The Public Utilities Commission has rejected a proposal to build a biofuels facility in Kau on the Big Island.
The developer, Aina Koa Pono, hoped to use plant feedstocks to produce drop-in biofuel for the electric utilities on the Big Island, Maui and Oahu. But the PUC said that the fuel would be too expensive, in a decision issued on Monday.
“The contract price for the AKP-produced biofuel is excessive and not cost-effective at present and for the foreseeable future, and thus, is unreasonable and inconsistent with the public interest,” commissioners wrote…. Read the rest
It goes to show that “we, the people” can make a difference.
In this case, a grassroots group of folks came together spontaneously to advocate for low-cost electricity on behalf of the rubbah slippah folks on the Big Island. We called ourselves the Big Island Community Coalition (BICC).
We supported other community members by submitting written testimony, and helped organize public participation at two PUC hearings on the Big Island. Here’s a post about it from last year.
The people involved in the BICC were Dave DeLuz, Jr., John Dill, Rockne Freitas, Michelle Galimba, Richard Ha, Wallace Ishibashi, Kuulei Kealoha Cooper, Robert Lindsey, H.M. Monty Richards, Marcia Sakai, Kumu Lehua Veincent and William Walter.
Did you see the letter to the editor from the Monsanto spokesman, Alan Takemoto, in the Hawaii Tribune-Herald last month? He testified to the fact that the reason Monsanto is not on the Big Island is that this island does not have the combination of factors they need, like deep soil, plenty of sunshine, irrigation and flat lands. It’s a practical thing. He wrote that they do not own land or even lease land here.
The Aina Koa Pono biofuel project proves this point. The Ka‘u bio fuel project, which plans to grow crops to make biofuel, needs a huge subsidy or it won’t work. They are even trying to hide the fact that we the people will pay $200/barrel for the biofuel.
The real problem is this: In a world of finite resources, how are we going to provide our people with affordable food? For this, we need, simply, farmers farming. All kinds of farmers need to contribute. And farmers need to make money so they will keep farming.
Let’s regroup, form a task force of knowledgeable stakeholders, and work toward this goal.
How are these two things related: The Aina Koa Pono biofuel project, which is subsidized by the rate payer at $200 per barrel, and Bill 79, the anti-GMO bill submitted by Councilwoman Margaret Wille?
There is a very good chance that we will soon start down the backside of the world oil supply curve. If there is even the remotest chance this will happen, we need to be focusing sharply on the things that are crucial to us, living out here in the middle of the Pacific Ocean.
Nothing is more important than being able to afford food.
We cannot waste time subsidizing $200 per barrel oil; what is the objective there? And we cannot waste time pitting farmer against farmer. We need to focus on helping all farmers make money. Because food security involves farmers farming. And if the farmer makes money, the farmer will farm.
Here in Hawai‘i, nearly 90 percent of our food is imported. We are going to need the help of all farmers to achieve food security. Bill 79 is a distraction that takes our focus away from helping farmers become economically viable. Worse, and most distressing, is that it pits organic farmers against conventional farmers.
We need the help of all the farmers to make Hawai‘i food secure.
The problem is that farmers’ customers are being squeezed by rising energy costs. The rubbah slippah folks can only go so far in supporting locally grown products. Oil costs have quadrupled in the last 10 years and electricity rates have continuously risen. It’s as if we had a massive tax hike. We’re in the middle of a crisis and we don’t even recognize it.
The small farmers on the Big Island know it, though. That’s why they are taking valuable time off from work to show support for each other.
By Steve Andrews – The following is taken from an interview with Steven Kopits, managing director of the New York office of Douglas-Westwood, an international energy analysis firm. The views expressed are atttributable to Mr. Kopits and do not necessarily represent those of Douglas Westwood.
…Peak oil does not occur when we run out of oil. Peak oil occurs when the marginal consumer is no longer willing to pay the cost of extracting and processing the marginal barrel of oil. And we can actually calculate what the related numbers are.
Q: How do we do that?
