 12,000 acres, produce 24
million gallons of fuel per year. That’s roughly 2,000 gallons of biofuel per acre,
which is four times more productive than palm oil, the only biofuel that can
compete with oil. Yet they plan to do it with an undetermined species of grass.
Ka‘u Sugar Company, in the projected area of Aina Koa Pono,
grew sugar cane and was one of the least productive sugar companies in the
state. Sugar cane is a grass.
AKP is not cost-effective and it doesn’t make sense for us.
We need to concentrate on solutions that better the condition of our people.
If you agree and would like to let the PUC know, this is the time. You can write to the PUC before November 30th at Hawaii.puc@hawaii.gov, and refer to “PUC Doc 2012-0185-Application for biofuel supply contract.”
West Hawaii residents described to the Public Utilities Commission how they have cut back on energy usage, and questioned why Hawaiian Electric Light Co. shouldn’t have to bear the costs of upgrading its own equipment.
The questions continued as the PUC heard comments from residents Tuesday evening on a proposed contract between HELCO, Oahu’s Hawaii Electric Co. and Aina Koa Pono for a biodiesel project in Ka‘u.
Albert Prados, manager of the Fairway Villas at Waikoloa Beach Resort, was one of more than 20 people who testified against HELCO’s rate increase request, which HELCO officials would raise rates 4.2 percent, or about $8 per an average 500 kilowatt hour monthly bill. Prados described the measures he has taken in his own home, including shutting everything off except the refrigerator at night, to lower his electricity bill. Read the rest
Mayor Kenoi took a very strong stand on renewable energy. He
made clear that it is not sufficient that it be renewable; it also needs to be affordable. He is concerned about the most defenseless among us.
He said, This is the kind of project that 20 years from now, we will be asking, “How did we let that happen?” He also said that we are doing this for the benefit of HEI and HECO – but that there is no benefit for the Big Island. The Mayor is very aware that high and rising electricity costs threaten our economy and also the folks on the lowest rungs of the economic ladder.
Rep. Denny Coffman asked, “How is it we are here? This is not even proven technology.” He pointed out that the electric utility is setting the state’s energy policy, and that that should stop while we finish the Integrated Resource Planning process that’s happening right now. Rep. Coffman understands the energy situation worldwide and he knows it’s foolish to be chasing unproven technology. It is both a waste of time and money. In Hawai‘i, we do have proven technology that is affordable.
My testimony:
To answer the Consumer Advocate’s question, “Would we change our minds if all the costs were given to the Oahu rate payers?,” the answer is no! I think that giving AKP a 20-year contract will forego the opportunity of developing lower cost alternatives. And it will take up valuable time. Liquid natural gas is an option. Ocean energy might be ready within the 20-year period. Geothermal is an affordable, proven technology. For instance, there is an 11 cent difference between geothermal and oil today. We could replace liquid fuels with 80MW of geothermal electricity, and apply that savings to pay the remaining debt of the Keahole 80 MW liquid fuel burning plant.
(80 MW is equal to 80,000 kilowatts. That 11 cents/kilowatt hour savings multiplied by 80,000 kilowatt hours equals $8,800 that you save each hour. And the savings per day is $211,200. That times 365 days equals an annual savings of $77 million. That is enough to write off the plant and still give the rate payers a break.)
Consumer Advocate Jeff Ono asked: “If O‘ahu rate payers would pay the cost, would you still be against the AKP project?”
Most of the time, making electricity has to do with making steam to turn a turbine. You can burn coal to make steam, or you can burn oil to make steam. You can burn firewood to make steam, or use the steam from underground – that’s geothermal.
AKP takes the long way. They grow plants using fossil fuels,
then they use electricity to make microwaves to vaporize the plants, then take the liquid that rises and convert it to a burnable liquid, and haul it to Keahole, where they burn it to make steam.
It isn’t surprising that it is expensive.
More than a few engineer folks tell me that this process
uses more energy than it makes. And if that is the case, it will always be more expensive than oil. This is not a good bet for us.
Palm oil is the only biofuel today that can compete heads up
with petroleum oil. It produces 600 gallons of oil per acre. AKP strives to produce 16 million gallons per acre, plus another 8 million gallons – or 24 million gallons from 12,000 acres. That is 4 times as productive as palm oil, the only biofuel that competes straight up with petroleum oil. If it works, they don’t need any subsidy from us. If it works, they will all end up billionaires.
We cannot predict the price of oil. But people are hurting right now. And if oil prices reach $200 per barrel, the tourism industry will be devastated and everything connected with it will shrink. We do not have the luxury of time. We need a lower cost alternative right now.
Well-respected Council of Revenues economists Paul Brewbaker, of TZE Economics, and Carl Bonham, Executive Director of the
University of Hawaii Economic Research Organization (UHERO), agree that low-cost energy is a key component of our economic future.
There are alternatives to $200/barrel biofuel. Geothermal is the equivalent of $57/barrel. Liquid natural gas is low cost now on the
mainland, and maybe ocean energy will be an alternative within the time period of the contract.
We need lower cost electricity, not higher, and AKP is not the answer. The AKP project is wasting valuable time, and we need to put it to bed so we can focus our attention on the next projects.
I agree with the electric utility from here forward. The next PUC hearing will be on the Hu Honua biomass plant at Pepe‘ekeo. They will use wood chips to boil water and make steam. This is proven technology and it looks to be cost effective.
After that will be a proposal for 50MW of geothermal. Geothermal does not have to burn anything. It just uses the steam underground to make electricity and it is cost effective.
At that time, HELCO with its leverage should be able to successfully renegotiate the old contract that is tied to oil. Then we will be well on our way to protecting ourselves from the volatility of world oil prices. Those two projects will result in a total of 110 MW of stable, affordable electricity using proven technology.
We need to strive for balance and common sense as we try to make things work for everyone. Hospitals, schools, hotels and businesses need the electric services provided by the grid. Fifty percent of our people rent and so cannot get off the grid. We need to be practical, and help to make sure the electric utility is healthy as we strive for a lower cost to the rate payer.
