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Ian Lind • Online daily from Kaaawa, Hawaii

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Energy costs, air fares, and our tourism-dependent economy

May 30th, 2011 · 27 Comments

I couldn’t help but notice an AP story on airline fuel costs in today’s Star-Advertiser.

U.S. airlines burn an average of 22 gallons of fuel for every 1,000 miles each passenger flies. At $3.03 a gallon, airlines are currently spending $330 per passenger just on fuel for a 4,950-mile transcontinental round-trip.

This can’t be good news for Hawaii’s tourism-dependent economy, as airlines have responded by raising fares and cutting capacity, and discretionary spending (think “Hawaii vacations”) for most Americans falls in order to compensate for rising gasoline costs.

Hawaii will survive the current spike in energy costs.

But what happens when the cost of oil jumps to new highs in the $200/barrel range? It would seem that this is only a matter of time. And where will Hawaii be when that happens?

I asked Chuck Smith, an old friend who delves into social and financial issues on his very insightful and well-respected blog (Of Two Minds), if he had any thoughts on how a future oil crunch will impact Hawaii. Here’s his reply.

Hi Ian:

Interesting question, and a difficult one for the reason that the end price of jet fuel and gasoline moves not just with the cost of oil but with speculative demand and also refining costs. And the price of oil in dollars can rise or fall in terms of the dollar’s relative value vs. other currencies. So oil could rise for those of us using dollars while it remains stable when priced in other currencies. (Or it could fall for us if the dollar strengthens.) Gasoline topped out at about $4.60/gal when oil hit $147/barrel, but that ratio is not set in stone. Gas could easily hit $6 on the mainland if oil goes to $200/brl, and of course it would probably be higher in Hawaii.

Even with oil around $100-$120/brl the airlines are charging up to $500 fuel surcharges on flights to Europe. It doesn’t take much imagination to see $1,000 for west coast to Hawaii round-trip flights becoming “the new normal” if oil creeps higher.

There would be two follow-on effects for Hawaii of $200/barrel oil: the already outrageous cost of living would jump, further marginalizing many households, and the “discretionary spending” that fuels tourism would decline, at least for the 90% of U.S. households who don’t own substantial financial wealth.

To the degree that Hawaii’s economy has become increasingly dependent on imported food (no local dairies now, etc.) and tourism, then that would be a double-whammy. If oil goes to $200/barrel, what’s to keep it from going to $300/barrel? Once it goes into shortage, then I think rationing a la 1973 will be the only viable choice. I can easily imagine strict gasoline rationing and also a rationing of airline travel.

I know there is a lot of disinformation about Peak Oil and a lot of disbelievers, but anyone reading these articles with an open mind can see the trend is obvious: supply will decline as costs of extraction rise dramatically.

http://www.marketwatch.com/story/arab-oil-faces-higher-break-even-price-2011-05-29

http://online.wsj.com/article/SB10001424052748704436004576299421455133398.html

In the WSJ article, Chevron spends $234 million to fire up a well that supplies 1,500 barrels a day–a completely trivial quantity of oil on a global scale–and that doesn’t account for the ongoing costs of heating steam to 600 F and pumping it thousands of feet down the well. Do the math on how much capital it will take to extract meaningful quantities of heavy oil in a global economy dependent on 88 million barrels a day just to maintain the status quo and you get an idea of the fragility of current supply. For context, the U.S. consumes around 18-19 million barrels of oil a day.

I have been mulling the (long) Life of the Land report on Hawaii’s energy future (I can’t find the link at the moment) which concluded that ocean thermal energy is the best large-scale alternative. That has only been proven in small test projects but it has a lot of advantages if it could be scaled up. It is out of sight (unlike huge wind turbines) and is available to all islands, precluding insanely expensive fantasies about transferring electricity from Lanai (the new “energy ghetto” for the state, it seems) to Oahu via a $400-$600 million cable. (Nobody seems to recall that huge quantities of power are lost in transferring power over long lines, and nobody knows how much such a cable would actually cost.)

Everybody in today’s ideological climate wants “private capital” to supply the money for new energy, but “private capital” only wants a sure thing, so nobody will gamble $500 million on ocean thermal energy. Only the state has that ability, but with every state constituency trying to protect its share of the revenue stream then that seems “impossible.”

How about what happens when oil is rationed or unavailable in quantities sufficient to meet demand? Is that also “impossible”? How will the state government respond then? Many people seem to forget that government’s role is to step in when the risk is too great for private capital. DARPA (Defense Advanced Research Projects Agency) “invented” the Internet with its funding, for example. Once the technology is developed, then private capital happily rushes in to profit. But some government guidance and oversight remains necessary.

I know some readers resent any commentary from “mainland haoles” regardless of any other conditions, but as a former resident of Lanai I resent the notion that’s it’s OK to turn Lanai into an energy ghetto to serve Oahu, and I also resent the fantasy-based ideas of undersea cables moving power from this new energy ghetto to Oahu. Where are the similar cables at comparable depth and distance elsewhere in the world? How much did they cost when all was said and done? What is their reliability?

If anyone starts asking the hard questions, then the idea that the “solution” is energy ghettos on Molokai and Lanai fall apart as wishful thinking.

Rethinking Hawaii’s dependence on oil (and coal for electrical generation) requires rethinking the state’s role and “politics as usual” on a profound level. What happens if private capital isn’t able to “save” the state with science-fiction “solutions”?

