Tag Archives: Biofuels

Big Island, Biofuel, Renewable Energy Sources

Another Testimony Opposing Aina Koa Pono

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Richard Ha writes:

Here’s another testimony opposing the Aina Koa Pono biofuel project. This one is from Bill Walter.

You can send an email opposing this project. Email it by this Friday, November 30, 2012, to hawaii.puc@hawaii.gov.

To: hawaii.puc@hawaii.gov
Subject: AINA KOA PONO CONTRACT

Please consider my testimony on : DOCKET # 2012-0185 (Aina Koa Pono supply Contract) 

AINA KOA PONO, LLC
Docket # 2012-0185

In this docket, HELCO is asking you to validate its proposed contract with AKP, passing on the expected additional cost of the project in the form of a surcharge to rate payers on both Oahu and the Island of Hawaii.  

It is difficult, sometimes, to imagine a decision of this nature on the basis of the economics of the case itself.  

To help us with this, AKP’s PR firm has reduced the numbers to minimize the apparent impact of the decision – simply add $1 per month to your power bill for 20 years or a total of $240.  Seems pretty small, not much of a decision or even much of a risk when put in these terms.  Of course this picture does not paint the costs as they apply to thousands of businesses, non profits, government entities or other organizations.  Neither does this demonstrate how those costs ripple through the economy to increase costs of goods and services while reducing the supply of the same.  So, lets look at this from three other perspectives before we get further into the discussion.  Those three perspectives are of a family barely making ends meeting (and actually not making it accept with government and family help); a family that makes ends meet but with some sacrifices and finally a family that has plentiful resources and buys whatever luxuries they desire.  But lets change the terms – to the cost of fuel for these three families.  

•Ask yourself, if you were the first family if someone offered to sell you gas for the next 20 years – starting in 2015 at twice today’s average rate or about $8/gallon and at today’s usage – would you buy this package?    Probably not – they are not assured that gas will cost $8/gallon over that period and can see that rather than trade a known (but apparently very high) cost of fuel they would anticipate that they would make yet more lifestyle changes.  They would increase car pooling, bus riding, volume grocery buying (if possible), growing more of their own food, etc.  THE POINT IS that they truly cannot and would not be able to afford the higher costs and so would take other steps to make ends meet.  In the same way, to families at the bottom of the economic ladder the AKP deal is something that they cannot afford and never would select.

•If you were in the second group the situation may present itself differently, but in this case you may have more options.  For instance, rather than locking into $8/gallon and at today’s usage you may decide to buy a more fuel efficient car; combine trips; consider other transportation (bikes, walking, carpooling, bus trips, etc.) reducing steps.  The point is that you would have more means of reducing usage so that the $8/gallon could take you further.  It is not likely that you would take the deal as presented.  You have too many assured usage reducing options and too little assurance that the price will actually reach $8/gallon.

•If you were in the third group you still might not buy into the proposition.  Your ability to purchase more efficient transportation -or even ignore the problem because fuel may not reach that level – is greater, the impact less.

So then, the point is that very few would even consider the option being proposed by AKP if it were put to them in terms that they work with every day.  Neither should the PUC.

These scenarios may have little impact on your decision, after all your decision is really on a macro level dealing with a large company, sophisticated planning and island wide demand.  For this I ask you to consider the following:

IS THE PROPOSITION REASONABLE AND IN THE PUBLIC INTEREST:

•If there are other alternatives for providing power to the Island of Hawaii that are or are likely to be less expensive then the answer is clearly “no.”  Why pay more to achieve the same result (power generation) when less expensive sources are or can with a similar degree of confidence be expected to be available.  So the question, then, is – are there?

• AKP’s contract appears to call for fuel at $200/barrel vs. today’s rate that bounces somewhere between $80 and $120 (but generally near the mid point – $100).

• PGV is able to produce power at the equivalent of $57/barrel – 28.5% of the cost of AKP’s proposal.  This is produced with reliable and proven technology here on the island of Hawaii.  it produces less carbon in the process and is a known quantity.

