HAWAII BRACES FOR HIGH COSTS OF RENEWABLE ENERGY MANDATES

by Bonner R. Cohen, Heartland Foundation, September 4, 2017

Already saddled with the nation’s highest electricity prices, residents of Hawaii may be facing even higher costs as the state’s utilities scramble to meet the statutory goal of 100 percent renewable energy by 2045.

In 2015, Hawaii became the first state to approve legislation setting a goal of 100 percent renewable energy by a date certain. Hawaii is instituting its renewable energy requirement in phases: 30 percent by 2020, 40 percent by 2030, and progressing to 100 percent by 2045, ending all fossil fuel use on that date.

Hawaii is one of 29 states and the District of Columbia that have adopted a “renewable portfolio standard” (RPS) mandating a rising market share of the electric power provided by the state’s utilities come from renewable sources. Hawaii’s RPS is by far the most ambitious, even surpassing those of California and New York, both of which have mandated 50 percent of their electric power come from renewable sources by 2030.

The challenge for utilities in complying with renewable power mandates is procuring or producing enough power to meet demand at an affordable price while maintaining the reliability of the electric grid. After three years of trying and multiple submissions, on July 14 Hawaii’s Public Utilities Commission (PUC) accepted the plan of Hawaiian Electric Companies (HECO), the state’s largest utility, to meet the renewable portfolio mandate. HECO’s plan is known as the Power Supply Improvement Plan (PSIP).

Phasing Out Faster Than Expected

Under PSIP, HECO says it will reach the state’s all-renewable goal by 2040, five years ahead of schedule. While accepting HECO’s plan, PUC noted several areas of concern, including the technical feasibility of integrating grid technologies, the advisability of moving the all-renewable goal to 2040, and the scheme’s effect on ratepayers.

“The commission commends the Companies’ commitment to achieving the RFS ahead of schedule,” the PUC regulators wrote when approving the plan. “Nevertheless, the commission has some concerns regarding the technical feasibility and the economics of the long-term resource plan for each island.”

HECO says wider adoption of energy storage and other emerging grid technologies will smooth the way for more renewable energy to enter the system. The utility is also counting on continued growth of private rooftop solar installations, which it projects will increase from the current level of 79,000 buildings to 165,000 by 2030.

In addition to the technical problems, PUC and Hawaii’s business community have raised questions about how much the renewable mandate will raise electricity prices. HECO has acknowledged rates could rise by more than 44 percent when PSIP is fully implemented.

High Prices, Going Higher

James Taylor, president of the Spark of Freedom Foundation, says Hawaii should serve as a warning to other states considering imposing aggressive renewable energy mandates.

“Hawaii is challenged by a unique geographical location, currently requiring the import of petroleum to power most of its electricity,” Taylor said. “As a result, Hawaii’s electricity prices are already more than double the national average.

“Other states should take notice,” said Taylor. “Even with such high prices, and even though Hawaii is blessed with a southern latitude, ample sunshine, and abundant breezes, wind and solar power are still more expensive than Hawaii’s current petroleum-fired electricity, which is why wind and solar advocates needed to pass laws to force Hawaiians to generate power from wind and solar.”

Even Greater Disparities Elsewhere

Hawaii’s experience shows renewable power sources still can’t compete with conventional sources of electric power on the basis of cost, says Taylor.

“Other states would be replacing more-affordable conventional energy than is available to Hawaii, and doing so under less favorable wind and solar power conditions, making the economic burden on ratepayers even greater than those about to be encountered by Hawaiians,” Taylor said.

Chuck Daniel, president of the Caesar Rodney Institute, says Hawaii’s renewable energy plan cannot work as designed.

“Hawaii is about to perform an experiment in renewable energy that is bound to fail,” said Daniel. “Middle- and lower-income people will bear a disproportionate share of the higher energy costs from the renewable mandate, taking the bullet in the name of combatting climate change.”

Bonner R. Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.