Whenever people start talking about undersea cables and energy ghettos on the outer islands, I always suggest putting a solar panel on every roof on Oahu as a first step. The first rule of power generation is generate it close to consumers so you don’t throw away 40% of it in transmission.

When I post this kind of thinking on “progressive” blogs in Hawaii, they get deleted. That tells me the Status Quo is already wedded to fantasy “solutions” which don’t threaten the current political and financial power structure.

This is not a well-organized essay, but it’s a meditation of sorts on what $200/barrel might mean for Hawaii.

warm regards,
chuck

What do you think?

Tags: Business · environment · Politics

27 responses so far ↓

  • 1 Richard Gozinya // May 30, 2011 at 8:58 am

    More and more we are becoming a nation of haves and have-nots and the disparity of wealth between the two groups is both shameful and frightening.

    As touched on in your post, increased energy costs will place a crushing burden on the average guy and gal. For the top small percent the higher costs will simply be a filter that keeps those private gated enclaves closed tight against the unwashed.

    Going forward, I foresee an even more bifurcated society, with a growing share of cash strapped Hawaii residents serving the wealthy visitors; think Ko Olina on steroids.

    Not a cheery thought.

  • 2 chuck smith // May 30, 2011 at 9:04 am

    Here is a link to the LOTL report, and 52 questions from its director on undersea cables and other “solutions” presented by the status quo:
    http://www.hirep-wind.com/documents/scoping-comments/ngos_private_entities/Life_of_Land2.pdf

  • 3 Mike Middlesworth // May 30, 2011 at 9:33 am

    From everything I’ve read, I have to agree with Chuck. The Lanai proposal is a pipe dream. We should be investing our tax money in solar panels for homes, and doing all we can to develop geothermal energy. Pumped storage hydro power is another option, especially when you have geothermal plants.

  • 4 cwd // May 30, 2011 at 10:51 am

    One of the major problems with solar panels – at least in our neighborhood – is that the houses are single-wall and, on average, 50 years old. When the people who lived next door installed a solar hot water system a few years ago, they have to buffer up the walls and replace the roof first – thus increasing the price to over $20,000.

    When they sold the house two years later, they recovered their investment. For most homeowners and landlords, however, that is not feasible.

    Our landlord will not install solar water-heating even if we paid for it directly plus paid an increase in the monthly rent to cover the property tax increase.

    With so many people renting, O`ahu will never really be energy-efficient until new technologies are invented.

    meanwhile, we pay almost $1500 more per year for electricity than the renters next door even though we don’t have air-conditioning and a dryer which they do.

    Re the Lanai issue – Life of the Land considers itself green because it wants to reduce Hawai`i’s reliance on fossil fuels; however, it opposes biofuels, nuclear, windpower, geothermal, and solar arrays on ag land. OTEC is the answer, but there’s been virtually no movement towards using that renewable source in more than 35 years.

    Yes, the research has shown its potential, but there’s been virtually no private – or public – investtment in moving it towards a usuable, reliable, and acessible resource.

    What will Hawai`i look like in 50 years? Fifty years ago and today are not that much different, but 50 years from now, housing, transportation, education, communications, economic activities, and even war will be much different than it is today – and so will our environment.

  • 5 cwd // May 30, 2011 at 11:39 am

    Whoops!! acessible = accessible

  • 6 Doug // May 30, 2011 at 12:11 pm

    Wait, wait, wait. I’m eager to know which “progressive blogs” in Hawaii are alleged to have deleted Chuck’s comments about energy!

    Do tell, please.

  • 7 skeptical once again // May 30, 2011 at 3:20 pm

    I was initially thrilled with the Hawaii Clean Energy Initiative, but I started to get suspicious when it began to sound more and more like the David Murdock Initiative. I made it a hobby to find out just how much that undersea cable would cost, and the closest I came was a comment on one of these local “progressive” blogs that stated authoritatively that “the cable will pay for itself in one year”. The same sources are more or less now saying that it will “pay for itself in 30 years”.

    Because oil is priced in US dollars, one of the worst case scenarios would be if the dollar lost value and oil producers compensated for their lower returns because of this to raising the price of oil, which would spark inflation, further reducing the value of the dollar, etc., etc. This was an abstract fear back in the inflationary 1970s and in the wake of the Reagan deficits, but now it’s more real with the current national debt. Throw in peak oil and Arab uprisings and global warming impacting agriculture and you’ve got yourself a perfect storm — only it’s not a scenario dreamed up by the RAND Corp but on the front page of the newspaper.

    By the way, the Saudis bringing in Chevron to develop the extraction of heavy oil despite the nationalization of the oil industry in Saudi Arabia is not just a matter of tapping Chevron’s expertise. The Saudis would need to sell oil even without a profit just to keep the world hooked on oil and not turn to alternatives. As they say, “The Stone Age did not end because we ran out of stones….” The problem is that a lot of the alternative sources of fuel seem just as destructive and exploitive as oil.

  • 8 Corporate Greed // May 30, 2011 at 6:13 pm

    I tried to find a phrase to describe the state we are in. I came up with Green Greed. It does not matter if an energy solution is viable for the public or not. As long as corporations get government subsidies and government contracts, the projects are viable.

    In order to brainwash the public and the politicians, they hire social media gurus to turn even the stupidest idea into a warm and fuzzy PC trend. The windmill is one such trend.

  • 9 Corporate Greed // May 30, 2011 at 6:15 pm

    I’m not surprised you got deleted from some blogs. You are disrupting their propaganda agenda.