• LNG is proposed as a possible alternative,  In fact we are told that many mainland power producers are turning to this source from coal and petroleum products.  They do so because of efficiencies and reduced dependance on foreign sources.  Would it not make more sense to at least wait to see what studies show the impact of LNG would be on our power costs before committing to a 20 year contract based on much higher prices?

• Ho Honua proposes to sell to HELCO at market rates.  Others are taking similar risks to produce fuel at market rates – whatever they may be – even at today’s rates (i.e. Big Island Bio-Diesel).

• Other technologies are coming on stream that promise reduced power generation costs as well – solar energy or various types, bio-fuels from algae, wave action, etc.  Why lock in a supplier whose promise is similar fuel but at higher prices.

•HELCO/AKP counter that if the fuel does not end up being economical – they can sell it to transportation or to other islands for their power generation.  But that assumption is based on the AKP created fuel being less expensive than fuels from other sources.  If it is not – then HELCO sells those fuels at a loss which the rate payer must subsidize.  In short – the risk remains

•This proposal is truly a gamble not simply on the cost of fuel over the proposed period (2015 – 2034) but on the cost of alternative fuels, alternative sources of power and even over whether the target plant (Keahole) will be economically viable throughout this period.  We would ask:  WHAT MITIGATING FACTORS WOULD DRIVE US TO MAKE THIS GAMBLE – particularly as we consider the impact on the lives of our residents and their businesses.

WHAT QUANTITATIVE OR QUALITATIVE VALUES SHOULD BE ASSIGNED TO SUCH A PRICE PREMIUM OR EXTERNALITIES

•This is a vital question.  It needs to be evaluated in its full context which includes: individuals at the lower end of the scale who cannot make ends meet today; businesses that will have to increase prices further and reduce product and service offerings further; individuals and businesses who are trying to compete with Oahu and other locations with lower power costs; companies that are evaluating the Island of Hawaii as a location but must take into account the already unusually high cost of power here as one of the deciding factors.

• The end is that many will find that their survival at any reasonable level does not allow for such luxuries as taking the risks this contract proposes.  These externalities for those who struggle are too high to pay and not worth the risk.

• For those who may point out jobs to be created in the production of these fuels do not account for the jobs lost throughout the island because of the additional costs of the AKP premium and there surely will be many.

WHAT RATE PAYER RISKS SHOULD THE COMMISSION CONSIDER IN EVALUATING THE BIODIESEL SUPPLY CONTRACT?

•The risk that the market price for fuel will not in the end justify this ($220/barrel) cost

•The risk that other power sources can be developed that will be less costly

•The risk that at each level higher those able to depart from the “grid” do depart from the grid making the remaining – less and less economically capable – rate payers pay a higher and higher proportion of the distribution and generation costs.  (This thing steamrolls literally).

HOW ELSE MIGHT THE COMMISSION AND HELCO PROVIDE FUEL TO KEAHOLE

•Dr. Schumpeter more than four generations ago pointed out that market systems need to encourage “creative destruction.”  By this he meant that ever more efficient technologies by their nature create higher living standards while making obsolete the technologies that they replace.  

This applies as follows:  WHEN KEAHOLE is no longer economically viable – it needs to simply cease to operate.  This is fundamentally an owner (i.e. stockholder) risk and should not remain a risk of the populace as a whole.  We should not be taking extraordinary steps to keep in operation a plant that may have become functionally and technologically obsolete.  Whereas there may have been a time when ensuring the viability of the assets of a controlled monopoly made sense – they no longer do.  

What happened in the communications industry (i.e. cell phones vs. land line phones) will and is happening in the power generation industry.  The PUC must recognize this change or the number of “well healed” customers who depart the grid will overwhelm the entire system leaving only those least able to pay on the grid having to pay for an overwhelmingly burdensome grid.  

•There is, nonetheless, more than one answer to this question and arguably all of the other options are less expensive and certainly less economically risky.  Keahole may be converted to operate on LNG.  AKP is essentially a hedge bet – it may well be that continuing to purchase fuel on the market (whether from local sources, or other sources) will be a less expensive option.  We do not know at the moment which it will be, so should we be taking this hedging risk?