Kopits: To begin with, we refer to the price a nation’s oil consumers are willing to pay as its “carrying capacity.” For the US, carrying capacity is about $95-100 Brent [per-barrel oil price in London]. If the oil price is above this level, oil consumption will decline—which is exactly what we see and what we predicted four years ago. But carrying capacity is not a static number. It changes over time, specifically, with three things: GDP growth, efficiency gains in the use of oil, and dollar inflation. So if GDP goes up, efficiency goes up and the CPI goes up, then the amount that consumers are willing to pay for oil will increase. For China, by the way, we estimate the carrying capacity at around $115-120 / barrel Brent. So oil consumption will increase in China at $115 Brent, but fall in the advanced economies—exactly the pattern we’ve seen in the last few years.
Q: So the story line getting a ton of ink of late—peak oil is dead….it isn’t actually quite dead yet, is it?
Kopits: No. But importantly, we’re going to peak out production not because we’re “running out of oil,” but because the marginal consumer is not willing to pay for the marginal barrel. We seem to be pretty much at that level today.
We need to understand these dynamics better. What are the combined effects of flat oil prices and rising production costs, that’s where I think the challenge is and where our professional work is focusing on the macro side…to better understand what these trends are, what they mean, and how companies in the industry should respond to it.
I’ll give you an example. Normally, if you look at an oil production system, it tends to be symmetrical around the peak. The rate at which you approach the peak is the rate at which you depart from the peak. We haven’t done that. What we’ve done is that we’ve approached the peak and we’ve leveled out production, the so-called “undulating plateau”. But we’ve maintained that plateau by turning to non-oil liquids, by dramatic increases in upstream spend, and also by technological innovation related to hydrofracking. All of these, as of today, look to be running their course. Even shale oil. Yes, it will grow for the next few years from the three majors plays in the US, but the peak of production growth is already behind us in the Bakken, for example. On current trends, Bakken production will be increasing by single digits within two years. Not a tragedy by any means, but not enough to move the global oil supply at that time, either.
Five Association for the Study of Peak Oil (ASPO) annual conferences later, it’s very clear to me that the information I learn at the conferences is cutting edge. It’s consistently two or more years before what the experts there are talking about shows up in the mainstream news.
From the first ASPO conference I attended, I noticed there were stock traders in the audience. I asked them why there were there, and one told me it was so he could make better investment decisions.
The oil decline situation is much more serious than people realize, and I highly recommend that anyone who wants to be on the cutting edge of knowledge attend the next ASPO conference. It is usually held around the end of November.
I also recommend you visit the ASPO-TV site and take in some of the videos there.
Robert Rapier gave this interesting talk at ASPO last year, which may be of interest to folks who have more than just a passing interest in energy issues.
Robert, who presented at the conference the last two years, lives
in Waimea now, where he moved to take the job of Chief Technology Officer for Merica International.
In Power Plays: Energy Options in the Age of Peak Oil, energy expert Robert Rapier helps readers sort through energy hype, doom and gloom, and misinformation to understand what really matters in energy, and how it impacts individuals, investors, businesspeople, and policy makers worldwide. The book
covers the overall global energy situation, the particular risks for the U.S. with its present energy mix, the energy outlook for the developed world and emerging economies like China and India, what peak oil really means, and the present and likely future of natural gas, coal, oil, nuclear power, and alternative energy sources.
The book also addresses common misconceptions. For instance, most readers are likely unaware that the U.S. is the third-largest oil producer in the world. Or that Canada leads the U.S. in per capita oil consumption. It will also highlight interesting facts—for example, China has solved part of its energy challenge by
mandating solar hot water systems in all new construction. Most
importantly, the book will provide specific energy insights unavailable elsewhere and help individuals and business planners chart future actions and decisions.
He once told me that if a biofuel project has a negative energy balance, it would never be cheaper than oil.
He is highly technically qualified and has a knack of making difficult issues and conclusions easy to understand. I highly recommend both his book and blog.