  • 10 skeptical once again // May 30, 2011 at 8:23 pm

    I think the term “Green Greed” is actually sometimes used, but not in a pejorative way. For example, Walmart has gone green and helped the environment as well as its own bottom line. It’s a win-win situation.

    What we have here in Hawaii is big time corporate “green scamming”. Not only is the Big Wind or any other “Big” project less viable as its scale increases, but it really is not green.

    What’s intriguing about the Big Wind project was that it was born in a moment of intellectual ferment locally as a skeptical eye was cast over the grand projects of the past. It was decided that we would commit ourselves to incremental, long-term projects that would not collapse when they hit a bumpy patch or a technical problem, and that would not become obsolete even as they came online. The culmination of that ferment was … just the opposite of what the preceding energy debate was about. It was back to the future, and back to all the wrong-headed type of policies that dominated the past.

    What is more intriguing is that the progressive rhetoric that cloaks all this corporate grasping is really rooted deep in Hawaii’s past. Certain members of Hawaii’s white elite like the German “sugar baron” Claus Spreckels were conservatives who supported the Monarchy, whereas the pro-democracy white American elite tended to oppose the monarchy. But once in power, this American faction did not exactly consummate their passion for democracy. So it seems to me that this tendency toward pseudo-liberal or pseudo-progressive rhetoric by the entrenched elites is deeply rooted in Hawaii, first in the Republican Party, and now in both parties. And they fund the media, both print and social.

  • 11 Yobo // May 30, 2011 at 9:20 pm

    This article on PBN today claims undersea transmission cable’s
    energy loss is just 5%. Now we know PBN is just as gullible as SA.
    http://www.bizjournals.com/mobile/pacific/blog/2011/05/how-much-energy-could-big-wind-produce.html

  • 12 Kolea // May 31, 2011 at 10:07 am

    Ditto.

    Which “progressive blogs” have deleted Chuck’s comments? Given how few local blogs there which might rightly be termed “progressive,” to leave this question unanswered leaves an insinuation hanging over those blogs, somewhat unfairly.

    “Skeptical once again” continues this effort to disparage “progressive” blogs, again without naming names.

    There has been a conscious campaign on the hard right, Glenn Beck is the most visible practitioner of the tactic, to badmouth “progressives” as akin to a fascists. Just as progressive politics are emerging as an alternative to neo-liberalism and its “Siamese Twin,” crony capitalism, it has become open season on the term. It’s a shame to see it here.

    I am in strong agreement that there is a corporate/political/public relations effort to “greenwash” a lot of projects as a means of sweet talking politicians and the public into granting these projects special dispensations they would otherwise not merit.

    One feature of modern “venture capitalism” is that the money is SO liquid. The same pool of investors, employing the same attorneys, public relations firms and sponsored politicians, can flit from fashionable investment to investment, depending upon which type of economic activity is hypnotizing the public imagination enough to suppress the collective critical judgment.

    We desperately need clean, alternative energy. In making the transition, we have an opportunity to break with the old pattern of monopolistic, crony capitalism. I believe “distributed generation” has the potential of decentralizing both energy generation AND wealth generation. But the default operation of our economy AND our political system tends toward reproducing the same structures.

    To see some “environmental” groups be co-opted by these forces is largely a sign of their desperation for both financial backing and SOME degree of “success” in the face of the looming environmental crisis. There is a great overlap and intersection of “environmentalists” and “progressives.” In my opinion, it is the “progressive” part of the environmental movement which is most skeptical of these greenwashed, crony capitalist initiatives.

    If we can drop these careless attacks on “progressives,” maybe we can come together and stop the corporate cooptation of the sincere public desire for clean alternative energy?

    Or we can fall for their “divide and conquer” campaign and help them undermine the legitimacy of “progressives” and their blogs.

    Your choice.

  • 13 Caroline B // May 31, 2011 at 1:03 pm

    Speaking only about the airfare issue relative to cost of oil:

    strangest thing now is the unadvertised and unbelievable fares to/from HNL to points all across the US. $458 r/t to ATL, $525 to NH (???). With the $330 cost of fuel quoted above for transcontinental, and those above include trans-Pacific as well, that means these are substantially lower than the cost of fuel–how can airlines make money?

  • 14 skeptical once again // May 31, 2011 at 1:30 pm

    Good point, and i should reveal that the blogs that wrote about the Big Wind project in glowing ‘environmentalist’ terms were not politically progressive or environmentalist blogs but mostly high-tech blogs, and the comments that the undersea cable would pay for itself in a year’s time was in the comment section.

    But you are correct, it’s hard to find a good progressive amidst all the corporate propaganda and greenwashing, so we shouldn’t indiscriminately cast aspersions.

    But here’s an interesting question: In Neil, we finally do have a progressive Governor, but what would the Hawaii Clean Energy Initiative have looked like if he had been at the helm rather than Lingle? More ambitious, less ambitious or just as ambitious but in a different way? And it’s funny that it was Lingle and later Aiona that made alternative energy their mantra, even while Lingle worked furiously behind the scenes to deregulate land use. Oh, those green Republicans, ever so closely tied to the aina.

  • 15 skeptical once again // May 31, 2011 at 1:49 pm

    The airlines cut fares when people stop travelling, because it’s better to have seats sold at fire-sale prices than be empty. The airplane is going to burn the same amount of fuel regardless of the number of passengers. (Before airplanes land, one can see jets of “steam” pouring from the wings, as the pilots evacuate the fuel tanks to lessen the risk of fire if there is a crash.)

