When it comes to the nation’s highest electric rates, Gov. David Ige doesn’t just understand our pain, he has felt it.
Like Hawaiian Electric Co. customers throughout the islands in recent years, the Ige family’s electric bills were “through the roof,” he says. “We were averaging $300 to $500 a month.”
So a few years ago, the Ige family did what an estimated 15 percent of homeowners in the state have done: They invested in a rooftop solar system. While environmental concerns also motivated them, the decision was driven mostly by financial logic — after they pay off their system, their electricity use will largely be free.
Since then, Ige has moved into the governor’s mansion, which also has solar power. From his new vantage point, he is working to help engineer a similar shift toward renewable energy for the state as a whole.
No one pretends it will be easy.
David Ige is both a politician and an electrical engineer in the crucial moment when the state faces a slew of defining decisions about how to generate electricity.
During a wide-ranging interview Friday in his executive chambers on the top floor of the State Capitol, the governor acknowledged that he is in a unique situation as he looks at the challenges ahead. He is both a politician and an electrical engineer in the crucial moment when the state faces a slew of defining decisions about how to generate electricity.
Choices made in the coming months and years could have repercussions on our cost of electricity, environment and quality of life for generations.
At the moment, Hawaii’s energy ecosystem is a remarkably uncertain place. The state has committed to “100 percent renewable” electricity generation by 2045, but no one can say with any precision how that will happen. There are major questions about what mix of energy sources will fuel us, and what sort of energy management and distribution systems will keep the power on as the state continues its shift away from oil-fired electricity generation.
There is also a notable gap in the technology necessary to make it all happen. We aren’t even sure who will own the power company, given that regulators won’t decide whether or not to OK the controversial $4.3 billion NextEra Energy purchase of Hawaiian Electric Industries until next year.
And, perhaps most importantly, we don’t have much idea of what it will all cost.
Amid all of this, the soft-spoken governor has been a strikingly visible advocate for change. It was his signature that made the 2045 commitment official after the Legislature, where he spent the previous three decades, passed it. His high-profile opposition to the NextEra-HECO deal and to efforts to import liquefied natural gas as a bridge fuel to generate power have created some the proposed merger’s greatest obstacles.
With so much uncertainty in the air, one fundamental question is: How will all of this looming change affect the cost of our electricity in the coming years and decades?
“I do believe that it can be less,” the governor says.
For one thing, the price of solar panels are expected to continue to drop. Ige noted they cost about one-third of what they did just three years ago.
He says energy industry experts believe the cost of panels produced in China will decline further as technological improvements and increased production continue. Such cost reductions can result in better deals in the islands.
The declining cost of oil may also be playing a significant, if somewhat counterintuitive role. The rapid drop in oil prices since mid-2014 has trickled down into lower electric rates in the islands since oil is used to generate about 70 percent of Hawaiian Electric’s power. When electric rates drop, there’s less reason for residents to invest in rooftop solar systems.
“I would say that (electricity) definitely feels a lot more affordable than it was a year ago.” — Gov. David Ige
But Ige believes that solar providers have responded to dropping oil prices by demonstrating they can provide rooftop photovoltaic at prices that are comparable or less expensive than oil, even at reduced prices.
This, says Ige, is a first. “It does create an incentive for people to ensure that these renewable projects are coming in at lower and lower costs,” he said.
The ultimate question remains: Will we ever enjoy affordable electricity in the islands?
“I would say that it definitely feels a lot more affordable than it was a year ago.”
And, according to HECO, the price of the average monthly bill has fallen from more than $200 to less than $140. That said, HECO customers’ electric rates remain about two and a half times higher than the mainland average.
There is no denying that money saved is an improvement, and the governor said he believes current prices can be sustained. “Is this the kind of pricing that we can look forward to on a going-forward basis? I do believe that (it is).”
Ige became a strong opponent for the HECO-NextEra merger in July when he came out forcefully against the merger based on what he knew at the time.
He questioned whether the Florida-based NextEra was really committed to Hawaii’s newly passed renewable energy goals. NextEra insists that the company is all-in for making Hawaii into a renewable energy Mecca.
