Hawaii drops LNG plans, backs renewables

21 July 2016, Week 28 Issue 427

Hawaiian Electric’s planned merger with NextEra Energy has fallen apart, ending the island utility’s plans to use LNG in the US’ 50th state. The company issued a statement on July 19 saying the LNG plan had been contingent on its merger plans and that, as such, it would not proceed with them. 

The merger was rejected by the Hawaii Public Utilities Commission (PUC) in a statement on July 15. The PUC said this had come in a 2-0 decision, with one commissioner, Thomas Gorak, abstaining. 

The PUC explained its decision stemmed from its conclusion that the benefits from a merger were “both inadequate and uncertain”. It went on to cite a number of reasons, including that the applicants’ commitment to meeting clean energy targets were vague, with the companies failing to “put forth near-term commitments for specific action tailored to Hawaii’s unique circumstances and clean energy goals”.

As a result of the PUC’s rejection, the merger plan was dropped on July 18. NextEra’s chairman and CEO, Jim Robo, said: “We wish Hawaiian Electric the best as it serves the current and future energy needs of Hawaii, including helping the state meet its goal of 100% renewable energy by 2045.”

Hawaii Electric’s president and CEO, Connie Lau, said the company was looking “forward to working together with communities across our state to realise the clean energy future we all want for Hawaii and to ensure a vibrant local economy”. NextEra will pay a break fee of US$90 million, with a reimbursement of expenses worth up to US$5 million, to Hawaii Electric. 

The LNG plan involved supplies from Fortis Hawaii Electric and upgrade work at the Kahe power plant to allow it to run on natural gas. 

Hawaii Electric’s vice president, Ron Cox, said the company would consider all options for using cleaner fuel to “bring price stability and [to] support adding renewable energy for our customers”. 

Hawaii has high carbon emissions and high prices, based on its use of petroleum products to generate power. 

A plan put forward by Hawaii Electric, in March, committed to increasing the state’s share of renewable energy from 23% in 2015 to the target of 100% by 2045. The target was to be achieved by 2030 on the Molokai and Lanai islands and on Maui and Hawaii by 2040. 

 

Running off the bridge

As part of its transition plan, though, the company said it intended to use LNG as a “lower-cost, cleaner fuel” that would serve as part of the transition to the 100% renewable energy target. Plans for the import of LNG would have run from 2021 to 2040.

Hawaii Electric said it would retire three oil-fired units at Kahe in 2020, replacing them with a more efficient, combined-cycle unit. Using LNG represented the cheapest option for a transition to renewable energy, while ensuring reliability, it said. 

The company went on to say that should the merger with NextEra fail, it could still go ahead with plans for LNG. However, it “would need to negotiate a different contract, likely with lower, delayed savings, and emissions reductions for customers”.

Hawaii Governor David Ige made clear his opposition to the LNG plan in October 2015. The governor said his opposition stemmed from the fact that LNG was an imported fossil fuel, noting that “any time or money spent on LNG is time and money not spent on renewable energy”. He went on to note problems with permitting and siting. 

“I have reached the conclusion that Hawaii does not need or want LNG in our future. It is time to focus all of our efforts on renewable energy and my administration will actively oppose the building of LNG facilities in Hawaii,” he said. 

Hawaii began importing LNG in 2014, via containerised shipments. Hawaii Gas issued a report on the use of gas in the state in January, saying a plan for a 15-year lease on a floating storage and regasification unit (FSRU), with an estimated cost of US$200 million, would reduce costs for its customers. Such a plan, it said, would reduce power bills by 25-30%, while also cutting emissions by 30%.