    People stop travelling not only when air fares rise but when everything rises in price because of the cost of oil. High oil prices also mean people eat out less and stop going to the movies and decide not to buy the Cadillac Escalade they always dreamed of. When you are thinking twice before you drive to church or buy something at the drug story, you probably are not inclined to plan for a trip to Jamaica or Maui. Nor will you buy a new house far from the rat race as easily as you once would have; you might rent a place next to a central bus stop. This part of an energy crisis is a good thing.

  • 16 Kolea // Jun 1, 2011 at 8:29 am

    Here’s a question I can use help on: if Hawaii shifts away from fossil fuels for generating electricity and running cars and trucks, what happens to the price of jet fuel?

    So long as Hawaii is dependent on tourists flying here, our economy depends upon jet fuel derived from oil. I believe jet fuel is the most valuable part of a barrel of imported oil. Gasoline and other petroleum products might be viewed as “by-products” of the refining of jet fuel. The lowest value sludge is used for producing electricity.

    What will happen to the economics of jet travel if we no longer use burn the oil by-products locally but have to export them?

  • 17 Reddy Kilowatt Jr. // Jun 2, 2011 at 12:54 pm

    Coming late to this discussion but a couple of points:
    It is not either/or (that is either interisland wind or OTEC, either biofuels or geothermal, etc.) but as much as all of them as Hawaii can accomplish to reach the renewable requirements now in state law (with possible penalties to the utility if targets are not reached).
    Opponents of whatever technology think the utility is totally committed to whatever they oppose. Anti-big wind folks say that is ALL the utility wants to do; anti-biofuels folks say that is ALL the utility wants to do; and so on. Fact is, there is forward motion on all the possibilities, including OTEC.
    When discussing Big Wind, opponents say “use the money to cover every roof on Oahu with solar.”
    First, there is no pot of money waiting for Hawaii to figure out how to spend it. Investors will be sought (and likely found) to finance a cable, just as several companies want to invest in wind farms.
    Second, we need all the roof-top PV we can get up to the point that it damages quality and reliability of electric service. Affordable, large-scale energy storage is the elusive solution to most of these problems
    Third, it would take more customer-sited and utility scale PV (plus storage) than could realistically be installed to come near to what big wind can produce. Those who say just do roof-top solar instead have not thought through the complications.
    Chuck Smith asks: “I know some readers resent any commentary from “mainland haoles” regardless of any other conditions, but as a former resident of Lanai I resent the notion that’s it’s OK to turn Lanai into an energy ghetto to serve Oahu, and I also resent the fantasy-based ideas of undersea cables moving power from this new energy ghetto to Oahu. Where are the similar cables at comparable depth and distance elsewhere in the world? How much did they cost when all was said and done? What is their reliability?”
    Zingers like “energy ghetto” just hyperbole. A wind farm on Molokai or Lanai would have major impacts, some negative and some positive, and which is which depends on the observer. We have some great renewable resources in these islands, but in general they are not where the great demand exists. The beloved lifestyles on Lanai and Molokai owe a lot to the people of Oahu, who pay the bills for most public services on those islands. I am sure education and medical services, roads and airports, sanitation and so on those islands could be better, but for sure they would be far worse if they had to depend on the taxes paid on those islands. Everyone needs to recall early lessons about sharing and playing well with others.
    But to answer the factual question, there are 30 or 40 similar undersea cable systems around the world, North America, Asia, Europe. Some cables are longer and deeper (and some both longer and deeper) than under discussion here. One recent project (similar in some respects to what would be built here) was recently installed in San Francisco Bay in about five years at or near budget under $600 million. The channels between Hawaiian islands present some challengers, but none that can not be over come. Telecommunications cables are already numerous among the islands.
    No one could responsibly say the cost could be repaid in a year. Like any other infrastructure, it would be paid over the life of its use. There are companies in the undersea cable business that would likely accept the risk and finance the construction, to be repaid from user fees. One goal of a bill that narrowly missed passage last session (in conference committee when time ran out) is to protect the public by selecting a cable company through competitive bidding and making it a public utility whose rates would be regulated, just like the utilities.
    Some people oppose big wind if David Murdock or Castle & Cooke makes a penny on Lanai or landowner Molokai Ranch makes a penny from a wind farm there. “Corporate greed” is another of those zingers that get thrown around. Duh, corporations exist to make money. Murdock has screwed Lanai or save it, depending on your situation. Are these the best grounds to base a decision?

  • 18 Reddy Kilowatt Jr. // Jun 2, 2011 at 12:59 pm

    PS: Kolea raises the best question in the whole exchange. No one really knows what will happen when (not if) fossil fuel use falls below what’s needed to efficiently operate two refineries here. And no one knows what the military’s research efforts to replace jet fuel (and gasoline) with reneweable alternatives will do for our energy system. The military, still fighting and dying to preserve our fossil fuel way of life, has the greatest stake in cutting our dependence on imported oil, or any oil at all. We gotta hope the folks who brought us the internet are as successful in this effort.

  • 19 skeptical once again // Jun 3, 2011 at 7:11 am

    Ian, a story in today’s New York Times might be relevant. If we are to have renewable energy, and the most realistic form of that is simply home generation — and NOT for distribution in some sort of smart grid, but for personal consumption — then we need to do what is necessary to promote that. But not only does that require potentially unpopular subsidies, but it goes against the self-interest of the utility.

