HAWAIʻI STATE ENERGY OFFICE RELEASES ALTERNATIVE FUELS, REPOWERING AND ENERGY TRANSITION STUDY
HONOLULU — The Hawaiʻi State Energy Office has released a comprehensive
Alternative Fuels, Repowering and Energy Transition Study that proposes an updated
Hawai‘i energy transition strategy to improve electricity affordability and grid reliability,
accelerate renewable energy adoption and support national security.
The study analyzes low-carbon fuels and repowering options to meet the state’s
Renewable Portfolio Standard (RPS) targets and mitigate oil price volatility that is so
damaging to Hawai’i’s economy in the aftermath of the Maui wildfires.
In this analysis, all alternative fuels were on the table. The fuels considered included
methane/liquid natural gas (LNG), hydrogen, biomethane, biodiesel, e-methane,
hydrogen, e-ammonia, e-diesel and e-methanol. HSEO and third-party consultants
developed an evaluation matrix that served as a decision-making framework to compare
alternative fuels based on technological maturity and commercial viability, cost-effectiveness and lifecycle carbon intensity.
“Viable pathways exist that allow for the rapid replacement of costly and carbon
intensive residual oil, offering cost savings to ratepayers while strictly adhering to our
RPS targets,” said Chief Energy Officer Mark Glick. “The addition of highly efficient
power generation and bridge fuels like natural gas can save money while the state
transitions to the most viable firm renewable energy options as they become
economical.”
Mitigating Liability Risk and Addressing Power Plant Reliability
In recent months, Hawaiian Electric has taken significant actions to reduce uncertainty
around its financial situation and the impact of wildfire litigation on customers. However,
the downrating of Hawaiian Electric’s credit rating after the tragedy has increased the
cost of debt financing for the utility and independent power producers, challenging the
financing of future renewable energy projects and necessary capital expenditures to
continue moving the energy transition forward.
Key Findings
The results of HSEO’s evaluation of fuels and power plant upgrades based on the
criteria of technological maturity, commercial viability, cost-effectiveness, and lifecycle
carbon intensity are summarized below:
- Land availability and other factors indicate that local energy supply is insufficient
to meet both current and forecasted demand. Accordingly, some energy imports
will persist for both the electric and transportation sectors even after Hawaiʻi
satisfies the 100% RPS. - The current Hawaiian Electric grid and development plans have high carbon
emissions primarily due to substantial reliance on Low-Sulfur Fuel Oil (LSFO) as
well as powerplant inefficiency. - Planned thermal capacity projects are critical to ensure grid reliability and will
provide some improved powerplant efficiency; however, HSEO asserts that
proposed and current Stage 3 and Integrated Grid Plan (IGP) thermal projects
will likely result in one of two outcomes: either (1) higher electricity prices if
biofuels are available and the PUC approves their costs, or (2) continued reliance
on liquid oil-based fossil fuels, such as LSFO or ultra-low sulfur diesel. - Power plants can be converted, and a new power plant can be built to run on
natural gas supplied by a Floating Storage Regassification Unit (FSRU) and
associated gas infrastructure. - LNG emerged as the near-term fuel with the potential to cost-effectively reduce
the state’s greenhouse gas emissions during the transition to economywide
decarbonization in 2045, but more analysis is needed to quantify a range of
potential benefits and to identify how those benefits can be maximized to
residents at the appropriate level of infrastructure buildout. - Policy guardrails will be necessary to ensure that lower carbon fuels, such as
LNG, will enable economywide decarbonization by 2045, not distract from it.
There is a narrow, but beneficial path for the inclusion of LNG in the energy
portfolio. Its build-out should not allow for backsliding on the RPS.
With the planned re-use of LNG infrastructure for a hydrogen transition in 2045, the
study indicates the incremental levelized cost of energy will be reduced by between 2.1
percent and 14.6 percent with LNG acting as a potential hedge against oil price volatility
until a fully renewable grid can be realized.
The import of LNG, as an alternative to LSFO, could result in as much as 38% to 44%
reduction in lifecycle carbon intensity when used in more efficient power plants. Natural
gas can be used as a replacement for residual oil until it is phased out completely by
2045, as local production of biodiesel is accelerated and technology advances for the
import of green ammonia and hydrogen.
Next Steps
HSEO has initiated a period of public outreach as legislators consider the
consequences of maintaining the status quo or proceeding to further development and
engineering design studies, integrating feedback from the community and utility
stakeholders including Hawaiian Electric, Hawai’i Gas and Par Hawai’i.
While HSEO’s findings suggest that using LNG on O‘ahu could lead to cost and carbon
savings, the analysis depends on certain key assumptions and risks including
acceptance by regulators and Hawaiian Electric, environmental review, permitting and
aggressive project timelines.
In releasing the study, the Chief Energy Officer emphasized that continued development
of solar, wind, battery storage, and other renewable power generation sources must
vigorously occur in tandem with a fuel transition to ensure Hawai‘i has a diverse energy
portfolio. The new energy strategy can attract needed capital to strengthen grid
reliability, stabilize costs, and increase affordability for Hawaiʻi ratepayers.