Friday, May 22, 2015

Coal Exemption & 100% RPS Target - What does that say about Hawaii's energy policy?

Juxtaposing the recently passed bills exempting coal from the carbon tax and establishing a 100% renewable portfolio standard (RPS) goal appears to make Hawaii's energy policy contradictory. While the Hawaii Legislature should be commended for transitioning the tax on a barrel of oil to a carbon based tax, that achievement has been marred by the coal exemption.

Unbelievably, the exemption language was handled by the energy/environment committees, the very committees pushing the 100% RPS goal and very concerned about climate change issues.  If the impetus for the coal concern was current power purchase agreements (PPA) in effect, that could have been resolved with language addressing timing and applicability because the HC&S PPA will soon terminate and AES is in the process of renegotiating an extension with HECO.  The wholesale exemption for AES, supposedly to address the dubious concerns noted in their testimony, was unwarranted.

I want to clarify that the use of coal does help to moderate Oahu electricity prices and the AES power plant has a role as an existing asset during a transformative time where it may be better to wait out uncertainty than to jump in with new investments.  But all this does not justify a tax exemption and the carbon tax should be equally applied to all fossil fuels.

I already made my views known about the 100% RPS goal in my February 4, 2015 post, "Is A 100% RPS Sound Policy?".  While I think we should aspire to the use of cleaner, renewable fuels, the RPS should be a real strategy stressing cost-effectiveness and a well managed transition for the public good.  We are in a period of rapidly advancing technologies and changing customer preferences and the fact that energy infrastructure investments are expensive and long-lived, therefore, each energy investment must be well well thought out to avoid or minimize stranded assets.  Even though the 100% target is far out into the future, it creates a race with a propensity to drive up costs to meet a target of aspiration, not an informed strategy.  Unfortunately, it is those who can least afford it that will be paying for this potentially expensive sound-bite.

Hawaii's carbon-based tax would have firmly established and reaffirmed Hawaii's premier role and leadership in advancing clean energy policies but, unfortunately, the coal exemption diminishes that recognition.  In exempting coal, the energy/environment committees played right into the coal industry's lobbyists' hands and left a big puka in Hawaii's clean energy policy.

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