    Also, get ready for the coming propaganda campaign when the utility company might opt to spread lies when people want to get more off the grid by saying that 1) home generation is too complicated and expensive and 2) creating a new centralized grid will be paid for by outside investors and not by taxpayers.

    Here is some of the text:

    New York Times

    “Solar-Power Incentives Get Results but Are Rare”

    by Kate Galbraith

    For many Texans, however, there is good reason not to go with a solar option: generous local incentives that allow Ms. Hilliard to pay so little for panels projected to account for about two-fifths of her electricity use do not exist in most of the state. Environmentalists had hoped that Texas lawmakers would pass a bill this session to establish a statewide rebate for solar projects, financed by extra charges on electric bills. But it died without getting out of a House committee.

    Texas prides itself on being the national leader in wind power, and many renewable-energy companies are looking to this big, sunny state as the next frontier for solar power, which California currently dominates. But solar technology remains expensive: notwithstanding its environmental benefits, it can be twice as costly as coal or gas power on a nationwide basis before incentives. The recent fall in natural gas prices has made it even harder for solar to compete (although panel prices are falling, too).

    “I don’t really want to explain to my mother why she’s got another dollar on her bill,” Representative Byron Cook, Republican of Corsicana and the chairman of the House State Affairs Committee, said in an April hearing.

    A raft of solar incentive bills also died during the 2009 session.

    Nonetheless, some large solar projects are emerging. San Antonio began getting power from a 14-megawatt solar farm late last year, and in May a developer started building a 30-megawatt solar facility in Webberville, a small community near Austin (the power will be sold to Austin Energy).

    For both large and small projects, incentives can make a big difference. Ms. Hilliard’s installer quoted her a total cost before fees and taxes of $19,190. But an Austin Energy rebate reduced that amount by nearly $11,000, and another local incentive (from a smart-grid project) and a federal tax credit cut it further, to the final $4,438 estimate.

  • 20 Nicole // Jun 3, 2011 at 9:40 am

    The solution for renters might be a virtual net metering program, where you buy into a larger project and then have your share of the energy it produces deducted from your home usage. This would also have the advantage of letting people start investing with the money they have now, rather than requiring tens of thousands up front.

  • 21 Kolea // Jun 3, 2011 at 2:34 pm

    @Reddy,

    You last comment suggests what is at stake here. Who, in your mind, “brought us the internet”? And what were the incentives which motivated them?

    DARPA played a key role in providing the funding, but it was academics working mostly for their salaries and the intellectual challenge who laid the groundwork. The early internet was called “the Electronic Frontier” for good reason. It was a wild, anarchic, semi-legal place where individuals had the freedom to experiment and develop there hare-brained ideas with little interference, either from government OR from corporate owners. It was NOT the big names in either computing or telecommunications who invented the modern Internet: the World Wide Web.

    Sure, there were efforts to privatize, to figure a way to capture control of the internet and some fortunes have been made doing that. But much–perhaps MOST of the creativity happened DESPITE the efforts of corporations to monopolize the Internet. Unfortunately, where there were once thousands of ISPs, access has now been almost completely captured by a few telecom monopolies with very little competition between them.

    As the old technology for generating and distributing energy is dying out, corporate forces that had resisted the transition to alternative energy before are now trying to capture as much control of the emerging system as possible. In Hawaii alone, we export between $6 to $7 Billion every year to pay for imported fossil fuels. Of course, HECO, Murdock and the SOON TO BE ANNOUNCED foreign investors are scrambling to grab ahold of as much of that money as they can for themselves.

    I want to guard against relying too much upon utopian illusions of what distributed generation of power can achieve. But I also want to do what we can to try to prevent the emergence of new monopolies. Or, if they are needed as “natural monopolies,” to ensure they are regulated appropriately by agencies NOT captured by the companies being regulated.

    Frankly, some of our elected officials seem poised to “give away the store” to the wannabe new monopolists, using the excuse of “clean energy” to enrich the well-connected.

    The Old Order of generating power is dying. The New Order is struggling to be born. If we do not pay close and critical attention, we will be shafted by the owners of the new system just as we are being shafted by the interlocked monopolies which control an ever growing portion of the rest of our lives.

  • 22 Henry Curtis // Jun 3, 2011 at 3:21 pm

    Reddy Kilowatt Jr. wrote

    “It is not either/or (that is either interisland wind or OTEC, either biofuels or geothermal, etc.) but as much as all of them as Hawaii can accomplish to reach the renewable requirements now in state law.”

    Correct in a limited sort of way. We could reach our goal 20 times over. So we must choose which assets we want and in what amount. HECO has done just that. They have put together HECO’s portfolio. We can reach the goal using up to 20 different portfolios. HECO has chosen one method and dismissed all other methods. So for HECO there is no choice.

    “Opponents of whatever technology think the utility is totally committed to whatever they oppose. Anti-big wind folks say that is ALL the utility wants to do; anti-biofuels folks say that is ALL the utility wants to do; and so on. Fact is, there is forward motion on all the possibilities, including OTEC.”

    We are not anti-wind. We think it has its place. We are not anti-biofuel. We think it has its place. There is certainly motion on the part of the utility. They want large scale centralized systems owned by a few companies. We do not believe that is movement forward. Rather it is movement towards concentration of power.

