Hawaii energy policy bedeviled by price, reliability tradeoffs

by Grassroot Institute of Hawaii, February 8, 2024

Hawaii intends to meet 100% of its power needs with renewable energy sources by the year 2045, but in the wake of Hawaiian Electric Co.s rolling blackouts in January, what sort of questions should lawmakers and the state’s Public Utilities Commission be asking about the feasibility of that goal?

According to Isaac Orr, a policy fellow in energy and environment policy at the Center for the American Experiment in Minnesota, “They should really be asking: ‘What will it cost, and at what price in terms of reliability?’” 

Speaking with host Joe Kent during a Zoom call on the latest episode of ThinkTech Hawaii’s “Hawaii Together” program, Orr said mainland states such as California and Texas also struggle with blackouts, but at least in California’s case, it can import power from a neighboring state. Texas, on the other hand, is similarly situated to Hawaii because it has limited transmission lines. 

Orr said that considering Hawaii’s geographic isolation, it “would be best served by wait-and-see with heavy wind and solar grids, because, you know, you guys are on your own out there.”

Orr said all of the “green technologies” in use today are “basically underwritten by the taxpayer, and if those supports were to go away, I think that we would see a lot less wind, a lot less solar and a lot fewer electric vehicles on the road.”

But subsidies aside, Orr characterized dependance on wind and solar power without reliable backup sources as “‘Dirty Harry’ energy policy,” saying, “You just have to ask yourself, like, ‘Do you feel lucky?’ And eventually you’re going to get unlucky.”

“It doesn’t matter if it’s Republicans who are doing it or Democrats who are doing it,” Orr said. “If you’re relying on the whims of the weather for reliable electricity, eventually you’re gonna get snake eyes.”

Orr cited nuclear power, geothermal power and biofuels as potential reliable energy sources for Hawaii, but ultimately, he said, “There’s no solution, there’s only trade offs,” because “there’s a lot of factors at play.” 

TRANSCRIPT

1-29-24 Joe Kent hosts Isaac Orr on “Hawaii Together”

Joe Kent: Aloha, and welcome to “Hawaii Together” on the ThinkTech Hawaii Broadcasting Network. I’m Joe Kent, executive vice president at the Grassroot Institute of Hawaii, and I’m filling in today for Keli‘i Akina; he’s the president and CEO of the Grassroot Institute. 

Well, Hawaii has a goal of making 100% of its electricity from renewable energy by the year 2045. But is that feasible? 

Well, if you were sitting in the blackouts like me earlier in January, you might be puzzled as to whether or not the state can actually hit that goal. And that’s the topic of this show. 

Isaac Orr is my guest. He’s a policy fellow in energy and environment policy at the Center for the American Experiment in Minnesota, and he holds degrees in political science and geology from the University of Wisconsin–Eau Claire.

Thanks for joining me, Isaac.

Isaac Orr: Hey, Joe. Thanks for having me on the show. Happy to be here.

Kent: So, how did you get involved with the topic of energy policy?

Orr: Yeah. Yeah, it goes back to my environmental geology class. Well, it goes back further than that. 

So, I grew up on a small family dairy farm in Wisconsin, and every summer when it would get really hot, the cows would get thirsty and they’d basically drink down the water pressure in our well. So I’d get done, like, cleaning pig pens or baling hay, and I wouldn’t be able to take a shower in the house because there was no water pressure. 

So, when I was in my environmental geology class in college and we were talking about, you know — well water, that sort of stuff — I’m like, “Oh, this stuff is very, very interesting.”

And I always knew that there was a, you know, very political aspect to the way that our energy decisions get made, and our, you know, mining decisions, landfill permitting stuff. So it really kind of, you know, was a sweet spot for both of my interests. And here I am today.

Kent: Well, that’s awesome. And you’re from my neck of the woods. I grew up in Minnesota. And actually, I remember in college, they started building a bunch of wind farms and solar farms. 