OTHER CONSIDERATIONS

•AKP is essentially a complex set of transactions designed to allow HELCO/HECO to meet the State’s goal of reducing dependance on foreign fuel sources while keeping alive Keahole and increasing spot employment among other benefits.  This particular scheme appears to have many benefits but at no small risk. At its heart are assumptions about the future price of oil, the capabilities of technologies untested at anywhere near the size and configuration proposed.  The commission must ask itself: IS IT APPROPRIATE to ask rate payers – many of whom are at the extreme low end of the economic scale – to participate in the risk?  If the answer was that there are really no other viable  options the answer may be clearly and easily “yes.”  But this is not the reality – there are many other alternatives and most of them at significantly lower cost.  Justification for this risk taking is, in fact, scant.

•In the 1970’s the Northwest Utilities made a series of judgements based on expected power requirements and power prices.  Prices assumptions were driven at that point by dramatic increases in the price of fuel and by its apparent (but not actual) scarcity.  Demand was based on charts showing post WWII growth and regional growth based on increasing industrialization of the area resulting from low power prices would continue on the same upwards trendline.  These factors led WPPSS to develop a complex funding scheme to build nuclear power plants.  All of this was well meaning and well intentioned.  The coming debacle – a $2.25 Billion default – is a classic example of what happens when we add uncalled for complexity based on a future that is much more nuanced than any chart can demonstrate.  (One summary of the adventure can be found at http://columbia.washingtonhistory.org/anthology/maturingstate/seduced.aspx)  Frankly, although similarly well intentioned and actually less complex – the driving factors for AKP share several of the same characteristics.  For a community that is paying 4X the national average for power, 25% more than Oahu for power – this is a risk that a fragile economy simply cannot bear and should not be asked to bear.  

Bill Walter

Related articles
Big Island, Biofuel, Lowering Electric Rates, Peak Oil, Renewable Energy Sources

Speak Up By Friday & Make an Important Difference

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Richard Ha writes:

Regarding the Aina Koa Pono (AKP) biofuel project, and despite its full-page newspaper ads, Hawaii Electric Light Company (HECO) has clearly shown that it does not have the public interest at heart.

The utility kept secret how much AKP would be paid – $200 per barrel – and manipulated that information to estimate that the average rate payer would pay $1 per month and make us feel like this was a small thing.

This is grossly unfair. There are many different ways HECO could have informed the public without compromising proprietary information. Instead, behind our backs, it was applying to pass through the cost of $200 per barrel oil.

It’s unconscionable to do this to the “rubbah slippah” folks.

Now, week after week, HECO continues to run its full page newspaper ads to wash our brains and tell us how much it is trying to lower our rates. Hmmmm.

This Friday, November 30, 2012, is the deadline to submit testimony to the PUC opposing the Aina Koa Pono project.

Email your letter to: hawaii.puc@hawaii.gov and reference this in the subject line: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono.

Here’s the testimony I sent:

To: PUC <hawaii.puc@hawaii.gov>
Subject: PUC Docket #2012-0185; Application for approval of biofuel supply contract with Aina Koa Pono

Aloha Chair Morita and commissioners:

I am strongly against the AKP biofuel supply contract.

I am president of Hamakua Springs Country Farms, which is a family farming operation. We farm 600 fee simple acres of bananas and tomatoes at Pepe‘ekeo on the Big Island. We have more than 35 years of farming experience. I am a committee member of the Hawaii Clean Energy Steering Committee. I was co-chair of the Geothermal Working Group. I have attended four Association for the Study of Peak Oil conferences, so I have a fair understanding of energy issues.

My testimony relates to the effect that the AKP biofuel contract will have on my workers and on my farm, as well as on food security in general and the Big Island’s economy in particular.

The AKP/HECO fueling arrangement contemplates AKP being paid approximately $200 per barrel of biofuel. The $200 per barrel payment to AKP will begin in 2015, when AKP is anticipated to deliver the specified quality fuel. The contract will then last for 20 years. HECO points out that the rate subsidy will only begin when AKP delivers fuel, as if to say that there will be minimum economic effect on rate payers. Nothing could be further from the truth.