My Op-Ed article on the Aina Koa Pono situation, and how it would raise electricity rates for O’ahu residents (though the project is on the Big Island), ran in yesterday’s Star-Advertiser. Here it is in full:
***
The Public Utilities Commission (PUC) is considering approving
a contract between Hawai‘i Island’s HECO-owned utility (HELCO) and a partnership known as Aina Koa Pono (AKP). Its decision is expected within the next several weeks.
Why should rate payers on O‘ahu care about this proposed
contract?
Because if approved, O‘ahu residents would pay about 90
percent of the cost – even though the very expensive fuel would only be used on the Big Island.
The contract between HELCO and AKP calls for HELCO (and you) to purchase fuel from AKP at about $200/barrel. Today, a barrel of oil costs about half that: $107. If this contract is approved, there will be a surcharge, to cover the difference, on your monthly electricity bill.
Furthermore, note that whenever oil has reached about $120/barrel, world economies have slowed precipitously. Many have gone into recession. This tells us that there is a natural economic “stop” in place that keeps oil from getting anywhere near $200/barrel.
And yet HELCO/HECO is trying to guarantee AKP a fixed price
of $200/barrel.
While a discussion of using renewable energy, rather than
primarily buying foreign oil, is warranted, when the cost of those renewables is so unrealistically high that any buyer would look for other alternatives, then that discussion has reached the point of absurdity.
What lower-cost alternatives exist for the Island of Hawai‘i?
The Island has significant geothermal resources at the equivalent price of $57/barrel. Right now, HELCO purchases only about 70 percent of the geothermal power available, meaning there is more geothermal available at well below the equivalent of $200/barrel.
HELCO currently purchases power from biofuel and hydroelectric sources that make a reasonable profit at today’s prices, and don’t ask for $200/barrel. Additional power plants are asking to come on line at today’s prices.
HECO and HELCO currently buy solar power at prices well below the equivalent of $200/barrel (in fact, from what we can tell, at less than half that price).
HECO and HELCO buy wind-generated power for far less than $200/barrel, with more potential sellers lining up to sell to them.
AKP’s plan has technical issues, as well. The process AKP plans to use has never been proven at the scale they propose; the proposed
yield of source material is many times more than ever grown anywhere. There are also cultural and environmental issues.
Finally, you might ask why O‘ahu rate payers should pay for power consumed by rate payers on another island. GOOD QUESTION.
The simple answer is that if rate payers on the Island of
Hawai‘i had to bear the burden, there is no way this could be approved. That kind of tells the whole story right there, doesn’t it?
We suggest you write to the PUC if you oppose this contract: hawaii.puc@hawaii.gov. You can also contact your State and County legislators and your Mayor.
Richard Ha, owner of Hamakua Springs Country Farms,
submitted this on behalf of the Big Island Community Coalition, of which he is a founding member. Other founding members include Dave DeLuz Jr., John E.K. Dill, Rockne Freitas, Wallace Ishibashi, Ku‘ulei Kealoha Cooper, Noelani Kalipi, Ka‘iu Kimura, Robert Lindsey, H.M. “Monty” Richards, Marcia Sakai, Lehua Veincent and Bill Walter. All operate as individuals and do not represent others. The Big Island Community Coalition (BICC) works primarily with cost issues on the Island of Hawai‘i, where residents pay about 25 percent more for electricity than do O‘ahu rate payers.
Speaking to a room of movers and shakers from Hawaii’s commercial real estate industry at the NAIOP Hawaii
Real Estate Symposium Friday at the Hawaii Convention Center, Dunkerley noted that without new product, such as hotels, tourists will eventually go elsewhere for their vacations.
Dunkerely says that Hawaiian Airlines, a subsidiary of Hawaiian Holdings Inc. (Nasdaq: HA) is doing its part by investing $11 billion in a “superior fleet.”
But Dunkerley and Hawaiian Airlines cannot do everything by themselves to save Hawai‘i.
It certainly won’t help if we increase the cost of doing business in Hawai‘i.
