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PURPA and the Impact of Existing Avoided Cost Contracts on Hawai'i’s Electricity Sector

The United States has been trying to reduce its dependence on imported fossil fuel since the 1970s. Domestic fossil fuel supply initially peaked in 1970, and the oil crises of 1973 and 1979 accelerated domestic policy and investments to develop renewable sources of energy (Joskow, 1997). One such policy—passed in 1978 by the U.S. Congress—was the Public Utility Regulatory Policies Act (PURPA).

In this policy brief, we identify the existing PURPA-based contracts in Hawai'i and use a Hawai'i-specific electric sector generation planning model, The Hawai'i Electricity Model (HELM), to estimate the impact that PURPA contracts have on both total system cost and the mix of generation technologies. We study a variety of scenarios under the maintained assumption that the state will achieve the Hawai'i Renewable Portfolio Standard, which requires that 40% of electricity sales are generated using renewable sources by the year 2030.


A Policy Analysis of Hawaii's Solar Tax Credit Incentive

This study uses Hawaii as an illustrative case study in state level tax credits for PV. We examine the role of Hawaii’s tax credit policy in PV deployment, including distributional and tax payer impacts. Hawaii is interesting because its electricity rates are nearly four times the national average as well as has a 35% tax credit for PV, capped at $5,000 per system. We find that PV is an excellent investment for Hawaii’s homeowners, even without the state tax credit. For the typical household, the internal rate of return with the state tax credit is about 14% and, without it, 10%. Moreover, the vast majority of installations are demanded by households with the median income and higher. We estimate that single-family homeowner’s in Hawaii may demand as much as 1,100 MW of PV. There are, however, significant grid constraints. Policy currently limits PV generation to no more than 15% of peak load for any given circuit, or approximately 3% of aggregate electricity demand. Tax credits are therefore not likely to increase the overall deployment of PV, but rather spread the cost of installation from homeowners to taxpayers and accelerate the rate at which Hawaii reaches grid restrictions.

 Published version:  Coffman, Makena, Sherilyn Wee, Carl Bonham, and Germaine Salim. "A Policy Analysis of Hawaii's Solar Tax Credit." Renewable Energy 85 (2016): 1036-043. Web.

Market, Welfare And Land-Use Implications of Lignocellulosic Bioethanol In Hawaii

This article examines land-use, market and welfare implications of lignocellulosic bioethanol production in Hawaiʻi to satisfy 10% and 20% of the State’s gasoline demand in line with the State’s ethanol blending mandate and Alternative Fuels Standard (AFS). A static computable general equilibrium (CGE) model is used to evaluate four alternative support mechanisms for bioethanol. Namely: i) a federal blending tax credit, ii) a long-term purchase contract, iii) a state production subsidy financed by a lump-sum tax and iv) a state production subsidy financed by an ad valorem gasoline tax. We find that because Hawaii-produced bioethanol is relatively costly, all scenarios are welfare reducing for Hawaii residents: estimated between -0.14% and -0.32%. Unsurprisingly, Hawaii’s economy and its residents fair best under the federal blending tax credit scenario, with a positive impact to gross state product of $49 million. Otherwise, impacts to gross state product are negative (up to -$63 million). We additionally find that Hawaii based bioethanol is not likely to offer substantial greenhouse gas emissions savings in comparison to imported biofuel, and as such the policy cost per tonne of emissions displaced ranges between $130 to $2,100/tonne of CO2e. The policies serve to increase the value of agricultural lands, where we estimate that the value of pasture land could increase as much as 150% in the 20% AFS scenario.


Economic Impacts of Inter-Island Energy in Hawaii

This study assesses the economic and greenhouse gas emissions impacts of a proposed 400MW wind farm in Hawaii. Due to its island setting, this project is a hybrid between an onshore and offshore wind development. The turbines are planned for the island(s) of Lanai and, potentially, Molokai. The project includes building an undersea cable to bring the power to the population center of Oahu. It is motivated by 1) Hawaii’s high electricity rates, which are nearly three times the national average, and 2) its Renewable Portfolio Standard mandating that 40% of electricity sales be met through renewable sources by the year 2030.

We use an economy-wide computable general equilibrium model of Hawaii’s economy coupled with a detailed dynamic optimization model for the electric sector. We find that the 400MW wind project competes with imported biofuel as a least-cost means of meeting the RPS mandate. As such, the wind project serves as a “hedge” against potentially rising and volatile fuel prices, including biofuel. Though its net positive macroeconomic impacts are small, the estimated reduction by 9 million metric tons of CO2 emissions makes the project a cost-effective approach to GHG reduction. Moreover, variability in imported fuel costs are found to be a much more dominant factor in determining cost-effectiveness than potential cost overruns in the wind project’s construction


Please contact Makena Coffman at makenaka@hawaii.edu for the full study.