The AKP fuel purchase contract of 20 years precludes utilizing potentially lower cost alternatives. Geothermal, for example, is 11 cents per kilowatt hour less than oil for generating electricity. If geothermal were used instead of oil at the 60 MW Keahole plant, it would save $58 million annually compared to oil at today’s price. And oil today is nearly half the cost of AKP’s fuel oil at $200 per barrel.

It appears that the AKP contract tracks the AEO 2012 high price scenario instead of the reference case scenario. During the last few years, knowledgeable commentators such as Jeff Rubin point out that rising demand and rising oil prices contains the seed of its own destruction. The last four recessions, dating back to 1970, indicate that oil price spikes cause recessions. And recessions cause oil prices to fall back. Global economic growth is grinding to a halt when oil is close to $100 per barrel. So it is more prudent to follow the reference case of the EIA’s AEO 2012 oil price projection – instead of the high rate case oil price path that HECO chose.

The PUC should not approve as just and reasonable that the utility should be allowed to establish a Biofuel Surcharge provision that will allow the pass through of the cost differential to the consumer as well as the actual cost pass through itself.

Rate payers will subsidize the difference between the actual oil price and the $200 that AKP will be guaranteed for 20 years. It is more than possible that actual oil prices would be substantially below $200 for the whole contract period. That will result in a heavy subsidy that rate payers must bear. The $200 per barrel rate is much too high. And the cost differential that is anticipated to be passed through to the rate payer is unconscionable.

On the Big Island, electricity rates have been 25 percent higher than Oahu’s rate for as long as people can remember. It has contributed to the Big Island having one of the lowest median family incomes in the state and the attendant social problems that come with a struggling economy.

Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse; as electricity prices rise, folks that can afford to leave the grid will do so, leaving the folks unable to leave to assume more of the grid infrastructure cost.

Oil price has quadrupled in the last ten years. People and businesses have made necessary adjustments, but there is just no more to cut. Farmers have cut back on employee benefits, and they have cut back on capital improvements to survive. But this is false economy; sooner or later, maintenance foregone will catch up. Farmers are especially vulnerable because they are price takers rather than price makers. It is our food security that is at stake.

Hawaiian farmers’ and food manufacturers’ main competition is U.S. mainland producers. Oil costs make up less than 2 percent of the electricity costs on the mainland. Oil is more than 70 percent of the cost of electricity in Hawa‘ii. Any mainland food product that has substantial cheap electricity costs imbedded in it becomes relatively more competitive to Hawai‘i products as oil prices rise. AKP’s price subsidy will make Hawai‘i food producers even less competitive to their mainland counterparts. Allowing cost differential pass through will threaten our food security.

Higher electricity costs from the AKP project will affect fresh food costs. Farmers, wholesalers and customers of locally gown food all pay for the electricity that it takes to maintain the “cold chain.” That raises food cost and takes away discretionary income from consumers. Consumer spending makes up two thirds of our economy. Allowing cost differential pass through threatens our economy.

Rising electricity rates act like a regressive tax – the folks on the lowest rungs of the economic ladder suffer the most. But it is worse: As electricity prices rise, folks that can afford to leave the grid will do so. This leaves the folks unable to leave to assume more of the grid infrastructure cost. These are the very people who are most affected by rising electricity rates. Allowing cost differential pass through is not in the public interest.

In this particular project, HECO has shown that it does not have the public interest at heart. Worse, it kept secret the $200 per barrel amount that AKP would be paid and then manipulated that information to come up with an estimate of $1 per month for the average rate payer. That was grossly unfair. Passing on the high biofuel cost to the rubbah slippah folks while making it seem that there would hardly be an effect is unconscionable. There were many different ways they could have informed the public without compromising proprietary information. Instead they chose this way. It speaks for itself.

Richard Ha

Related articles
The Big ‘Aina Koa Pono’ Risk
Rubbah Slippah Folks Turn Out at Kona PUC Meeting
Hilo’s PUC Meeting Successful: ‘Enough is Enough’
Biofuel, Community, Geothermal, Peak Oil, Renewable Energy Sources

Rubbah Slippah Folks Turn Out at Kona PUC Meeting

Richard Ha writes:

The Kona PUC hearing we’ve been talking about here took place on Tuesday evening.