Q. HELCO AND HECO RECOMMEND THAT THE COST DIFFERENTIALBETWEEN THE BIODIESEL AND THE FOSSIL FUEL THE BIODIESELREPLACES SHOULD BE
SPREAD ACROSS BOTH HELCO AND HECORATEPAYERS. IN YOUR OPINION, IS THIS JUST AND REASONABLE?
The Consumer Advocate responds:
A. No. In my opinion, the entire cost premium differential should be borne by HECO ratepayers. I refer to it as a cost premium, because the price of biofuel is currently higher than the price of petroleum diesel.
O‘ahu hotels already pay high electricity costs. Let’s not price them out of the market. This does not help our tourism industry, Hawaiian Airlines or us.
For Big Islanders, our worst fear is that AKP is approved by the Public Utilities Commission. If that were to happen, we would be locked into a 20-year contract that would preclude our selecting lower cost alternatives for 1/3 of our base power electricity use.
An oil price of $200/barrel will be very damaging to the airline industry, as well as to our tourism industry.
We don’t need to be paying for $200/barrel biofuel now when we don’t have to.
The Energy Information Agency (EIA) projects oil will cost less than $150/barrel in their reference rate case during the 20-year period of the potential AKP contract.
Yet HECO chose to use the EIA’s highest rate scenario of $200/barrel.
What if they are wrong?
Why are we pursuing this alternative? It’s like we are choosing to go over the cliff now, in order to maybe prevent going over the cliff
later.
Why do we want to be first in the world to achieve cellulosic biofuel? There is a 90 percent chance of failure! It would be far smarter to copy someone else who is the first in the world. Then there would be a 90 percent chance of success.
• Are we pursuing this to stimulate economic activity? That’s just taking out of one pocket to put into another, and causing electricity rates to rise as we do it.
A rising electricity price acts like a giant regressive tax. Folks who can afford to do so leave the grid. And those who cannot leave, pay even more.
Two-thirds of our economy is made up of consumer spending. If folks had discretionary income, they would spend it, businesses would hire and people would have jobs.
The opposite is what’s happening now.
• Or are we pursuing AKP to better the lives of future generations? This proposal worsens the prospects for future generations.
We cannot let AKP pass. It would be a disaster for our economy for the next 20 years and beyond.
Every organism, organization and even civilization needs surplus energy or it goes extinct.
When a mama cheetah catches an antelope, for instance, she needs to get enough energy from consuming that antelope to take care of her kids.
Let’s say all the antelopes are very skinny, and the energy she gets from eating a skinny antelope only gives her enough energy to make one more sprint, and that’s all.
That would be described as an "energy return on investment," an EROI, ratio of 1-1. She has no excess energy available to do anything but catch her next meal. That would be a very scary existence: She would have to catch an antelope on every single sprint, or her species would go extinct.
But if the antelopes got fatter, and the cheetah could make two sprints from eating one antelopes, we would call this an EROI of 2-1.
When the cheetah could make five runs from eating one antelope, things would be starting to look better (EROI 5-1). She would have energy left over to do more than just survive. She could spend time washing and playing with the kids.
At an EROI of 10 to 1, she could send the kids to grad school; things would be wonderful.
At an EROI of 30 to 1, the cheetah population would start to grow. The cheetahs would move into condominiums and take vacations in Hawai‘i.
So what does this mean in real life? Here’s some history.
In the 1930s, we could extract 100 barrels of oil from the ground by using the energy we got from one barrel of oil. That’s an EROI of 100-1.
By 1970, we were only getting 30 barrels of oil from the use of one barrel (an EROI of 30-1).
And in 2013, it’s around 10 barrels of oil (EROI 10-1).
Tar sands is around 5-1.
And biofuels are less than 3-1. Some biofuels (for example, alcohol from corn) are barely more than 1-1. You can see why putting our money and efforts into biofuels hardly makes sense.
Especially when you realize that geothermal, as we have in Hawai‘i, appears to have an EROI ratio of 11-1. It’s also significant to note that this rate won’t change anytime soon. The Big Island will be over the “hot spot,” which creates our geothermal conditions, for 500,000 to 1 million years.
