Hawaii Looks beyond Oil
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Perhaps the most glaring detail missing has been a serious explanation of how we will pay for the major changes to our power infrastructure that the agreements promise. The No. 1 example is the undersea cable linking the proposed wind farms of Lanai and Molokai with the energy-strapped Oahu grid. Estimates for the cost of constructing such a cable range between $500 million and $1 billion.
Current plans suggest that the cable will be paid for and owned by the state, but operated by the utility. That is not, however, set in stone. One thing is clear: the cable’s going to cost the consumer. Robbie Alm, HECO’s senior vice president for public affairs, says flatly, “I think we may be able to get some federal monies for it, but rate-payer and taxpayer money is going to pay for most of it.”
Perhaps the strongest critique of the state’s new initiatives has come from Fereidun Fesharaki, a well-regarded energy economist at the East-West Center. Fesharaki is not so sure that the rate-payers and taxpayers will welcome the high cost of investing in alternative energy. He acknowledges that the recent spike in oil prices to nearly $150 a barrel certainly made wind and solar seem more attractive, but he points out that the true price of oil is surprisingly elastic. “The cost of production of oil today — conventional oil — is around $30 a barrel,” he says. “The rest is profit.” On the other hand, the cost of switching to alternatives is relatively high and inflexible, a fact highlighted by the need for tax credits and other subsidies to support them. Fesharaki notes, “It could be two or three times the price of oil. And while everybody becomes brave when oil prices are high, when the prices come down, people are going to ask, ‘Why am I paying all this extra?’”
The answer, of course, is straightforward: pay me now, or pay me later. Even Fesharaki acknowledges that the demand for oil will soon outstrip the supply. “I think, in two or three years, oil will probably be around $200 a barrel,” he says. So the question of whether to invest in renewables is really a political rather than a technical one, and most experts give the Lingle administration credit for its initiative in dealing with the problem now. Peck has a colorful way of putting it: “The question is very analogous to a tsunami; are we going to stay on the beaches, or are we going to go to high ground?” The price of oil may, indeed, fall in the short term, Peck says, “But that doesn’t mean the wave isn’t coming. It’s coming.”
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