From West Hawaii Today:

Powerful resistance to PUC

By Erin Miller

West Hawaii Today

West Hawaii residents described to the Public Utilities Commission how they have cut back on energy usage, and questioned why Hawaiian Electric Light Co. shouldn’t have to bear the costs of upgrading its own equipment.

The questions continued as the PUC heard comments from residents Tuesday evening on a proposed contract between HELCO, Oahu’s Hawaii Electric Co. and Aina Koa Pono for a biodiesel project in Ka‘u.

Albert Prados, manager of the Fairway Villas at Waikoloa Beach Resort, was one of more than 20 people who testified against HELCO’s rate increase request, which HELCO officials would raise rates 4.2 percent, or about $8 per an average 500 kilowatt hour monthly bill. Prados described the measures he has taken in his own home, including shutting everything off except the refrigerator at night, to lower his electricity bill. Read the rest

Mayor Kenoi took a very strong stand on renewable energy. He
made clear that it is not sufficient that it be renewable; it also needs to be affordable. He is concerned about the most defenseless among us.

He said, This is the kind of project that 20 years from now, we will be asking, “How did we let that happen?” He also said that we are doing this for the benefit of HEI and HECO – but that there is no benefit for the Big Island. The Mayor is very aware that high and rising electricity costs threaten our economy and also the folks on the lowest rungs of the economic ladder.

Rep. Denny Coffman asked, “How is it we are here? This is not even proven technology.” He pointed out that the electric utility is setting the state’s energy policy, and that that should stop while we finish the Integrated Resource Planning process that’s happening right now. Rep. Coffman understands the energy situation worldwide and he knows it’s foolish to be chasing unproven technology. It is both a waste of time and money. In Hawai‘i, we do have proven technology that is affordable.

My testimony:

To answer the Consumer Advocate’s question, “Would we change our minds if all the costs were given to the Oahu rate payers?,” the answer is no! I think that giving AKP a 20-year contract will forego the opportunity of developing lower cost alternatives. And it will take up valuable time. Liquid natural gas is an option. Ocean energy might be ready within the 20-year period. Geothermal is an affordable, proven technology. For instance, there is an 11 cent difference between geothermal and oil today. We could replace liquid fuels with 80MW of geothermal electricity, and apply that savings to pay the remaining debt of the Keahole 80 MW liquid fuel burning plant.

(80 MW is equal to 80,000 kilowatts. That 11 cents/kilowatt hour savings multiplied by 80,000 kilowatt hours equals $8,800 that you save each hour. And the savings per day is $211,200. That times 365 days equals an annual savings of $77 million. That is enough to write off the plant and still give the rate payers a break.)

Jeff Ono

Consumer Advocate Jeff Ono asked: “If O‘ahu rate payers would pay the cost, would you still be against the AKP project?”

Most of the time, making electricity has to do with making steam to turn a turbine. You can burn coal to make steam, or you can burn oil to make steam. You can burn firewood to make steam, or use the steam from underground – that’s geothermal.

AKP takes the long way. They grow plants using fossil fuels,
then they use electricity to make microwaves to vaporize the plants, then take the liquid that rises and convert it to a burnable liquid, and haul it to Keahole, where they burn it to make steam.

It isn’t surprising that it is expensive.

More than a few engineer folks tell me that this process
uses more energy than it makes. And if that is the case, it will always be more expensive than oil. This is not a good bet for us.

Palm oil is the only biofuel today that can compete heads up
with petroleum oil. It produces 600 gallons of oil per acre. AKP strives to produce 16 million gallons per acre, plus another 8 million gallons – or 24 million gallons from 12,000 acres. That is 4 times as productive as palm oil, the only biofuel that competes straight up with petroleum oil. If it works, they don’t need any subsidy from us. If it works, they will all end up billionaires.

We cannot predict the price of oil. But people are hurting right now. And if oil prices reach $200 per barrel, the tourism industry will be devastated and everything connected with it will shrink. We do not have the luxury of time. We need a lower cost alternative right now.