Potential Benefits, Impacts, and Public Opinion of Seawater Air Conditioning in Waikïkï

This report provides a summary of an investigation by the University of Hawai‘i Sea Grant College Program into the viability and effectiveness of installing a seawater air conditioning district cooling system in Waikīkī. Seawater air conditioning (SWAC) harnesses the cooling properties of cold seawater to provide cool air for air conditioning purposes. In doing so, SWAC reduces the amount of electricity needed for air conditioning. SWAC is particularly relevant to Hawai‘i for two reasons: first, the proximity of deep, cold, ocean water to areas of high population make Hawai‘i an obvious location for implementing the technology; and secondly, with approximately 90% of its electricity generated from fossil fuels, Hawai‘i is the most fossil fuel dependent state in the nation. Unlike the rest of the U.S., where coal, natural gas, and nuclear power are called upon to meet a substantial proportion of the electricity demand, Hawai‘i relies heavily on residual fuel oil (the by-product of refining crude oil for jet fuel, gasoline, and other distillates). As a result, Hawai‘i has very high electricity prices compared to the rest of the country. SWAC has the potential to both cut the cost of air conditioning and reduce the amount of harmful emissions that are released as a by-product of generating electricity from fossil fuels.

Seawater air conditioning works by pumping cold (44-45°F), deep (1,600-1,800 feet) seawater into a cooling station (Figure 1). Here, the cold seawater is used to chill fresh water flowing in nearby pipes. The chilled fresh water is then piped into hotels for cooling purposes while the seawater (slightly warmed to 53-58°F) is pumped back into the ocean at a shallower depth (120-150 feet).


Sustainable Development and the Hawaii Clean Energy Initiative: An Economic Assessment

 The connection between the emerging field of sustainability science and the economics of sustainable development has motivated a line of interdisciplinary research inspired by the notion of “positive sustainability.” This notion is founded on three principles or pillars: (1) adopting a complex systems approach to modeling and analysis, integrating natural resource systems, the environment, and the economy; (2) pursuing dynamic efficiency, that is, efficiency over both time and space in the management of the resource-environment-economy complex to maximize intertemporal well-being; and (3) enhancing stewardship for the future through intertemporal equity, which is increasingly represented as intergenerational neutrality or impartiality. This paper argues that the Hawaii Clean Energy Initiative (HCEI) fails to satisfy all three pillars of sustainability, and consequently fails to achieve the "sustainability criterion" put forward by Arrow, Dagupta, Daily et al: that total welfare of all future generations not be diminished. HCEI shrinks the economy, contributes negligibly to reduction of global carbon emissions, and sparks rent seeking activity (pursuit of special privilege and benefits) throughout the State of Hawaii.


Tax Credit Incentives for Residential Solar Photovoltaic in Hawai‘i

Solar photovoltaic (PV) tax credits are at the center of a public debate in Hawai‘i. The controversy stems largely from unforeseen budgetary impacts, driven in part by the difference between the legislative intent and implementation of the PV tax credits. HRS 235-12.5 allows individual and corporate taxpayers to claim a 35% tax credit against Hawaii state individual or corporate net income tax for eligible renewable energy technology, including PV. The policy imposes a $5,000 cap per system, and excess credit amounts can be carried forward to future tax years. Because the law did not clearly define what constitutes a system or restrict the number of systems per roof, homeowners have claimed tax credits for multiple systems on a single property. In an attempt to address this issue, in November 2012, temporary administrative rules define a PV system as an installation with output capacity of at least 5 kW for a single-family residential property. The new rule does not constrain the total number of systems per roof, but rather defines system size and permits tax credits for no more than one sub-5 kW system. In other words, it is possible to install multiple 5 kW systems and claim credits capped at $5,000 for each system. There is an additional 30% tax credit for PV capital costs at the federal level. There is no cap for the federal tax credit and excess credits can be rolled over to subsequent years.


Statewide Economy and Electricity-Sector Models for Assessment of Hawai‘i Energy Policies

This paper uses both a "top-down" and "bottom-up" economic model to asses the cost and greenhouse implications of various energy and environmental alternatives. The Hawai‘i Computable Generable Equilibrium Model (H-CGE) is a “top-down,” economy-wide model that captures the interaction between both producers and consumers, including full price effects between sectors. The Hawai‘i Electricity Model (HELM) is a “bottom-up” representation of Hawai‘i’s electricity sector.  The dynamic optimization model solves for the least-cost mix of generation subject to satisfying demand, regulatory requirements, and system constraints.  The models are fully integrated in respect to the electricity sector, where overall economic conditions determine electricity demand and, subsequently, the type of electricity generation has economic impact.


