CLEAN POWER NOW!

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Paying too much for electricity? Probably. And with the vast majority of our electricity coming from dirty, fossil fuel power plants, the next generation will still be paying for today’s electricity. It need not be this way. We can choose our preferred energy future. A slate of measures before the legislature this year propose to revolutionize the way Hawai`i produces and uses energy – transitioning away from imported petroleum and toward clean, indigenous resources.

What’s so special this year? For one, we’ve learned some tough lessons over the past year. With hurricanes in the Gulf shutting down a large percentage of refining capacity for a while, a growing global demand for oil, and continued instability in many oil-producing countries, cheap, plentiful oil is far from a sure thing. What’s more, the facts supporting global climate change grow frighteningly stronger. The year 2005 was the hottest since modern recording began. A wild hurricane season and weird weather everywhere have scientists scratching their heads.

What else is unique this year is the breadth of support for clean energy reform. Governor Linda Lingle introduced a package of revolutionary energy proposals, including a measure to create a separate “energy efficiency utility,” require the electricity utilities to share the risk of future oil price spikes (instead of simply passing them on to consumers), and increase the income tax credit for solar photovoltaic to $10,000. Democrats in the legislature introduced measures in their majority packages containing similar – but less aggressive – energy reforms. More community and opinion leaders are publicly supporting changes, and businesses are learning that clean power is simply smart business.

Regardless of political leaning or motivation, most recognize that the time has come to end our addiction to oil. Skyrocketing oil prices, terrorism related energy insecurity, and global climate change demand a bipartisan consensus. The solutions are all around us. Hawaii’s natural environment provides us with enough indigenous renewable resources – wind, solar, wave, seawater, biomass, and biofuels – to meet our energy needs.We have the technology and the know-how to enjoy economic growth while using 20% less energy than we do today.

Hawaii’s energy realities are changing at a glacial pace. We currently generate only 7% of our electricity from renewable sources and, despite being 8th in per capita efficiency spending, the pace of energy efficiency implementation is only half that of the national average. Some progress has been made: 60 megawatts (MW) of wind and 40 MW of biomass / municipal solid waste facilities will be built by 2012. These projects will bring us to 9% renewable power production by 2012. The sugar companies are shifting to ethanol production, which will help meet the 10% ethanol blending mandate. Yet, despite these positive changes, at the current rate of growth in energy consumption, Hawaii’s fossil fuel dependence will remain virtually unchanged at 94%. We are running to stand still.

Real energy security will require a comprehensive approach to energy policy. We must address both energy supply and demand and integrate Hawaii’s entire energy system, including both transportation and power. Initiatives currently pending before the legislature will put Hawai‘i on a clear path to real energy security and independence.

Huh? A Giga-what?

Admittedly, any discussion about energy policy gets pretty technical and “wonky” pretty quick. Here’s a detailed look at the key clean energy concepts in play at the legislature.

Renewable Portfolio Standard (RPS)
Despite much discussion about policies to increase the amount of clean, indigenous energy generated in Hawai‘i, only about 7% of Hawaii’s electricity comes from renewable sources. Previous attempts to mandate that an increasing percentage of electricity be renewable have failed. Our current so-called “Renewable Portfolio Standard” (RPS) falls far short of its original intent, creating major loopholes that allow Hawaii’s utilities to meet the standards without ever siting a new renewable power facility. It is time for Hawai‘i to set clear policy on the percentage of clean, indigenous energy it desires by a set date. A specific RPS would send a clear market signal to those seeking to invest in renewable energy projects in Hawai‘i. We are seeking a 20% clean energy mandate by 2020, with renewable energy being defined as only electricity generation from non-fossil sources (wind, solar, biomass, etc). This RPS needs to be accompanied with a provision that specifies that penalties for noncompliance cannot be recaptured by the utility through a rate increase.

Renewable Energy Income Tax Credits (REITC)
Tax credits for clean energy systems – residential and commercial – are an investment for the state. Each dollar of solar water heater tax credit spent by the state stimulates the generation of $1.82 tax revenue – a rate of return few, if any, other state tax credits could match. Tax credits leverage private investment that helps to create jobs, primarily in the small business sector.

Currently, homeowners can receive income tax credits of $1750 for solar water heaters, photovoltaic (PV), or wind power devices on their home. Measures pending before the legislature would increase that credit to up to $2250 for solar water and $10,000 for PV. Proposals are also alive that would increase the credit for businesses from $250,000 to $500,000 for solar water and PV equipment. These credits are in addition to the new Federal credits that are in effect for 2006 and 2007. Bills would also remove the sunset (expiration) date for the state tax credits.

Energy Efficiency Utility (EEU)
Much of Hawaii’s “new” energy demand can be addressed with simple changes in existing homes and businesses. Energy efficiency improvements can pay for themselves many times over while decreasing oil dependence and providing more comfortable living and working environments. Currently, the electric utility manages efficiency programs funded through a Demand Side Management (DSM) surcharge on utility bills. Unfortunately, this surcharge pays for more administrative overhead, marketing, and shareholder incentives than actual efficiency improvements. Further, efficiency programs directly compete with the utility’s main revenue stream: units of electricity sold.

Hawai‘i should establish a Public Benefits Charge – replacing the current DSM surcharge – that will be used to directly fund efficiency and distributed renewable energy through an independent, accountable third party. This approach mirrors the State of Vermont's efficiency utility, Efficiency Vermont. Today, Efficiency Vermont has achieved twice the national average in energy savings of other states' efficiency programs, while Hawai‘i currently achieves roughly half the national average. Efficiency Vermont was a 2003 winner of Harvard University’s Kennedy School of Government‘s Innovations in American Government Award.

The state estimates that establishing an “energy efficiency utility” would increase funding directly applied to efficiency improvements by as much as $9.7 million.

Energy Cost Adjustment Clause (ECAC)
Does your monthly utility bill keep getting larger even though your rate and usage has stayed the same? The reason is the energy cost adjustment clause, or ECAC. ECAC is an automatic rate adjustment mechanism that passes through 100% of the fuel cost increases to utility consumers, effectively allowing energy utilities to avoid the risks associated with the costs of fuel, including the financial risks associated with fuel price volatility. On O`ahu, Hawaiian Electric’s ECAC accounts for over 30% of the average residential utility bill. Proposals pending before the legislature would require that the utilities share a percentage of this fuel price risk. Such a policy should encourage the utilities to be more circumspect in their future electricity source planning decisions, ideally leading them to favor less risky renewable power over increasingly volatile fossil sources.

Renewable Transportation Fuels Standard
Transportation fuels can be made from renewable resources, such as sugarcane or even waste products. These materials are neither as scarce nor as expensive as crude oil. Even more importantly, these materials are available here. Relying only on petroleum fuels for Hawaii’s increasing transportation needs is expensive and risky. With federal incentives, renewable fuels have been cheaper than gasoline for many years. Forty percent of American gasoline contains ethanol. Hawai‘i is one of the last states in the nation without ethanol fuel available. We are a leader in biodiesel fuel, but even those supplies are limited. By 2020, twenty percent of our fuel could come from renewable sources -- equal to the projected increase in transportation fuel demand. This would lower fuel costs, diversify our fuel supply, provide energy security and create a new market for Hawaii farmers to produce fuel from Hawaii crops and waste materials.

© Copyright 2005 Sierra Club, Hawaii Chapter