Well-respected Council of Revenues economists Paul Brewbaker, of TZE Economics, and Carl Bonham, Executive Director of the
University of Hawaii Economic Research Organization (UHERO), agree that low-cost energy is a key component of our economic future. 

There are alternatives to $200/barrel biofuel. Geothermal is the equivalent of $57/barrel. Liquid natural gas is low cost now on the
mainland, and maybe ocean energy will be an alternative within the time period of the contract.

We need lower cost electricity, not higher, and AKP is not the answer. The AKP project is wasting valuable time, and we need to put it to bed so we can focus our attention on the next projects.

I agree with the electric utility from here forward. The next PUC hearing will be on the Hu Honua biomass plant at Pepe‘ekeo. They will use wood chips to boil water and make steam. This is proven technology and it looks to be cost effective.

After that will be a proposal for 50MW of geothermal. Geothermal does not have to burn anything. It just uses the steam underground to make electricity and it is cost effective.  

At that time, HELCO with its leverage should be able to successfully renegotiate the old contract that is tied to oil. Then we will be well on our way to protecting ourselves from the volatility of world oil prices. Those two projects will result in a total of 110 MW of stable, affordable electricity using proven technology. 

We need to strive for balance and common sense as we try to make things work for everyone. Hospitals, schools, hotels and businesses need the electric services provided by the grid. Fifty percent of our people rent and so cannot get off the grid. We need to be practical, and help to make sure the electric utility is healthy as we strive for a lower cost to the rate payer.

Biofuel, Geothermal, Lowering Electric Rates, Peak Oil

Try Wait – Comparing costs for Geothermal vs. Aina Koa Pono Biofuels

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Richard Ha writes: 

It’s all about the cost.

What if we substituted geothermal electricity for Aina Koa Pono’s biofuels proposal, in order to replace the 80MW that the Keahole liquid fuel-fired plant produces?

Aina Koa Pono’s proposed plan would cost rate payers the equivalent of $200/barrel of oil.

The “barrel of oil equivalent” for geothermal-produced electricity is $57/barrel, and this price will be stable for 500,000 to a million years. (Geothermal is competitive with – though cheaper than – natural gas, which is $5.16 per million BTUs and breaks even with oil at $57/barrel; and nuclear power, which breaks even at $6.26 and $69).

At today’s oil prices, there is an 11 cent difference between oil- and geothermal-produced electricity. Geothermal is cheaper by far.

The Keahole plant’s capacity is 80MW, which is 80,000 kilowatts per hour. Using geothermal would save $8,800/hour, $211,200/day, and $6,336,000/month. In a year, the savings would be $76 million.

Why can’t we split the difference? Part of the savings goes to lowering rate payers bills, and the other half to retire debt?

The electric utility should not be punished for trying to achieve its renewable energy goals. But we have to realize there may be alternatives that better prepare us for the future. Let’s not lock ourselves out of these opportunities by signing a 20-year contract just because of an arbitrary time schedule.

In the end, with geothermal we would pay the oil equivalent of $57/barrel on our electric bills. If we go Aina Koa Pono’s route, we pay the equivalent of $200/barrel.

Am I missing something?

Biofuel

Why Aina Koa Pono Biofuels Isn’t In Our Best Interest

1 Comment

Richard Ha writes:

The Aina Koa Pono (AKP) biofuels experiment will saddle us with expensive electricity costs when there are other, better, alternatives.