Foundations for Hawai‘i’s Green Economy: Economic Trends in Hawai‘i Agriculture, Energy, and Natural Resource Management

It is clear from previous studies that Hawai‘i’s natural capital is highly valued and should be managed accordingly. For example, Kaiser et al. (1999) estimate that the Ko‘olau watershed provides forest benefits valued between $7.4 and $ 14 billion, comprised of water resource benefits ($4,736-­‐9,156 million), species habitat benefits ($487-­‐1,434 million), biodiversity benefits ($0.67-­‐5.5 million), subsistence benefits ($34.7-­‐131 million), hunting related benefits ($62.8-­‐237 million), aesthetic values ($1,040-­‐3,070 million), commercial harvest ($0.6-­‐2.4 million), and ecotourism ($1,000-­‐2,980 million). Hawai‘i’s coral reefs alone are estimated to generate at least $10 billion in present value, or $360 million per annum (Cesar and van Beukering, 2004). Another recent study considering the value to all U.S. households finds that increasing the current size of marine protected areas in Hawai‘i from 1% to 25% and restoring five acres of coral reefs annually would generate $34 billion per year (Bishop et al., 2011).2 While many studies that place value on Hawai‘i’s natural resources have been undertaken in recent years, little is known about the economic impacts generated by agencies charged with protecting and managing these important resources in Hawai‘i. To that end, an online survey of natural resource managers in Hawai‘i was conducted, and the results are summarized in section 6 of this report.


Foundations for Hawai‘i’s Green Economy: Economic Trends in Hawai‘i Agriculture, Energy, and Natural Resource Management

This report provides the first comparison of standard economic indicators for three sectors that are key to future sustainability in Hawai‘i - renewable energy, agriculture and natural resource management. Economic information has long been collected for many sectors in Hawai‘i, including agriculture and energy, but no systematic surveys have been conducted on the NRM sector to date. With support from The Nature Conservancy and Hau‘oli Mau Loa Foundation, the University of Hawai‘i Economic Research Organization was tasked with characterizing this important part of Hawai‘i’s economy, in terms of number and types of jobs, salaries, and annual expenditures.


An Assessment Of Greenhouse Gas Emissions-Weighted Clean Energy Standards

Published in the journal Energy Policy, this paper quantifies the relative cost-savings of utilizing a greenhouse gas emissions-weighted Clean Energy Standard (CES) in comparison to a Renewable Portfolio Standard (RPS). Using a bottom-up electricity sector model for Hawaii, this paper demonstrates that a policy that gives “clean energy” credit to electricity technologies based on their cardinal ranking of lifecycle GHG emissions, normalizing the highest-emitting unit to zero credit, can reduce the costs of emissions abatement by up to 90% in comparison to a typical RPS. A GHG emissions-weighted CES provides incentive to not only pursue renewable sources of electricity, but also promotes fuel-switching among fossil fuels and improved generation efficiencies at fossil-fired units. CES is found to be particularly cost-effective when projected fossil fuel prices are relatively low.


UHERO has developed a two-page Policy Brief on this paper. The full publication can be found at http://www.sciencedirect.com/science/article/pii/S0301421512000961

KITV Project Economy: APEC Economic Impact

UHERO Research Fellow and Director of the EGGS program, Dr. Denise Konan discusses the economic impact of the APEC conference.


Greenhouse Gas Emissions in Hawaii: Household and Visitor Analysis

This paper focuses on petroleum use and greenhouse gas emissions associated with economic activities in Hawai‘i. Data on economic activity, petroleum consumption by type (gasoline, diesel, aviation fuel, residual, propane), and emissions factors are compiled and analyzed. In the baseline year 1997, emissions are estimated to total approximately 23.2 million metric tons of carbon, 181 thousand metric tons of nitrous oxide, and 31 thousand metric tons of methane in terms of carbon-equivalent global warming potential over a 100-year horizon. Air transportation, electricity, and other transportation are the key economic activity responsible for GHG emissions associated with fossil fuel use. More than 22 percent of total emissions are attributed to visitor expenditures. On a per person per annum basis, emission rates generated by visitor demand are estimated to be higher than that of residents by a factor of 4.3 for carbon, 3.2 for methane, and 4.8 for nitrous oxide.

The full publication can be found at: http://www.sciencedirect.com/science/article/pii/S0140988309001133 

Analysis of Introduction of Plug-in Electric Hybrid Vehicles to Honolulu

The primary aim of this study is to understand the benefits and barriers which might be associated with the introduction of PHEV technology to Hawaii. This analysis illustrates that PHEV’s represent a much larger and more pervasive strategic opportunity than is generally appreciated in the State. Specific interests that guided our research were:

  • To estimate the impacts which relatively modest PHEV penetration rates might have on Hawaii’s GHG emission and fuel substitution goals.
  • To determine whether PHEV’s could be introduced to Hawaii without triggering major generating capacity additions.
  • To consider whether PHEV’s might play a role in optimizing the use of renewable wind resources that might otherwise be un-usable.
  • To assess the role of PHEV’s in the Hawaii’s attempt to control GHG emissions.

UHERO project report

Targeting Hawaii Greenhouse Gas Emissions Reductions: Emission Forecasts and Their Implications for Act 234

Act 234 calls for the state of Hawai‘i to return its greenhouse gas (GHG) emissions to 1990 levels by 2020. Under a business as usual environment, we forecast Hawai’i’s 2020 emissions to be between 18 and 34 percent above 1990 levels. Since transportation and electricity account for about 75 percent of Hawai’i’s GHG emissions, most likely a large share of the reductions will need to come from these sectors for Hawai’i’ to comply with Act 234.

Uhero project report

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