And so I went around and asked, you know, a lot of questions about whether or not these things were feasible. And the answer that I kept getting over and over from every source was, “Well, it only is feasible because of government handouts.” 

And that’s, that’s — so, do you, do you, is that still the case? That was a long time ago, but is that still the case generally, do you think?

Orr: Yeah, it still is the case, Joe, and it’s going to be really tough for that to not be the case. Warren Buffett said the only reason that we build wind turbines is because we get the wind-production tax credit, which is a subsidy, right?

And ultimately a tax credit, Joe, is better than cash — because if you got a direct cash transfer, you’d have to pay taxes on that. So the tax credit just cancels out your taxable income — or liability — sorry. 

So, the Inflation Reduction Act that was passed reestablished this tax credit for wind turbines and solar panels. It had a whole bunch of other goodies in there too for electric vehicles. 

So essentially all of the, you know, quote-unquote “green technologies” that we use or we see on the roads or in the field every day is basically underwritten by the taxpayer. And if those supports were to go away, I think that we would see a lot less wind, a lot less solar and a lot fewer electric vehicles on the road.

Kent: Well, I was thinking about all of that during the blackouts in January. My family and I were just sitting in the dark, wondering when the lights would come on — we were looking for candles and — along with the rest of Honolulu. 

Now, according to Hawaiian Electric Company, which is the state’s monopoly utility company, the reasons for the blackouts were, let’s see, cloudy conditions and light winds that caused the solar and wind power sources to stop producing energy.

And then the electric company’s backup batteries also ran out and couldn’t be repowered. Then you’ve got the company’s two oil-fired generators, which went offline. And then the island’s waste incinerator power plant had less power than expected. 

So, you know, with all of that, what sort of questions should Hawaii’s Public Utilities Commission and state lawmakers be asking about this goal to reach 100% reliance on renewable energy by the year 2045?

Orr: Yeah. They should really be asking, “What will it cost, and at what price in terms of reliability?”

So, you know, the AES [Hawaiʻi] coal plant that was shut down very recently was 185 megawatts. If that plant had still been online, would you have had the blackouts? 

And we don’t know the answer to that question because Hawaiian Electric didn’t tell us — we asked them a few questions via email, and they didn’t say how deep the blackout was, in terms of how many megawatts was the shortfall. 

But, you know, we can’t know whether that plant would have been on outage, right? So, December is typically — January and December are typically times when there isn’t a lot of electricity demand in Hawaii, so the power company makes the very rational decision to do maintenance on the plants that they depend on to keep the lights on. And, you know, …

Kent: I see, what you’re saying is that we all switch our air conditioners off in January and December … 

Orr: Yeah.

Kent: So we should have a lot of extra reserve.

Orr: Yeah, you would — yes, absolutely. The demand isn’t as high and, you know, that reserve got, you know, taken away by the weather not cooperating, right? 

I think that that is number one, a problem that Hawaii needs to think good and hard about. But you know, also, you have to plan for your plants to be down at some point.

And if you are depending on the whims of the weather, it’s kind of like “Dirty Harry” energy policy; you just have to ask yourself, like, “Do you feel lucky?” And eventually you’re going to get unlucky. That’s just the way that it works.

Kent: Well, but don’t we try to mitigate against that luck by having a buffer? I mean, I read somewhere that Hawaii is supposed to have like a 30% buffer for reserve power, just in case anything happens.

But, now renewables are making up around 30% of the grid, on Oahu at least. So if the renewables go out because it’s a cloudy day or there’s no wind, then does that eat into the buffer?

Orr: So the main reason the buffer was gone during the storm was there was a short circuit at one of the oil-fired plants, and then the transmission line to another one was down.

So, every utility has their own different way that they plan for that reserve margin that you were talking about — that buffer. So, in the Midwest, where I live, the utility company says, “Well, we think that the wind is going to be about 18% reliable when we need it most, and we think that solar will be available 50%  of the time when we have a summer peak,” right? 

