Wednesday, November 30, 2011


Cost of electricity is silent factor in Hawaii energy policy

by Larry Geller

Civil Beat reporter Sophie Cocke has posted a story this morning on the Big Wind project that hints at increased costs for electricity on Oahu—where electric rates are already, as the article notes, triple the national average. 

Read: Time Running Out For Hawaii Wind Farm Grant (Civil Beat, 11/30/2011).

The same author red-lighted the earlier biofuels option that promised to suck money out of each of our wallets in her story Hawaii Biofuels Option Could Prove Costly (Civil Beat, 8/15/2011).

Green energy projects are important to both reduce the amount of coal and oil Hawaii imports and to ultimately reduce our high energy costs. Energy costs already suck away part of retiree’s savings, make it harder to send kids to college, and contribute to chasing away business from the islands. So it’s important that we not only have full transparency on these plans but have the ability to participate in decisions that affect our pocketbooks.

There are many alternatives in today’s green energy market. Are we making the best choices? Can we count on greed (on the part of energy companies and developers) to keep our best interests at heart?

Watchful pressRead energy-related articles that have appeared here on Disappeared News and on Civil Beat to learn both what is happening and what is being kept from you.

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Larry, why are “green energy projects” important when they are ultra-expensive? And why not increase the amount of coal that Hawaii imports because it is ultra-cheap at 3 cents/kWh (and combined with OPXBIO its CO2 emissions produce $2.50/gallon drop-in transportation fuels with a *negative* carbon footprint to save the planet)? If you object to mining coal because it is *dirty*, to be consistent shouldn’t you objective to mining rare earth metals for wind turbine magnets n1 & solar panels manufactured in China n2 because they too are likely even *dirtier*?

Is there something ideological or dogmatic going on here? Is Hawaii doing “green energy” for its own sake? Has there been a conspiracy in that provision 8 of the Hawaii Clean Energy Initiative makes coal taboo, and provision 36 authorizes a public awareness campaign? n3 Has Hawaii been subject to sophisticated propagandistic brainwashing (e.g., “reduce the amount of coal Hawaii imports to ultimately reduce our high energy costs”), and are green energy projects just a huge tax credit scam?

Even more amazing is how HECO is benefitting from decoupling and the Energy Efficiency Portfolio Standard (EEPS) in which their new business model is transmission & distribution (T&D) and backup power generation. Like the tail wagging the dog, intermittent wind & solar is now wagging HECO in that it is the catchall to ensure reliable service.

The beauty of decoupling for HECO is that it perversely rewards *economic inefficiency* in that over-investments and screw-ups are incorporated into its rate base. Here an example of over investment is that both wind & solar (and interisland cable) will be *useless* during HECO’s peak demand event of post-sunset muggy Kona weather days when everyone comes home from work and blasts their air conditioner—in that there will be a massive duplicate fuel-based infrastructure with low fixed-asset capacity utilization (i.e., non-revenue generating assets that are idle for most of the year).

For the Energy Efficiency Portfolio Standard, its purpose is to justify a smart grid which will likely have massive software development cost overruns – perhaps in perpetuity. The beauty of decoupling here is that rather than waiting until the smart grid is completed before capitalizing its software development cost, it is capitalized into the rate base as expended. In other words HECO has the perverse incentive that the larger its over-investments & cost overruns, the larger its rate base (and hence earnings).

Proof of all this is HEI’s investor presentation in which it forecasts a *5% average growth (5-year CAGR) of its rate base* n4 which translates to a 5% average growth in earnings -- which translates to a 5% average growth in HECO ratepayer bills. And again, all this with *zero* business risk with decoupling’s perverse incentive of capitalizing over-investment & software development cost overruns into HECO’s rate base. Brilliant! HECO did exactly what folks like Henry Curtis demanded and judo flipped it to its benefit.



n3 See Acrobat pp. 18 & 44.

n4 See Acrobat p. 27

Thanks for your comment.

I hope people will learn about this issue, and that discussions might be held somewhere with expert resources available.

There must be a way to go green without going broke.

Oops, regarding "energy security," note that the United States is the Saudi Arabia of coal with the world's largest coal reserves. So with coal being ultra-cheap & energy secure, using the code word “fossil fuel” to conflate coal with oil is intellectually dishonest.

Another perverse unintended consequence of Hawaii's green energy policy is that HECO has planned a massive 215 MGY purchase of biofuels for its fast load-following generators to compensate for the intermittency of wind & solar n1 which given Hawaii's limited land & water crowds out biofuels for transportation (the remaining two-thirds of Hawaii's oil consumption) -- thus dooming Hawaii to be addicted to oil.

Most shocking is HECO CEO Rick Rosenblum saying that when the HCEI Agreement was signed in 2008, "we don't know how to do this." n2 Yikes! No wonder Hawaii’s green energy policy is a public policy disaster with no end in sight to increasing electricity rates!

n1 See slide 6

n2 Jump 21:20

Coal is cheap only to the end user. Coal is destroying the State of West Virginia along with it citizens. The burning of coal is destroying the environment and with that causing many health related diseases. Coal is subsidized by tax payer dollars. The coal industry has managed to internalize the profits and externalize the costs to humans and the environment. Coal is expensive and dangerous. Coal is cheap only if you pretend it is cheap.