    “When discussing Big Wind, opponents say ‘use the money to cover every roof on Oahu with solar.’ First, there is no pot of money waiting for Hawaii to figure out how to spend it. Investors will be sought (and likely found) to finance a cable, just as several companies want to invest in wind farms.”

    The military has been more aggressive than the utility in pushing photovoltaic.

    “Second, we need all the roof-top PV we can get up to the point that it damages quality and reliability of electric service.”

    That is true for every type of energy system. It should not damage equipment or threaten reliability.

    “Affordable, large-scale energy storage is the elusive solution to most of these problems”

    True.

    “Third, it would take more customer-sited and utility scale PV (plus storage) than could realistically be installed to come near to what big wind can produce.”

    The utility has never looked at this solution. Without looking or analyzing, it is easy to discover one’s own version of the truth. the

    “Those who say just do roof-top solar instead have not thought through the complications.”

    The major complication is the refusal of the utility to consider it. We have thought that through. It is a real problem.

    “Zingers like ‘energy ghetto’ just hyperbole.”

    As opposed to — If you oppose Big Wind you’re a NIMBY?

    “A wind farm on Molokai or Lanai would have major impacts, some negative and some positive, and which is which depends on the observer. We have some great renewable resources in these islands, but in general they are not where the great demand exists.”

    Every building in this State is exposed to solar, wind and hydro (rain). These resources exist on site. It is just that these locations are not being seriously considered by HECO.

    “The beloved lifestyles on Lanai and Molokai owe a lot to the people of Oahu, who pay the bills for most public services on those islands. I am sure education and medical services, roads and airports, sanitation and so on those islands could be better, but for sure they would be far worse if they had to depend on the taxes paid on those islands. Everyone needs to recall early lessons about sharing and playing well with others.”

    Sharing ideas means listening to the other side and discussing the options. Anybody can give a lecture.

    “But to answer the factual question, there are 30 or 40 similar undersea cable systems around the world, North America, Asia, Europe. Some cables are longer and deeper (and some both longer and deeper) than under discussion here. One recent project (similar in some respects to what would be built here) was recently installed in San Francisco Bay in about five years at or near budget under $600 million.”

    The world has a lot of various types of renewable energy and energy infrastructure that we do not have. We have a number of things the world does not have. We have the Aloha Spirit. We are the endangered species capital of the world. There are benefits to being a non-homogeneous world. Just because someone else has something does not mean that we need it. O`ahu has 41 story buildings. Is that justification for putting them of all of the islands?

    The channels between Hawaiian islands present some challengers, but none that can not be over come. Telecommunications cables are already numerous among the islands.”

    Anything can be overcome.

    “No one could responsibly say the cost could be repaid in a year. Like any other infrastructure, it would be paid over the life of its use. There are companies in the undersea cable business that would likely accept the risk and finance the construction, to be repaid from user fees.”

    The rate of return that ratepayers will pay these companies is between 13-20% per year. That is a higher rate than the utility gets. The premium would be paid because of the risk involved.

    “One goal of a bill that narrowly missed passage last session (in conference committee when time ran out) is to protect the public by selecting a cable company through competitive bidding and making it a public utility whose rates would be regulated, just like the utilities.”

    The public is not protected by secret negotiations involving secret prices in which all of the risk is transferred to the ratepayer. HECO has told the Public Utilities Commission that the cable will be an ‘interconnection facility.’ That is not a utility.

    “Some people oppose big wind if David Murdock or Castle & Cooke makes a penny on Lanai or landowner Molokai Ranch makes a penny from a wind farm there.”

    Do not belittle the issue. No one has mentioned pennies. Rather we are talking about billions of dollars.

    “’Corporate greed’ is another of those zingers that get thrown around. Duh, corporations exist to make money.”

    A few months ago HECO sought to cut back of the wages of its union. At the same time it was not very publicly announced that the upper echelon of HEII received pay hikes, short term incentive hikes, long term incentive hikes and bonuses. There is ‘reasonable profit’ and there is the Wall Street financial melt-down. There is a difference. It is called GREED.

    “Murdock has screwed Lanai or save it, depending on your situation. Are these the best grounds to base a decision?”

    History repeats itself for those who do not learn the first time.

  • 23 skeptical once again // Jun 3, 2011 at 4:39 pm

    @Kolea

    I too was perplexed by the comparison of the development of the Internet to the Big Wind project. From what I remember, the ARPANET was a military-financed RESEARCH project at universities, largely utilizing the pre-existing telecommunications infrastructure. In fact, isn’t the whole point of the Internet that data broken up into packets and scattered across the widely varying and heterogeneous telecommunications grid will eventually find its way to the address in its destination and recombine itself into its original form? In the event of a disaster, man-made or otherwise, the system would therefore “fail safely” rather than be “fail safe” — regardless of the infrastructure. As far as I know, much of the Internet boom consisted of the government funding universities, not funding corporations to build infrastructure. This culminated (as far as I know) in the 1990s with the Clinton administration (Al Gore?) partly financing classes in universities to teach students about the nascent WWW; these students went home and taught their parents and siblings and friends, spurring on the adoption of the Internet by the masses.