Because here we have air conditioning; that’s when we have the most power demand. And it’s really going to boil down to how Hawaiian Electric evaluates the reliability of its wind, solar and battery storage facilities. 

So one of the things that happened was, it had been cloudy or rainy for a series of days. So that battery that was supposed to replace the reliability of the coal plant that got shut down was only about 80% charged. 

And we also have to keep in mind that that battery can only discharge its maximum amount of 185 megawatts. So basically, you can only floor that battery for three hours before it’s completely drained.

Whereas a coal plant has probably a month or two worth of fuel on site. So you could go for days, weeks, maybe months without having to ramp it down, if you have the demand there. 

Kent: I see.

Orr: So we need to recognize that these different technologies do not have the same reliability value to the grid.

Kent: And more and more, the grid and technologies like batteries are relying on renewables, which are weather-sensitive. 

And so, as we get more and more of our grid and power makeup coming from weather-dependent sources, then we’re going to be even more sensitive or vulnerable towards, you know, inclement weather. 

So even the backup systems though — like batteries, for, like you just said — it was only 80% full or powered. And so, and it couldn’t be increased because the solar power wasn’t there to put in more power to the batteries, right? 

So, you know, “Is this even feasible?” is my bigger question. Is it even feasible to increase the percentage of renewables that Hawaii is dependent upon?

Orr: Yeah, I’m sure that you would be able to increase it to some extent, right? You could build offshore wind facilities; you know, you have more land that you could use to put solar panels on. 

It’s just a question of how much is that going to cost and how reliable is that going to be even after you build all of that stuff, right? Like the problem with wind and solar is that zero times anything is still zero. And sometimes, the wind will be producing no power. And the sun goes down every night. 

So you have these challenges. You can either build a lot of battery storage — which is very, very expensive — or you can have something that’s reliable and carbon-free. You could go nuclear. You could go geothermal.

Those would offer superior reliability attributes. And in the long run, they would be lower cost as a result of that higher reliability value.

Kent: Now, what about other states? And Hawaii isn’t the only state; we were the first state to be 100%, to have a 100%  mandate by the year 2045, but other states have that too.

So, are they also having problems with rolling blackouts?

Orr: Some of them are, right? California is. California was having blackouts until the Federal Energy Regulatory Commission said that they could siphon power away from the Northwest that was, you know, supposed to be headed down to Arizona. 

So, you know, California’s been very aggressive with their mandates for, you know, quote-unquote, “renewable energy.” And they were actually going to be shutting down Diablo Canyon, their large nuclear facility there, until basically public pressure after the blackout said, “Look, this is carbon-free electricity. Why are you shutting this down?”

So, California has wised up a little bit. They’re actually keeping some of their oil-burning plants and their natural gas peaking plants — that were scheduled to be shut down previously — online, because they realized that, you know, the politicians there don’t like angry voters. And not having power is one way to get a very angry voter.

But Texas is having the same problem, right? So, it doesn’t matter what party is in power. It doesn’t matter — you know, because, like, this stuff doesn’t necessarily work; it’s based on the weather. 

So it doesn’t matter if it’s Republicans who are doing it or Democrats who are doing it. If you’re relying on the whims of the weather for reliable electricity, eventually you’re gonna get snake eyes, and you’re gonna have a blackout.

Kent: So, snake eyes meaning you’re putting your state’s energy at risk. 

Orr: Yeah. 

Kent: So what do other states do then when their energy is jeopardized? Let’s say, they have a power plant go down, and they might have to think about doing rolling blackouts just like we did. 

Do they have tools that we don’t have? And how do they deal with that?

Orr: Yeah, absolutely. That’s a great question, Joe. So Hawaii has the misfortune of being an island, and you don’t have the ability to import power from neighbors, right? 

Texas is kind of like that in the same way. There’s very limited transmission lines between Texas and the rest of the grid. So, that’s why Texas is also especially vulnerable to rolling blackouts, especially the parts in the Electric Reliability Council of Texas, or ERCOT.

