Hawaii Gas, the state’s only gas utility, said Tuesday it has an agreement with a supplier of liquefied natural gas to build the facilities needed to import bulk LNG into the state for
$200 million.
Using LNG instead of oil to fire Hawaii power plants would have saved ratepayers $132 million in fuel costs last year, Hawaii Gas said.
The “binding bid” with the LNG supplier includes building the infrastructure for $200 million and supplying LNG for
15 years, said Alicia Moy, president and CEO of Hawaii Gas, at a news conference. Moy did not name the company because Hawaii Gas is in the final stages of the contract. The state Public Utilities Commission must approve the plan.
“Hawaii has secured a source of LNG,” said Joe Boivin Jr., senior vice president of business development and corporate affairs at Hawaii Gas. “What we’ve done is put the plan on the table with firm numbers.”
Hawaii Gas is hoping to be the main supplier of LNG in the state if regulators decide to make the switch from low-sulfur fuel oil and coal now burned in Hawaii power plants. Hawaii Gas has said LNG would be cleaner than coal and oil and could be a “bridge fuel” as Hawaii moves toward its goal of 100 percent renewable electric generation by 2045.
On Oahu, 71.3 percent of the electricity generated in 2014 came from burning oil, and
19.4 percent from coal.
Hawaiian Electric Industries Inc., the state’s largest utility, has a different plan for LNG. HECO wants to be the importer instead of buying the fuel from Hawaii Gas.
“We’re reaching out to HECO and independent power producers to share this information about the pricing,” Moy said. “I think there is a lot of alignment. We both see there are some benefits to natural gas for power generation in terms of saving carbon emissions sooner rather than later and near-term cost savings for customers.”
HECO said it is willing to
listen to Hawaii Gas but is working on a separate plan.
“We are in the final stages of our own request for proposals, evaluating LNG suppliers and the potential to provide the greatest possible savings for our customers,” said Darren Pai, HECO spokesman. “We are open to learning more about Hawaii Gas’ plans if they will reduce costs for our customers and are consistent with state policy. One thing that is important to consider is the infrastructure that would need to be developed to support any energy resource. The option we are focused on would use specialized shipping containers to deliver LNG to our generating stations, thus minimizing the need for permanent infrastructure.”
Gov. David Ige said he is opposed to using LNG as a bridge fuel for electric power. Ige said in August that LNG is a fossil fuel and that its use would just slow the switch to 100 percent renewable energy for electricity.
Marti Townsend, executive director of the Sierra Club of Hawaii, said she was disappointed in the Hawaii Gas announcement.
“LNG is not a bridge to anything. It’s a distraction from our ultimate goal of a 100 percent renewable energy future,” Townsend said. “Why dig a hole just to fill it in again, unless Hawaii Gas’ real interest is just making money for investors, with no regard for the harm it causes the environment, economy, or people of Hawaii?”
Moy said LNG is a bridge fuel.
“The way that we have designed this is to ensure that we can back out LNG as renewable energies take hold,” she said.
The $200 million cost would cover the infrastructure to build an offshore station to collect and regasify the LNG, which includes a floating storage and regasification unit roughly a mile offshore, a subsea gas pipeline, a nitrogen injection station and onshore pipelines. The total pipeline extension requirements are estimated to be between 5 and 10 miles.
Hawaii Gas plans for LNG ships to deliver the fuel to a receiving ship moored off the coast of Kalaeloa. The receiving ship would convert the LNG from a liquid to a gas and send it down an undersea pipeline to a new gas facility onshore. The gas could then be piped to HECO and other power plants nearby. It could also be sent down an existing pipe to Honolulu Harbor.
Hans Tobler, general manager at Kalaeloa Partners LP, said the use of LNG would help the facility meet emissions requirements by the U.S. Environmental Protection Agency. Kalaeloa Partners provides 208 megawatts of power to Oahu’s grid by burning oil.
“There are only two ways to do that (meet the EPA requirements); one is to lower the output or to switch to a cleaner fuel,” Tobler said. “We are very interested in the possibility of a cleaner fuel supply, but I’ll believe it when it is here. If I could run turbines on hot air, I would have plenty of fuel. … What it comes to is price and availability. The first player that can sustainably provide this fuel will most likely be the one that will be successful.”