  1. It costs way too much. Generating electricity from oil today costs 21 cents/kWh. AKP will charge us the 21 cents/kWh plus a surcharge until oil reaches some target price in the future. In comparison, geothermal costs approximately 10 cents/kWh, according to a 2005 GeothermEx report.
  2. It uses more energy than it generates. An independent third party should do an analysis of the whole Aina Koa Pono process, especially its Energy Return on Energy Invested (EROI). The process uses fossil fuel energy to grow its crops, then uses electricity made from fossil fuel to run its microwaves to get pyrolysis oil. That oil (which is more like vinegar) is then sent through a refinery to make it into a fuel, which will be trucked to Keahole, where it will be burned to make electricity. If the objective were to make electricity with biomass, it would be cheaper to burn the biomass, make steam, turn a turbine and make electricity that way.
  3. It is speculative. Did you know there is no industrial-scale project in the world using this process to produce electricity? We are trying to be first in the world. Very frequently, a better strategy is to copy the first in the world. It greatly reduces the risk of failure.
  4. It will tie us to a 20-year contact, during which rate payers will have a difficult time investing in other alternatives. We need to invest in the smart grid, so we can bring more solar and wind on board.
  5. Rate payers (that’s you) should not be made to be venture capitalists.
Biofuel, Geothermal

The Farmer’s Point of View (on Geothermal & Biofuels)

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Richard Ha writes:

I recently participated in a panel discussion at the Hawaii State Association of Counties conference, which was held at the Hapuna Prince Hotel. I was on the Renewable Energy panel to present the farmer’s point of view.

HSAC

Panel members, left to right: Jay Ignacio, President of HELCO; Joe Pontanilla, Vice Chair of Maui County Council; Mina Morita, Chair of the PUC; me; The Honorable Patricia Talbert, IDG

Here’s what I talked about:

I have attended four Association for the Study of Peak Oil (ASPO) conferences on the mainland. I went to learn about oil so I could position our farm business for the future. The most important thing I learned from my first trip was that the world had been using twice as much oil as it had been finding for the last 20 to 30 years. Clearly this was not good, and would have consequences.

A concept I picked up was Energy Return on Investment (EROI), sometimes called EROEI – Energy Returned on Energy Invested. It answers the question: What is the net energy left over after energy is used to get it? Said another way, the energy left over to get energy minus the energy it takes to get your food gives you your lifestyle.

In the 1930s, getting 100 barrels of oil took the energy of 1 barrel.

In the 1930s, 100 to 1
In the 1970s, 30 to 1
Now, it’s approximately 10 to 1

Canadian tar sands is  5 to 1
Biofuels is 2 to 1 (or less)

It takes approximately 6 to 1 to maintain our present, oil-based infrastructure.

Hot steam geothermal, like we have on the Big Island, might be 15 to 1. And its EROI will not decline for 500,000 years. Very few in the world are so fortunate.

Carl Bonham, head of UH Economic Research Organization (UHERO), was in Hilo recently for a Bank of Hawaii presentation. I asked him: If we were to use geothermal as our primary electrical base power for the Big Island, would we become more competitive to the rest of the world? He said yes.

Geothermal benefits all Big Islanders, from the rubbah slippah folk to the shiny shoe ones. It means more jobs and more money in people’s pockets.

What about growing biofuel?

Biofuel is traded on the world market. So we are in competition with producers the world over. The bottom line is that the producer with the best competitive advantages will have the most competitively priced product. When growing fuel crops, the best set of circumstances occurs when the production is concentrated an equal distant from the processing plant. A circular model works best. Intense sun energy, flat land and deep fertile soil with good irrigation gives one good advantages. These qualities rarely occur on the Big Island at the scale necessary for our farmers to compete on the world market.

What about small agriculture? When oil is $100 per barrel, each pound of that oil is worth 38 cents. If a farmer needs to grow 4 pounds of stuff to squeeze out 1 lb. of liquid, the most that farmer can expect is 9 and 1/2 cents per pound to grow the stuff.

Everything being equal, any farmer would prefer to grow something that makes more than 9 and 1/2 cents per pound.

Several years ago on the mainland, there were cellulosic biofuel projects that needed farmer-grown feedstock that cost no more than $45 per ton. But farmers were getting $100 per ton for hay. So they received a subsidy of $45 per ton.

In spite of that, and many many millions of dollars of subsidies, there is still no successful cellulosic biofuel project In Hawaii, farmers get $200 to $300 for hay. It’s unlikely they would choose to grow something for half the return. It’s all about numbers.

What about Big Island biodiesel? Although it’s challenging, I do think they have the best chance of enabling farmer-grown biofuels. They have a model that works. All they have to do is tell farmers the form they want the product delivered to them and the price they will pay. Enterprising farmers will figure it out.