So, you can’t just call up the neighbors. Like California says that they’ve reached a certain amount of, you know, renewable electricity. But when you look at the data, about a third of their electricity is imports. 

So when the sun goes down or the wind isn’t blowing, they call up Arizona and Nevada, and they say, “Hey, do you have any coal firepower or any natural gas firepower? We could really use some right now.”

And, because Hawaii is, you know, far away from the mainland it would be insanely expensive to build a transmission line out there. I don’t even know if that’s possible, frankly. 

So when it comes to, you know, having reliable power, you guys are kinda on your own out there.

Kent: Hawaiian Electric, our state’s monopoly utility company, has released some plans to provide Oahu with firm renewable energy. And I guess that’s the big problem with renewable energy is you can’t — it’s not necessarily reliable. 

But there is one source, at least, of reliable firm power that’s renewable, and that’s biofuel. And so apparently, the electric company is considering converting some of its oil-fired power plants to biofuel. So, what’s your take on that?

Orr: Yeah. I mean, ultimately, the cost of the biofuel plant and the reliability is going to be about the same as an oil plant. But how much is it going to cost to get the fuel for it?

And ultimately, if that’s higher than the diesel fuel or fuel oil that they’re burning right now — I’d imagine it’s not diesel, I would imagine it’s something lower grade than that — then you’re going to have higher electricity prices, right? 

So there’s always — there’s no solution, there’s only trade offs. So if you go to biofuel, I don’t know if you’re going to be able to generate all of that fuel on Hawaii, or whether you’re going to have to be importing that from somewhere else.

So ultimately, there’s a lot of factors at play. I’m not aware of the specific proposals, but that’s one option. And that’s a better option, I think, than pretending battery storage is going to be able to get you through the cloudy and not-very-windy periods that will inevitably show up.

Kent: But you mentioned it’s the price. And that is the problem, I guess, with all of this, is we have goals to have it be reliable and renewable, but also reasonable — reasonably priced, anyways. It’s hard to get all three of those things at the same time. 

Now, when it comes to batteries, we’ve got the Kapolei battery facility that you mentioned, and it’s replaced, supposedly, the coal plant. But is it a long term solution? And what would be the problem of creating more of these coal plants? Or maybe that’s a good idea? Or, excuse me, more of these battery plants.

Orr: Yeah, yeah, I understood what you meant there. So battery storage facilities are, you know, good for smoothing out some of the dips in frequencies that happen on the grid. 

I think that Hawaii is going to be a really good test case for whether they are able to maintain grid reliability if you start to depend on them more. 

And as far as long-term solution, the expected useful life for lithium-ion batteries is anywhere between 10 and 20 years; a lot of people say 15. So that is — that’s a big question mark right there. 

Because theoretically, you will have to replace that battery before the coal plant would have needed to get torn down, right? Because coal plants can last anywhere between 30 and 60 years, if you take care of the plant. 

And that plant that was there — the 185 megawatt facility — was only 30 years old, right? It was a relatively young, healthy plant; and it was actually generating some of the lowest cost power on the island — it was much cheaper than the oil plants that stepped up to replace it. 

So, I think that the jury is very much out on battery storage as a long-term solution. I am skeptical, but we’ll see — you’ll see — and we will be watching with bated breath.

Kent: Well, but wouldn’t it be better, though, for us to see what they do on the mainland over the next, you know, decade or two with all of these new renewable technologies — how they work out, instead of doing it here first, and also being the first to deal with all the problems associated with it?

Orr: Yeah, that would be a good way to look at it. You know, you could also look at Japan, right? Japan is restarting the nuclear reactors that they shut down in the wake of Fukushima. 

South Korea has a very robust nuclear sector, right? They build nuclear power plants for different countries all over the world.

So, you know, there are options out there — realistic ones. But they all involve, like, having a reliable, dispatchable power plant, right? And that’s not what wind and solar provide. 

And, you know, Germany is a really good example of what happens when you decide to go all in on wind and solar with, you know, Russian natural gas.

