Russia invaded Ukraine, global oil prices spiked, and one U.S. state in particular will feel the crunch.
Hawaii imports all of its oil, much of it from Russia itself. As the U.S. Energy Information Administration succinctly notes, “Isolated by the Pacific Ocean, Hawaii is the most petroleum-dependent U.S. state.” And while gasoline prices are rising everywhere, Hawaii is unique among the states in how much it depends on oil for electricity.
The geopolitical strife in Eastern Europe catches Hawaii at an awkward moment of transition from fossil-fueled electricity to clean energy.
The biggest power plant on the most populous island, the coal-powered AES plant in West Oahu, will shut down in September 2022. The fleet of large-scale renewable projects developed to replace the coal plant is facing delays and cancellations. Until new clean capacity comes online, oil plants are part of the fallback plan to keep the lights on for Oahu’s 1 million residents when coal power goes away.
“We have warned about leaving the cost of this transition up to world oil markets, and this week’s events are another reminder of the price we pay for oil dependence,” said Jay Griffin, chair of the Hawaii Public Utilities Commission, in a Friday email.
In recent years, roughly one-third of Hawaii’s oil came from Russia, according to information from the state’s Energy Office. After Russian forces began their invasion of Ukraine, the U.S. ordered sweeping new sanctions on Russia and Russian businesses, including the company building the Nord Stream 2 gas pipeline between Russia and Germany.
As of Friday, it remained unclear whether tensions between the U.S. and Russia would interrupt the flow of oil to Hawaii. Russian gas continued flowing to Europe despite the invasion, the Associated Press reported, and U.S. officials have insisted that sanctions were tailored to avoid disruption to Russian energy exports.
Utility Hawaiian Electric, which supplies almost all of the state’s electricity, buys fuel oil from local refiner Par Hawaii. The refiner has assured the utility that it will be able to pivot to other crude oil sources if current supplies get interrupted. Hawaiian Electric also stocks 1 to 1.5 months’ supply of fuel oil, according to a spokesperson, so there’s no immediate risk of running out.
“We’re confident that we’ll be able to generate power without interruption since fuel can be fully sourced without relying on supplies from Russia,” Hawaiian Electric spokesperson Shannon Tangonan told Canary Media Thursday. “However, we’re concerned about the impact on price.”
The cost of fuel is passed on to customers under the state’s utility regulations. That means the utility does not profit from an increase in the price of oil — but customers will notice the difference when their bills come due.
More renewables on the way
Regulators at the Hawaii Public Utilities Commission previously castigated the utility for its plans to increase reliance on oil-burning plants after the coal plant shutdown, citing concerns about carbon emissions and added costs for consumers.
Griffin and his fellow regulators acted last week to further reduce the state’s reliance on oil plants. The commission called for Hawaiian Electric to convene a fresh round of bids for new clean power plants “as soon as possible.” This would be a “Stage 3” procurement, following two previous rounds that resulted in contracts being issued for new clean resources.
In a letter to Hawaiian Electric, the regulators said that Oahu is expected to have enough energy to keep the grid reliable for the next few years thanks to the first two rounds of contracts for new renewable and battery projects. But, the letter adds, “nearly all Stage 1 and 2 projects have faced delays,” and multiple projects have been canceled due to pandemic-induced supply chain problems.
“In order to meet the future replacement capacity needs, the Commission finds it is necessary for Hawaiian Electric to perform another round of competitive procurements on Oahu and Maui as soon as possible,” the regulators wrote.
The utility is still reviewing the letter, but generally, it seems to be confident about the situation.
“The company believes that projects before the commission for approval and projects in development will be sufficient to meet our near-term needs,” Rebecca Dayhuff Matsushima, Hawaiian Electric vice president of resource procurement, told Canary Media in an email Thursday.
The Mililani and Waiawa solar and storage projects on Oahu are on track to come online this year and shore up the grid in 2022, Griffin noted. The new round of competitive bidding is intended to address uncertainty around electricity supplies in 2023 and 2024, given project delays and cancellations in that timeframe.
The utility is pursuing other sources of capacity, like paying households that have rooftop solar and batteries to aggregate up to 50 megawatts of capacity for peak hours — a rare instance of collaboration between a monopoly utility and the residential solar industry. Hawaiian Electric is also pursuing a new 20-megawatt battery project and energy-conservation measures, Dayhuff Matsushima added.
Hawaiian Electric is working with regulators on an “integrated grid planning” process to determine whether and what kind of new power plants will be needed. That will inform what the utility asks for in its new request for proposals. But the timeline to complete that analysis means the new renewables procurement may not happen until late 2022 or early 2023, Dayhuff Matsushima noted.
Reduce oil reliance with clean energy
Hawaii never developed the facilities necessary to import fossil gas for power, so oil plays an unusually large role in the state’s grid. Petroleum generated 60 percent of Hawaii’s electricity in 2020, and even that hefty amount was the lowest level in two decades, according to the EIA.
Hawaiian Electric “is working to add more renewable resources and battery storage to our island grids to stabilize rates for our customers and reduce our dependence on oil for power generation,” Tangonan noted.
The 30-year-old AES coal plant slated to be shuttered this year generated cheaper power than the oil plants, while diversifying the fuels used in Hawaii’s power production. But its closure is part of Hawaii’s transition to a 100 percent renewable grid, as required by a 2015 law.
The goal was to fill the gap with several new solar and battery plants, including the Kapolei Energy Storage facility, a battery project now under construction that is sized to pump out as much power as AES did (though, unlike the coal plant, it will need to recharge). The islandwide buildout ran into the complexities of developing large projects in the space-constrained landscape. Then Covid-19 hit, supply chains got jammed, and projects started falling behind or falling through.
Hawaii is moving toward its goal of 100 percent clean electricity by 2045, using a combination of large-scale renewables and solar located on homes and businesses to meet its power needs. That transition also reduces exposure to exactly the sort of oil volatility unfolding today.
“Fossil fuels have been more expensive than renewables for years now in Hawaii. Then on top of that, we get hit with the price volatility roller coaster — and that’s the real killer for customers’ pocketbooks,” said Isaac Moriwake, managing attorney at the Honolulu office for Earthjustice, an environmental legal firm. “Compare that to lower-cost, fixed-price renewable resources, and it’s a no-brainer that we need to get off of fossil fuels as much as possible, as soon as possible.”
Converting vehicles to electric, powered by locally sourced clean energy, will further reduce Hawaii’s oil needs. The vast majority of the state’s petroleum goes to transportation, including cars, trucks and aviation.
Julian Spector is senior reporter at Canary Media.