What can we do to help farmers make money? We can start with affordable electricity. And there is nothing more affordable than geothermal. On the Big Island, it costs 21 cents per kilowatt hour to generate electricity from oil. It costs half that to generate electricity from geothermal. While the price of oil will keep on rising, geothermal energy will stay stable for hundreds of thousands of years.

Farmers and ranchers incur costs associated with refrigeration at the processing plants, the distribution system, retailers and home refrigerators. If farmers and ranchers have lower costs, they can compete more successfully against mainland imports. And if their customers have more money in their pockets, they can support locally grown foods.

Food security and fuel are closely tied together. Food security involves farmers farming. And if farmers make money, farmers will farm.

Big Island, Biofuel

Challenges of Biofuels on the Big Island

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In the video below, Robert Rapier, Managing Editor and Director of Analysis at the Consumer Energy Report, discusses the challenges of producing cellulosic ethanol, the role natural gas plays in biofuel production, and the uses of excess heat in the production of biofuels.

In general, a circular production model with the production facility in the middle is most efficient. Flat land, deep soil without rocks, lots of sunshine and adequate water supply give significant efficiency advantages.

These conditions do not exist in sufficient scale on the Big Island, making it difficult to produce biofuels in any cost-effective way.

Biofuel, Geothermal, Government

Should Farmers Grow Biofuels Instead of Food?

Should farmers grow biofuels instead of food?

This is a fundamental question that our society will need to answer. How much do we value food production?

When farmers look at rising and uncontrolled oil prices, and are not able to raise their prices to keep up, the message they get is that our society does not, fundamentally, value farmers.

One thing that can help our farmers is geothermal – because it is cheap and its price is stable. Having cheap electricity bills would mean that the people who are the farmers’ customers will have discretionary income, which they can then use to help support farmers.

Every day I talk to many people who are very fearful about rising electricity and gas prices.

Mayor Billy Kenoi has thrown down the gauntlet. He is saying: “We have geothermal; why aren’t we using it?”

I agree with the mayor. Geothermal can help the folks that are on the verge of having their lights turned off. It’s truly about the effect on real people.

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Biofuel, Geothermal

Why Biofuel at Keahole?

Why would we want to burn expensive biofuels at the Keahole plant on the Big Island? We know that will result in increasing electricity rates.

Biofuel is expensive, unproven technology. You cannot even get a sample of it. It should not be used to make electricity when there are other alternatives. Biofuel should only be used for transportation, where there are no alternatives.

Keahole is the largest-capacity generating plant on the Big Island. Locking in expensive biofuels and fossil fuels there for 20 years means locking out cheap geothermal for the same amount of time.

This will not be good for the rubbah slippah folk.

Biofuel, Geothermal, Renewable Energy Sources

Fascinating Comparison Chart on Energy Solutions

This chart was created by Tom Murphy, who is an Associate Professor of Physics at the University of San Diego. He writes big picture physics analyses of energy solutions.

The chart points out that biofuels, of all sorts, are misspent if they are used for electricity. That’s because there are many ways to make electricity, but there are very few ways to make liquid transportation fuels. Click chart to enlarge.

Energy-score

Notice geothermal. It has the most positive attributes when one considers available hot spots such as we have here on the Big Island.

On top of that, geothermal is a low-cost alternative, says a September 2009 Wall Street Journal blog Environmental Capital. That article asks:

…What price would oil or gas have to be for each technology to be break-even without subsidies, using combined-cycle gas turbines as the low-cost yardstick?

Geothermal is the cheapest: It is competitive with natural gas at $5.16 per million BTUs or oil at $57 a barrel. Nuclear power breaks even at $6.26 and $69.

Traditional, onshore wind power breaks even with gas at $8.33 or oil at $92. Offshore wind still needs a push: It requires gas at $17.14 or oil at $189.

In contrast, solar thermal needs to see natural gas at $35.66 or oil at $393. And good old photovoltaic solar, like the kind on rooftops? Natural gas needs to be at $59.61 or oil at $657 a barrel.