    Now, if private investors want to build an undersea cable and develop windfarms and link it all together with a smart grid, they should feel free to do so. The governments role should be limited to funding research (we need to do more of that) on alternative energy, educating students on its economic potential and scientific underpinnings (with a focus on quality teaching of math and science in the schools) and training workers in the field (especially training technicians in the home solar power and wind generation technology). Heck, even if David Murdock wants to be a bully and threatens closing a hotel or two (which he has done) to get his way, he should be allowed to do so as long as no laws are broken. I don’t even have a problem with the emergence of a private monopoly in power generation and distribution; if it happens, so be it, and let the corporations who invested in the infrastructure milk us for what we are worth.

    But when it comes to the socialization of costs and the privatization of profits, I say “Never!” No way. Let them pay their own way. Why should we pay for a system that will enslave us?

    The funny thing is that HECO was always notoriously complacent about developing alternative fuel sources. But it seems that the quid pro quo for ‘decoupling’ or ending the power generation monopoly in Hawaii was the creation of an alternative fuels monopoly of distribution. Suddenly there is a panic throughout the land about ‘peak oil’, which was dismissed by the local status quo up until recently.

    Personally, I just want to get as much off the grid as possible, and tell as many people as possible to try to do as much as they can to lower their energy footprint.

  • 24 Kolea // Jun 6, 2011 at 9:01 am

    Wow, that is clever!

    I don’t think calling it “virtual net metering” is a good idea. I don’t think it is “virtual.” It is quite real. But it is “collective” or “cooperative” or “aggregated.” (None of those adjectives are exactly right either).

    But I like the idea. “Conceptual block-busting” in action.

    Thank you, Nicole.

  • 25 Kolea // Jun 6, 2011 at 10:43 am

    @skeptical,

    I think looking to the development of the Internet is helpful as a model of what works–and what doesn’t– in technological development. DARPA was responsible for funding much of the research and infrastructure. Some of that research was directed at immediate, practical problems. But some of it financed very visionary research, as well. And most of the research took place in academia. Some of the most productive research in the private sector was also relatively freed from the drive to make an immediate profit. The development of the Graphic User Interface, by Xerox PARC, for example, led to the Apple interface and, eventually, the Windows system.

    While the internet started as a command line interface, eventually, GUI transformed the Internet experience.

    And the entrepreneuerial impulse, flowered most in the small startups, like Apple and Microsoft. Because Apple continues to be a fount of creative, transformative technology, they might serve as a counter-example to my central thesis that monopolistic, corporate privatization of research and development tends to stifle creative technological development. (I can live with that. It just provides a challenge to look more closely at what makes Apple stand out as an exception and learn from those particular features.)

    Under my model, HECO has been the major obstacle to the development of new alternative energy development in Hawaii. Ironically (far an anti-militarist like myself), the Department of Defense has been a major force for development of alternative energy, much like DARPA was responsible for many of the revolutionary developments in the Internet, computing and user interfaces, like Virtual Reality.

    Partly, that is because the Pentagon is “as rich as Croesus.” So they can throw a small portion of that money into research. And their research needed be aimed at making an immediate return on investment–a “logic” which now dominates most of the corporate world.

    Microsoft was VERY late to seeing the potential of the Internet. If they had had a stranglehold on computing and telecommunications, the Internet would be several generations behind where it is now.

    HECO is facing a serious economic challenge. As more and more people adopt small scale alternative energy: rooftop solar heating, photovoltaics, windmills, they free themselves from serfdom to HECO and the customer base of HECO shrinks and their profits along with that. But “more worse,” HECO needs to RAISE electrical rates on its remaining customer base to pay off their capital costs. This increases the incentive for even more customers to leave, deepening HECO’s crisis.

    So HECO has been using its considerable political influence, and its PR operations, to hobble the adoption of alternative energy. The BIG Wind project is an attempt by the m to use their remaining political clout to break free from the accelerating crisis they face and retain their position as a monopolist, rentier overlord. They are forced to reach an accommodation with other corporate forces, to cut them in on the deal, rather than lose it all.

    And too many of our politicians, partly because they are suckers for a good “high tech” appeal and partly because they have been conditioned to think primarily in terms of “reducing our dependence upon imported fossil fuels,” are willing to go along with the Big Wind project.

    I anticipate an announcement at the APEC conference, or shortly thereafter, that an outside MAJOR investor has been found to help fund the undersea cable and this will be treated as a major “solution” to removing a roadblock to the project.

    But this outside investor will require a “reasonable” rate of return from the people of Hawaii. either as “rate-payers” or as “taxpayers,” so the problem of the high cost of the undersea cable will really not have been solved at all. It will just mean a major jump in the “cost of paradise” being extracted by the corporate elite from the people of Hawaii.

    Centralized, heavily capitalized energy projects are somewhat akin to industrial, mono-crop agriculture. Just we need bio-diversity in agriculture, we need variety in energy development.

    Reddy Jr. pays mouth service to such diversity, but that strikes me as a PR move on behalf of HECO, for whom Redddy undoubtedly works. Push through a massive centralized project like Big Wind in the name of energy diversity. A clever ploy.

    Two cheers for small scale, competitive capitalism and entrepreneuership. Let’s create an atmosphere that promotes a “biodiversity” of solutions, experiments and adoptions of various alternative energy sources of various scales.

    But let’s avoid the new monopolies dreamed of by our current crony-capitalists and the aspiring wannabes. “Greenwashing” investment schemes in order to secure tax credits and subsidies from the politicians is just the latest iteration of a long established pattern.

    Let’s be more creative. Let’s have “A New Day” in Hawaii. A “New Beginning,” if you prefer. Not the same ol’, same ol’.

    Power to, and power FROM, the people!

