Tuesday, April 09, 2013


Liquefied Natural Gas (LNG) is a double-edged sword

By Henry Curtis
Ililani Media

Besides the fracking issue, if both HECO and Hawai’iGas import LNG because of its low price, then HECO can use LNG to generate electricity, while Hawai`iGas will ship it through their downtown Honolulu pipeline system.

The Hawaii Consumer Advocate notes that "HECO and Hawaii Gas, formerly The Gas Company, are  both carefully studying the  possibility of importing LNG for electricity generation." The Consumer Advocate goes on to say that "given this currently low price, LNG offers  potential lower cost electricity generation for Hawaii’s consumers.”

In other words, Hawai`iGas would rely only on LNG, so if the price of LNG were lower than other fossil fuels, Hawai`i Gas could offer substantial price reductions to its customers. Since HECO’s electricity prices would be based on both high and low cost fuels, the total price of HECO’s electricity would not change as much.

Commercial and industrial customers could rely on the Hawai`iGas pipeline system to get gas delivered to their buildings. These customers could install on-site combined heat and power  (cogeneration) units which can convert 90% of the energy content of LNG to useful heat and electricity.

Commercial and industrial customers will also be able to choose to stay attached to the HECO grid and to rely on utility generators which are 20-40% efficient. Most of the energy content of the fuel burned in a utility generator is lost as heat, either up the smokestack or out to sea through an outfall pipe.

Many of these large users will find the Hawai`iGas option to be much more desirable, and will severe their electrical connection with HECO’s grid.

HECO has fixed costs for all of their investments. These are divvied up among HECO’s ratepayers. As large customers leave, those remaining will have to pay higher rates to cover these fixed costs. As part of the Hawai`i Clean Energy Initiative (HCEI), the Public Utilities Commission recently enacted a decoupling mechanism which automatically raises rates to cover this contingency.

As rates rise, more residential customers will install photovoltaic systems and energy efficiency devices driving down their own individual bills.

The decoupling mechanism will kick in again, driving rates even higher for those who are unable to install photovoltaic systems and energy efficiency devices. More and more people will then self-generate.

Eventually HECO will collapse under its own weight.

Hawaiian Electric Industries (HEI), the holding company which owns HECO, MECO and HELCO, has  already informed the U.S. Securities and Exchange Commission (SEC) about the possibility that self-generation will put the utilities out of business.

Hawai’iGas  is courting HECO as a customer for LNG.

HECO, MECO and HELCO are currently involved in a one-year Public Utilities Commission led process called Integrated Resource Planning (IRP). The HECO Companies are in the process of developing a 5-year Action Plan and a 20-year Strategic Plan. HECO believes that their generators could be converted to using LNG in 2020. Alternatively, they could rely on locally grown biofuel.

The Hawaii Governor just gave state money to a private interest to use genetically engineered microbes to convert various crops, including genetically modified crops, into biodiesel. The biodiesel could then be burned in utility generators to make electricity.

The installed price of photovoltaic systems is dropping 5-7% per year. The price of lithium batteries is also dropping. Thus solar/batteries might be the solution of the near future. As part of the IRP process, HECO has run hundreds of computer simulations, but not one has involved batteries.

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There are other health problems associated with LNG. Those with respiratory & chemical disabilities would have major problems, never mind, "equal access" problems in public buildings. It's the same old problem, old men thinking in liquid petroleum terms instead of envisioning new technology.

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