But you basically have rising prices, declining reliability, and then you have increased risk or susceptibility to rising prices. So electricity prices in Hawaii in 2022 [were] super high because oil prices went through the roof, right? 

So I think that, you know, if you can use more geothermal out there, awesome. That sounds like a really good — I mean, Iceland has a lot of geothermal, and they’re also on a volcano. So, like, there are options out there. 

I just, I think that yes — Hawaii would be best served by wait-and-see with heavily wind and solar grids; because, you know, you guys are on your own out there.

Kent: Well, that’s interesting you say that about geothermal. I mean, I was on the Big Island, and I toured the geothermal plant there. 

And interesting, it was built a long time ago — it’s really old technology — but it works pretty efficiently, though. It powers a big chunk of the Big Island’s energy makeup. You know, it’s hard to do any more geothermal here, I think, because of political reasons. 

But, you know, right now, the politicians are really pushing solar, and there’s a push to get people to add more solar to their roofs. The state’s been encouraging this for a long time, and now they’re actually kind of changing the money or rates that solar panels can get for producing electricity. 

So, how does rooftop solar affect the grid? I mean, is there anything — we’re talking really negatively about solar. There’s nothing negative, per se, about solar; it’s just that the mandate that there’d be so much of it is the problem, would you say?

Orr: Yeah, there are a lot of — so there’s no free market for electricity, and there never has been, and there probably never will be, right? 

Unless we have some sort of wireless transmission of electricity from a power plant provider straight to your house, right? So, we have to kind of work within that framework or that mindset.

And one of the problems with rooftop solar — not so much rooftop solar — but, you know, it’s more expensive to produce electricity from a rooftop system than a utility scale system. 

Because you have a lot more smaller components, you have to work on somebody’s roof; it’s more, you know, hazardous in that way. You can’t just have a large field where you have, you know, economies of scale, right? 

So there’s just certain things that make rooftop solar more expensive, and it becomes kind of so expensive that it’s not attractive as an investment. So, what utility companies and politicians have done in order to incentivize solar is generally a program called “net metering,” which allows you to sell your electricity back to the grid for the retail cost of it. 

And that’s great if you own the solar panels on the top of your home — but that’s not great if you don’t, because there are a whole bunch of different costs that go into maintaining the entire electric grid. 

So you have to have the backup plants, right? So what if it’s not sunny? Then you have to have, you know, investment in the oil plants, the battery, the transmission lines, pay the employees and the distribution system. 

If you are getting the retail rate instead of the wholesale rate, you’re not paying for any of that additional infrastructure that is necessary to make sure that you can buy power from the grid when the sun isn’t shining, and that you can sell it back to the grid when you’re producing more than you need. So, ultimately, those extra …

Kent: So you’re saying that, let’s say I’m a homeowner, I put solar panels on my house, on my roof, and I generate more [power] — let’s say I don’t use my AC much, I keep the lights off in my house, and I have all this extra power that I’m generating — I can sell that back to the grid, and I get money. 

And the rate, the money that I get, is high compared to what I’m producing?

Orr: Yeah, absolutely. So the cost of generating, like — I’m just going to use Minnesota numbers because I’m more familiar with them, like just like take, keep in mind everybody, that the numbers will be different. 

But in Minnesota, we have a coal plant that produces electricity for about $30 a megawatt hour, and $20 of that is the coal, right? So, the retail electricity rates in Minnesota are, let’s just say that they’re 10 cents a kilowatt hour to keep everything nice and even, right? 

So, I think that people who are, have, you know, solar panels on the roof should get paid the avoided fuel cost, right? So they should get two cents per kilowatt hour back for the power that they’re selling. 

Because you didn’t have to burn coal — you saved money on fuel as a result of your solar panel, but you didn’t get rid of the need to maintain the coal plant, you didn’t get rid of the employees. You didn’t get rid of the need to maintain all of that other infrastructure that pipes that power to your house when you need it.

