Abstract
Hawaii generates the majority of its electricity through oil-fired generation. New production technologies have led to rapidly declining natural gas prices that has renewed Hawaii’s interest in liquefied natural gas (LNG) imports. This study integrates a detailed model of Hawaii’s electric sector with a computable general equilibrium model of Hawaii’s economy to estimate the economic and greenhouse gas (GHG) impacts of importing LNG for use in the electric sector. Incorporating a range of possible price pathways (low, medium and high) out to the year 2040 for LNG imports, we find Hawaii could lower electric sector costs in a range from 6 to 16 % and petroleum refining output declines by over 20 % (in 2040). Gross state product increases in a range of $300 million to $5 billion in net present value. Using natural gas reduces out-of-stack GHG emissions but can also increase GHG emissions in other jurisdictions. Moreover, introducing natural gas could reduce the incentive to pursue renewable energy and energy efficiency. As such, adopting and enforcing policies encouraging renewable energy and efficiency becomes even more important to meet Hawaii’s clean energy and GHG mitigation goals.
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Notes
Excluding aviation-related GHG emissions.
The bio-oil forecast is based on the EIA’s forecast for ethanol prices. In addition, a minimum cost assumption is made in that the price of bio-oil cannot drop below that of crude oil.
Household electricity demand is estimated from the number of people in a household and typical per capital consumption (6 kWh/day), which is adjusted according to household income and an assumed income elasticity of demand for electricity (0.5). We assume that PV is installed such that the household’s electricity use is effectively cancelled out based on the existing Net Metering Agreement.
Since FGE’s LNG price projections are based on the imported crude oil price in AEO 2012, we adjust their forecast to AEO 2015 by applying the percent change between the AEO 2012 and AEO 2015. We convert FGE’s forecast from $2012/MMBtu to $2007/MMBtu using the US Consumer Price Index (CPI), and since their price projections end at 2030, we extend their forecast through 2040 using the difference between years in Galway’s middle demand scenario. Similarly for Galway, we convert their forecast from AEO 2013 to be consistent with AEO 2015.
To a lesser extent, boil off and regasification loss are factored into the delivered cost.
FGE uses estimates from their Shipping Rate Calculation Model for a 25,000 cbm tanker under the assumption of a Jones Act waiver for gas sourced from the US West Coast, USGC, and Alaska. For the US West Coast, the cost of transporting LNG via ATBs is equivalent to non-US tanker rates, implying that the Jones Act does not impact costs. Shipping USGC-sourced gas costs two-and-half-times as much as from the US West Coast since twice the distance is covered and Panama tolls are incurred enroute. Galway on the other hand, assumes Jones Act compliant vessels for shipping gas from the US West Coast and USGC (i.e. cost of complying with Jones Act is accounted for in shipping costs). Transportation costs vary by supply source, vessel type, and LNG volume.
Regasification costs are illustrative of both an onshore terminal and various FSRU configurations. On an energy content basis ($/MMBtu), the range between the two alternatives is relatively small. FGE models an onshore terminal while Galway assumes regasification costs for FSRUs (US GoM-2xFSRU double buoy, Jordan Cove-Dockside FSRU, Canada-2xFSRU double buoy).
The shares shown in Fig. 2 are based on electricity sales, which is the unit of measurement for compliance with the RPS law. The difference between generation and sales account for transmission and distribution losses, which we here assume to be 8 %. As such, the percentage shares shown for the years 2015 and 2040 exceed 100 %.
We estimate the impact to electricity rates by assuming that Hawaiian Electric Co.’s “base rate” accounts for all O&M costs. We take the most recent “Effective Rate Summaries,” filed to the PUC in July 2014, and multiply the residential base rate by the estimated electric sector cost savings (HECO 2014). We then add on the difference between the effective and base rate.
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Acknowledgments
We would like to acknowledge and thank the University of Hawaii Economic Research Organization and the Center for Global Partnership, Japan Foundation, for support of this research.
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Coffman, M., Bernstein, P., Wee, S. et al. Economic and GHG impacts of natural gas for Hawaii. Environ Econ Policy Stud 19, 519–536 (2017). https://doi.org/10.1007/s10018-016-0157-2
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DOI: https://doi.org/10.1007/s10018-016-0157-2