Question of Values: PV & wind turbines are cheap because they are made in China. PV manufacturing & rare mining for wind turbine magnets are destroying China along with its citizens. The manufacturing of PV & the mining of rare earth metals for wind turbine magnets are destroying the environment and with that causing many health related diseases. n1 n2 PV & wind are subsidized by U.S. & Hawaii taxpayers. The PV manufacturing & rare earth mining industries have managed to internalize the profits and externalize the costs to humans and the environment. PV & wind energy are expensive for Hawaii, and PV manufacturing & rare earth mining for wind turbine magnets are dangerous. PV & wind energy are *not* cheap for Hawaii while HECO pays coal-burning AES Hawaii *only* 3 cents/kWh.

Obviously whether coal is acceptable is a question of values (at least the United States has EPA & OSHA to protect the environment and ensure worker health—whereas China does not). In October HECO charged Oahu residents 33.1 cents/kWh with no end in sight for future increases. IMHO this 11:1 economic gap is *economic injustice* to struggling working families, fixed-income retirees, and ratepayers-at-large.

Question to Old Diver: Are you willing to stand before the villagers (e.g., PHOCUSED, AARP) when they pick up their pitchforks & torches when they learn of this *economic injustice* that has been perpetrated on them and defend your opposition against coal?

p.s., Apologies for reposting the footnotes below but it is for completeness.



Coal is destroying the village of West Virginia and other coal mining villages by poisoning the water supply, contaminating the air, and removing mountain tops . Coal is killing the villagers in those states. Coal is has destroyed the quality of life of those villagers. The question we must ask ourselves as a nation is, are we going to exploit those villages so we can have what we falsely perceive to be cheap energy.

Old Diver, you ask the right questions. I think you also know the answer. Are we going to exploit those villages? So far, yes. To heck with their mountain tops. It's the American way. And I'm not being sarcastic.

OBSCENE 11:1 Economic Gap in inflicting Avoidable Suffering: October 2011 HECO Residential Rate of 33.1 cents/kWh vs. AES Hawaii Coal-fired Generation of 3 cents/kWh. “Minimize avoidable suffering” (followed by “maximize the freedom of individuals to live as they wish”) are the guiding principles for public policy put forth by Sir Karl Popper’s The Open Society and Its Enemies.” n1 Popper’s open society is all about pragmatism (i.e., problem solving) and its enemies are ideology/dogmatism (i.e., solutioneering: e.g., Plato’s traditionalism, Hegel’s tribalism, Marx’s utopianism). n2 [Yes, I’ve read Popper’s Open Society cover-to-cover which is why I am speaking out!]

Responding to Old Diver, as I said above the question of coal in Hawaii is a *question of values*. Yes, I am sensitive to the plight of West Virginia villagers but *they too* live in an open society (the United States of America) in which *they* (through their elected representatives in Congress & State government) have the power to strengthen EPA, OSHA and West Virginia regulatory rules regarding environmental protection and worker health & safety (which is *unlike* what is happening in China regarding PV manufacturing & rare earth mining for wind turbine magnets). My point is that if indeed there are environmental & worker injustices committed in the State of West Virginia it is at the “consent of the governed.” So in an open society like the United States (versus a dogmatically closed society like China), if your *beef* is about the undesirable repercussions of mountain top removal on West Virginia villagers, I urge that you take your complaint to West Virginia’s elected officials (and *not* get Hawaii involved [plus Hawaii does *not* import coal from West Virginia so your complaint specious]). [To be ideologically consistent, because PV panels & wind turbines now largely come from China, you should advocate banning PV & wind imported from China.] To emphasize, America is an open society -- unlike China which is a closed society. Put another way Old Diver, who are *YOU* to say what West Virginians want given that they are citizens in an open society (versus the Chinese manufacturing of PV panels & mining of rare earth metals for wind turbine magnets in a closed society)?

Getting back to Popper’s guiding principle of “minimizing avoidable suffering,” Old Diver given your sympathies with the plight to West Virginian villagers in which your *utopian* vision is to eliminate all coal mining -- how can you justify a wind- & solar-centric driven OBSCENE *11:1 economic gap* between HECO’s October 2011 residential rate of 33.1 cents/kWh & HECO paying coal-burning AES Hawaii *only* 3 cents/kWh? To me this OBSCENE 11:1 economic gap is an *ECONOMIC INJUSTICE* inflicting “avoidable suffering” on Hawaii’s struggling working families, fixed-income retirees, and ratepayers-at-large (again, would you be willing to go before PHOCUSED & AARP to argue why this *OBSCENE* 11:1 economic gap is in their members’ interests [remember these villagers have torches & pitchforks, and you could be lynched!]). IMHO, this *OBSCENCE* 11:1 economic gap in inflicting avoidable suffering is not right, not pono.



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