Hawaiʻi is weighing one of its most consequential energy decisions in years: whether to invest billions in infrastructure to import liquefied natural gas for O’ahu’s power plants or continue to use oil.

Both paths require that our aging generation fleet be upgraded or replaced. And while the market price of LNG is lower than oil, importing it requires new infrastructure. The Hawaiʻi Natural Energy Institute analysis indicates LNG is likely to have only a small impact on electricity rates either upward or downward, depending on timing and final cost of the infrastructure. This means that other issues, besides cost, should drive the decision.

Proponents point to substantial savings for ratepayers. In January 2025, the Hawaiʻi State Energy Office released a study projecting that switching to LNG could lower electricity rates by more than 15% and cut CO₂ emissions by 40%. In March 2026, JERA — Japan’s largest power generation company, now in a strategic partnering agreement with the state — released a proposal projecting savings of up to $170 million per year and an even larger 20% reduction in household electricity bills. 

These potential savings were widely reported in the press. Then, at a March legislative briefing, significant errors in the HSEO study were identified, prompting HSEO to revise its report. In May, with those errors corrected, HSEO issued a revised report claiming an 11.4% decrease in residential energy costs for a scenario. 

To evaluate these claims, the HNEI built its own benefit-cost model, evaluating more than 70 scenarios for Oʻahu by comparing various combinations of power plant repowering, fuel switching, load growth, and renewable deployment from 2030 to 2045. When HSEO’s ambitious timeline and fuel price assumptions from the revised report are used, the HNEI model shows slightly greater total savings than HSEO’s ($730 million vs. $651 million) but a much more modest ratepayer savings of less than 3%. 

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What’s Driving The Differences

The widely varying forecasts of ratepayer savings are the result of errors in converting from operational cost savings to rate savings. HSEO uses their timeline and costs assumptions to estimate the cost savings for each MWh of electricity generated using LNG. HSEO then erroneously applies those savings to every MWh of electricity sold by the utility, including utility-scale renewable energy. When the savings are applied only to electricity generated from LNG, the HSEO and HNEI results are in close agreement, yielding savings of approximately 1 cent/kWh, or about 3% of the average bill.

JERA has also mischaracterized the impact of production cost savings on ratepayer savings. JERA’s identifies a higher estimated savings than HSEO — $170 million per year. However, if that saving is spread over projected utility sales, the estimated ratepayer savings is about 6%, not 20%. HNEI’s analysis also shows that these modest savings disappear if there are project delays or cost overruns.

The common thread across the three studies is that, when ratepayer savings are correctly calculated, bills are unlikely to move significantly up or down, despite the multibillion-dollar investment and large infrastructure risk. There are several reasons for this.

First, more than two-thirds of the roughly $2 billion price tag under the JERA and HSEO plans is for new power plants, investment that will be needed with or without LNG. Second, fuel costs make up only 30% to 40% of the average electricity bill; the rest pays for power plants, poles and wires, renewable energy contracts, and utility overhead, none of which changes when the fuel changes. Third, as Hawaiʻi generates more of its electricity from renewables, fuel use and with it any savings from LNG steadily shrinks.

What Should Drive The Decision Instead

If converting to LNG will not move bills more than a penny or two per kWh in either direction, the decision should focus on other considerations:

• Renewable integration. One argument that has been made is that LNG will make it easier to integrate large amounts of renewable energy. In reality, modern, flexible generators are equally suitable to be paired with solar and wind whether they burn oil or LNG.  Batteries, like those already installed and currently approved also provide significant flexibility. Grid flexibility is not a reason to choose one fuel over the other.
• Reliability. HNEI’s grid analyses show Oʻahu cannot keep the lights on with wind, solar, and batteries alone; some firm generation will be needed. Hawaiian Electric Co.’s proposed repowering projects at Waiau and Pearl Harbor, and the proposed LNG plant at Barbers Point, would deliver comparable system reliability, regardless of fuel.
• Emissions. LNG burns cleaner than oil, but nearly two-thirds of the HSEO’s projected emissions reductions come from the improved efficiency of  new power plants. These reductions would be realized regardless of fuel. Lifecycle emissions from in-state re-gasification and methane leakage further shrink the advantage. Faster renewable deployment would cut emissions more than any plant repowering or LNG conversion.
• Price stability and fuel diversity. While a second fuel would diversify supply, and could provide some protection against fuel shortages, most LNG contracts remain linked to oil prices and are exposed to the same geopolitical shocks driving oil-price volatility. The argument has also been made that locally available LNG could serve marine shipping, spreading costs beyond electricity customers, but shippers will almost certainly continue buying fuel at cheaper ports rather than from a more expensive local facility.
• Refinery impacts. HECO is an anchor customer for PAR Hawaiʻi’s refinery. Significantly reducing its fuel purchases could affect availability of gasoline, aviation fuel, and other petroleum products, impacting Oʻahu and the neighbor islands. Impacts on refinery operations deserve further analysis.
• Post-2045 fuel use. HSEO and JERA highlight potential reuse of LNG infrastructure for hydrogen, but any new oil or LNG fired plant would be similarly fuel-flexible. It is unclear what fuel will be available after 2045 to meet the State’s 100% renewable mandate. Remaining flexible to future options may be the best strategy.

Converting to LNG will neither save nor cost ratepayers a significant amount on their bills. That does not mean LNG should be dismissed out of hand. Hawaiʻi faces real questions about affordability, energy security and long-term fuel availability. But those questions must be answered using accurate numbers — not savings claims that do not add up. Hawaiʻi’s families and businesses will live with this decision, its costs, and its secondary impacts for decades. They deserve an honest accounting before the state commits.

ABOUT HNEI: The Hawaiʻi Natural Energy Institute, an applied research unit of the University of Hawaiʻi at Mānoa, has spent more than 20 years analyzing Hawaiʻi’s energy policy and grids, working alongside Hawaiian Electric and the Public Utilities Commission. Its LNG benefit-cost model and supporting analysis are available to stakeholders on request.