So you — in order to be, you know, fair — you should have to pay for, pay your fair share of that investment, too. 

And unfortunately, that’s not what happens with net metering solar, which is why you had California come out and say, “Look, we really need to reevaluate the way that we compensate rooftop solar owners, because we are foisting a whole bunch of these extra costs onto low-income households, and that’s not what we want.”

Kent: Yeah, you said something earlier about the free market — there’s no free market in energy. 

And, you know, it reminds me of Ludwig von Mises, this famous economist, [who] once said that it’s hard to run an economy without prices. And the price system tells you a lot of information about which things to, are more productive, more efficient than others.

In the energy space, though — since we don’t really have a free market — we’re kind of blindly picking winners and losers in the energy space. So how do you know which ones should have been picked?

Orr: Yeah, absolutely. So, what we’d like to do in Minnesota, because we have an existing grid — like none of this stuff happens in a vacuum. 

You can look at Federal Energy Regulatory Commission data that tells you how much each power plant is producing electricity for, and you can compare that to what you would potentially replace it with, right? 

So, they have metrics called the levelized cost of energy, which are interesting, but they’re not complete, right? Because you can’t really compare the cost of an oil-burning plant to a solar panel. 

Because, like, you’re gonna have a much lower fuel cost — and maybe it’s a lower overall cost for the solar panel while it’s generating, but when it’s nighttime, you still need that extra capacity online. 

So, you really have to be making sure that you’re looking at the apples-to-apples comparison. Like, do these provide the same reliability value to the grid? And that’s kind of where you need to start, which is always why I say, “Go nuclear, ‘set it and forget it,’ it’s Ron Popeil.” 

And then you can reach your carbon goals while also having electricity at night.

Kent: You know, there was a commentary recently in the Honolulu Star-Advertiser that said that climate change creates disproportionately greater negative social, economic and health impacts on underprivileged groups, and that our solutions must not only solve climate change, but also address these disparities, the disparities on underprivileged groups.

But does a statement like that suggest that the writers are ignoring the benefits of fossil fuel energy sources, though? I mean, in other words, there are some benefits to — even though fossil fuel might be, might have some negatives, there’s some pluses too, right?

Orr: Oh, absolutely. It’s reliable, affordable electricity around-the-clock, right? 

So, when you look at the policies that the folks who, you know, want to transition to renewable energy are implementing, those costs basically are going to be borne disproportionately by those same low-income families that they were talking about in terms of, like, climate change, right? 

So if you’re going to be increasing the cost of heating your house, running your air conditioner by going all wind and solar; or if you’re a low-income household and you lose an entire refrigerator worth of food because there was a blackout, that is going to impact a low-income household far more than some, you know, wealthy people that live in a gated community.

So, ultimately, they need to be worried about the impacts of the climate policies that they are implementing. Because they are essentially raising prices on those who can least afford it, and putting them most at risk of feeling the negative consequences of blackouts. 

Kent: But that commentary actually also was calling for a carbon tax. And there are people at the Legislature right now calling for a carbon tax.

Now, assuming that eliminating carbon is truly, like, a really good desirable goal, is a carbon tax the best way to achieve that?

Orr: In a vacuum, maybe, right? But that’s never where we actually live. 

There’s always going to be a subsidy; there’s always going to be a mandate; there’s always going to be somebody that wants to basically phase out one fuel or promote another.

So, like, I think in a perfect world, maybe that would be an acceptable way to go about it. But we don’t live in that perfect world, so I would say no.

Kent: And let’s not forget that Hawaii has among the highest energy bills in the nation — I think we are the highest actually, about three or four times what they pay on the mainland. 

So, any carbon tax, I assume, would be passed on. But we’ll have to leave it there. 

Isaac Orr, thanks so much for joining us today.

Orr: Yeah, thanks for having me. I appreciate it.

Kent: And thanks to all the viewers for watching this episode of “Hawaii Together.” We’ll be back in a couple weeks. I’m Joe Kent. Aloha.