  • 26 Reddy Kilowatt Jr. // Jun 6, 2011 at 10:52 am

    NOTE TO KOLEA, SKEPTICAL ONCE AGAIN AND ANY OTHERS WHO SAY:
    “I too was perplexed by the comparison of the development of the Internet to the Big Wind project. “
    Sorry for confusion. Tried to compare the military role in internet to military effort to find a non-oil liquid replacement for jet fuel. I hope the latter succeeds like the former. Troops are dying and billions spent because we’re so thirsty for oil; jet fuel is one major use with a replacement technology that still seems far off. Some planes have flown on biofuel, but we have a long way to go.
    Onward. Who knew Mr. Curtis was such a kidder? Anyone who’s tried to read his endless filings or blog posts will get a charge (forgive bad pun) from his admonition not to “lecture.”
    Mr. Curtis has two main ideas for Hawaii’s energy future.
    1) Ocean thermal energy conversion. Enticing potential that seems technologically possible (on tiny scale so far) and would provide firm power.
    2) Distributed generation. Require residents and businesses to produce their own electricity to reduce business for “greedy” utilities and other companies that make electricity.
    But wait!! These ideas are in diametric contradiction to one another.
    1) OTEC, if it happens, is the epitome of large-scale, central station, corporate generation. Development will be risky (in the financial sense) requiring a deep-pocket corporation that will demand those big returns to venture into an untried business where environmental impacts, financial viability and even the permitting requirements are totally unknown.
    2) DG. How many people want to be in the electricity business? I try to conserve but don’t want to make my own electricity. I’d like a small garden, but don’t want to produce all my own food. The decentralized life espoused by Mr. Curtis is an ideal for very few.
    Families (especially folks working two or three jobs) want to lead their lives, not tend home battery packs. Renters and apartment dwellers can’t do DG even if they’ve got the substantial bucks. Landlords watch the bottom line, so few rental properties come with renewable energy.
    As for companies, most want to do their core business not electricity. They will spend for efficiency (good for bottom line) but in most cases (except big box stores, storage and warehouses, etc.) don’t do DG except for image/ PR purposes.
    Nowhere on earth is there a working, commercial, utility-scale OTEC plant. No modern technological community depends on customer DG for more than a tiny share of electricity. But let’s hope these are Hawaii’s energy future and do as little as possible while we wait. This is the thinking of self declared environmental “leadership” in Hawaii. Contradictory, unrealistic and narrow.
    By narrow I mean Mr. Curtis’ blind antipathy to the utility. HECO et. al. could do more and used to do a lot less. But Mr. Curtis’ opposition (which I will join Voltaire to protect his right to express) doesn’t make for convincing arguments or a reasonable path to action.
    He says: “The military has been more aggressive than the utility in pushing photovoltaic.”
    Duh, the military is a customer with thousands of houses (and tenants who follow orders), open roof tops/space and a top-down directive to cut energy bills. Military contractors do a great job of building energy efficient homes with solar water and PV.
    The comparison to the utility is meaningless. The utility worries about PV on a system not built for two-way flow of electrons, but kicking and muttering it is entering the 21st century, offering ways for different sized customers to sell power to the utility, thus encouraging DG. The state backs it with rebates and tax credits. The utility is a handy whipping boy, but there are lots of challenges to widespread PV.
    He says: “The utility has never looked at this solution (“customer-sited and utility scale PV (plus storage) as an alternative to Big Wind”). Without looking or analyzing, it is easy to discover one’s own version of the truth.”
    Mr. Curtis knows this how? I’ve seen solar compared to Big Wind by the state energy office, U.S. DOE observers. I’d guess the utility has done its comparison as well. No good can come from dissing solar to promote wind because, again, it’s not either/or. Need to do both to meaningfully cut oil use. Period.
    Responding to the fact of 30-40 undersea cables around the globe, he says: “The world has a lot of various types of renewable energy and energy infrastructure that we do not have. We have a number of things the world does not have. We have the Aloha Spirit. We are the endangered species capital of the world. There are benefits to being a non-homogeneous world. Just because someone else has something does not mean that we need it. O`ahu has 41 story buildings. Is that justification for putting them of all of the islands?”
    A high school freshman debater would recognize the Red Herring fallacy, extraneous comments to divert from the issue. Endangered species? Tall buildings? How did they come into this discussion? As to Aloha Spirit, love it. It may keep me warm at night but won’t chill my beer or give me light to read after dark.

  • 27 zzzzzz // Jun 6, 2011 at 1:36 pm

    This discussion seems focused on the generation end of things. IMO, for us to really move forward with the use of renewable resources to replace our consumption of fossil fuels, primarily to generate electricity and power vehicles, we also need to work on the consumption end of things.

    Our current consumption model is largely demand-based. Someone at the power plant essentially ‘steps on the gas’ when we collectively demand more electric power, and eases off when demand does. This is relatively straightforward because we have energy stored in the fuel the power plants burn, whether diesel, coal, or trash. Even the limited hydroelectric plants have energy storage.

    But many of our renewables cannot produce electricity on demand, so we need to begin to move to an availability-based demand model (BTW, this is one reason solar waters heaters work so well–they have an intrinsic energy storage medium).

    We’re headed in that direction, with everyone carrying so many battery-powered devices these days. But a key to this is likely to be electric cars, and having them constantly plugged into the grid to store energy when electricity production exceeds demand, and to source it when demand exceeds production.

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