Hawai‘i should be sending more people to the Association for the Study of Peak Oil (ASPO) conference. The folks at ASPO are on the leading edge of energy data interpretation. We need more people with cutting -edge energy knowledge.
For example, for several years now ASPO folks have been utilizing Energy Return on Investment (EROI) as a tool to evaluate energy
options.
If HECO had understood the concept and its parameters, it
may not have committed to Aina Koa Pono’s biofuel project so wholeheartedly.
Biofuels, in general, have very low EROI ratios (net energy). It takes a ratioof 3 to 1 just to maintain society’s petroleum infrastructure. Biofuels, except for cane ethanol, are lower than 2 to 1.
If we can’t make money in Hawai‘i now with cane ethanol, what makes us think we can do cellulosic biofuels, which are more costly and more difficult?
Despite spending hundreds of millions of taxpayer dollars, there are zero commercial competitive cellulosic biofuels in production
today. Zero. We wish AKP well, but it should use its own money, not that of the rate payers.
When HECO responded to Consumer Advocate questions about how it justified its pricing, the utility used the Energy Information Agency (EIA) 2012 AEO report’s high-case scenario for its long-term forecast.
But the EIA’s short-term forecast, just a couple of weeks ago, estimates the 2014 price of oil at $101/barrel – while HECO estimates that oil will cost $180/barrel in 2015. The rate payer wouldn’t care about this if they didn’t have to subsidize the biofuels at $200/barrel.
Putting a secret $200/barrel biofuel surcharge on rate payers, and then telling them, “Trust us, this won’t hurt much” – while raising the pay of top executives – stands in sharp contrast to the CEO of Japan Airlines, who insists on being treated exactly like his workers. Watch that short (2:20) video for a very different approach than we are used to. Really interesting.
Aina Koa Pono (AKP) just announced plans to bring a trailerable “Micro Dee” process to Ka‘u to demonstrate the pyrolysis oil process.
That liquid is not drop-in diesel.
It still needs to be sent through a refinery so that it can meet fuel specifications.
After refining, rate payers will still subsidize the fuel to the tune of $200 per barrel.
It kind of looks like the same old piggy but with lipstick and a pretty dress.
From the Aina Koa Pono press release:
….Our plan is to start with one, 33-ton-a-day unit so the community can see and understand the Micro Dee (Microwave Thermo Catalytic Depolymerization) process in place. AKP and its engineering, construction and procurement partner, AECOM Technology, are focused on final plans for this trailerable unit; we’re performing final validation on technology so investors are confident as we move ahead. We expect to locate the 33-ton unit in Hawaii within the next several months and be operational before second quarter, 2014.
AKP has 12,000 acres on which to produce the crop they need to make fuel. Palm oil is the only crop that can compete with oil in the biodiesel space. It yields approximately 500 gallons/ acre.
Assuming – and this is a huge assumption – that AKP gets the same yield as palm oil produces, they might get 6 million gallons annually from their 12,000 acres.
That will be far short of the 18 million gallons the utility is looking for.
Right now the land is mostly in cattle, but it’s clear that AKP will need every inch of land.
I wonder when they are planning to break the news to the cattle ranchers – that the cattle ranchers will need to leave?
Even more reason for the PUC to set aside the Big Island’s Aina Koa Pono biofuels project!
From the New York Times:
Published: January 25, 2013
WASHINGTON — A federal appeals court threw out a federal rule on renewable fuels on Friday, saying that a quota set by the Environmental Protection Agency for incorporating liquids made from woody crops and wastes into car and truck fuels was based on wishful thinking rather than realistic estimates of what could be achieved.
But actual production has been near zero.
While the mandate springs from a 2007 act of Congress meant to promote advanced biofuels to run cars and trucks, “we are not convinced that Congress meant for E.P.A. to let that intent color its work as a predictor, to
let the wish be father to the thought,” the court wrote….