But the governor, even now, is not convinced.
He wants NextEra to provide specific commitments, such as on the scale of investments the company will make in the islands.
Asked whether he could still change his mind on the deal, the governor suggested there is still time, but sounded doubtful.
Ige concedes he hasn’t read through what he described as the 60,000-page docket. But he says state agency officials have, and they are waiting to see what comes out of a series of hearing before the Hawaii Public Utilities Commission that are set to begin later this month. It is the PUC, not the governor, that has final say over whether the deal will be approved.
Ige also continues to oppose the use of less-expensive liquefied natural gas as a bridge fuel for the next few years until more renewable sources come on line.
“If we had a solution today for (energy) storage, then game over; 2045 would not be an issue at all.” — Gov. David Ige
Given the governor’s skepticism, is there any sort of clear backup plan if the deal falls apart? After all, the 2045 renewable commitments will remain regardless.
Ige notes that HECO has submitted testimony to the PUC that the company will be able to meet the 2045 goal even if the NextEra deal falls through. He thinks other players would step forward and partner with HECO.
But the company’s business model has to change, Ige said.
Hawaiian Electric Co. President and CEO Alan Oshima said in a recent interview that crucial changes are already taking place within his company, but that the process would take place much faster if the merger were approved.
So where does the governor believe the impetus for change would come from if HECO emerges from a failed merger attempt?
“I do think that lots of (HECO’s transformation) will end up being internal. I don’t think that it’s all that different than the cultural change that I’m trying to engineer in state government. It is really about embracing the employees and ensuring them they are part of the solution. And the best ideas about how to move forward would come from the employees.”
While generating electricity from renewable sources won’t be a problem, storing energy to be used when the sun isn’t shining or the wind isn’t blowing will be.
Ige says the bigger challenge facing the utility business going forward is storage.
“If we had a solution today for storage, then game over; 2045 would not be an issue at all,” the governor said.
Reliable and cost-effect storage isn’t available yet, and utility-scale storage is too expensive to be viable, he said.
Home storage systems are being developed and are coming down in price, although some are within reach of only wealthy customers. But competition within the battery storage industry is expected to bring costs down, Ige said.
“I guarantee you that the price of storage in the next 30 years will get to a point that will make it economically viable,” he said.
Other power sources, like pumped hydropower and geothermal energy, could also help fill energy production gaps, according to Ige. Both are well understood and have well-established cost structures.
Ige does not disagree with the PUC’s recent decision to cap the so-called net metering program that allowed solar customers to sell their excess energy back to the utility at very favorable rates, meaning some people were paying off their systems in less than five years.
The PUC grandfathered in people who already had a permit for their systems but cut the incentives for new installations. That has prompted prominent solar companies to try to overturn the decision in court.
But the governor made clear he believes the solar market has matured enough so that taxpayer support is no longer necessary to spark momentum for solar.
“I do think that the penetration of solar is a direct result of the tax credits and some of those incentives, and clearly Hawaii is leading the country in penetration,” Ige said.
“But the flip (side) of that is when you look at the tax credits and some of those kinds of incentives, when you have return-on-investment calculations that are less than five years … maybe that was too generous.”
The impact that energy prices have on Hawaii is significant and Ige is well aware that there is a huge public interest in what happens.
“It really, for the longest time, has been a huge factor in the cost of living here in Hawaii,” he says.
If Hawaii does manage to shift away from oil-generated electricity by 2045, the governor says as much as $2 billion per year that is paid to far-away oil producers could instead be spent on energy generation, distribution or storage in the state to speed up and smooth Hawaii’s transition.
But the remarkable level of interest in sustainable energy in the islands isn’t just about costs.
The governor believes that people in Hawaii “do care more about the environment than in most areas.”
“Because we live in Hawaii, we all have an appreciation and I think we can relate to the fact that burning fossil fuels is going to impact sea-level rise, which will have a tremendous impact on our community. I do think it is partly our environmental consciousness, our wanting to do better by the environment in general.”
But, he acknowledged, it is also about “how it impacts me and my neighbor’s bottom line.”
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