A state agency guiding Hawaii energy policy is recommending that Hawaiian Electric generate power on Oahu from liquefied natural gas — a decade after the state blocked the utility from such a move.

The Hawaii State Energy Office recently published a study that said imported LNG can be a cheaper and more environmentally friendly substitute for imported oil burned in Oahu power plants over much of the next two decades until carbon-­emitting fossil fuels can be permanently eliminated by 2045.

HSEO’s study suggests that using oil to generate electricity on Oahu can be almost completely eliminated by 2031, mostly by running several combustion power plants on LNG.

“The preliminary pathway to meet the projected future power demand at the lowest cost and lowest emissions involves transitioning to LNG as a primary thermal energy source, with built-in fuel flexibility in new generation infrastructure to accommodate lower-carbon, fossil-free alternatives as they mature and become more cost-effective,” the study said.

Hawaii has the highest electricity prices in the nation, and Oahu has the highest average greenhouse gas emissions intensity for electrical power generation in the U.S., according to the study.

At the end of 2024, 31% of the energy on Oahu’s electrical grid was from renewable sources, up from 30% a year earlier.

HSEO recommends that Hawaiian Electric, which is regulated by the state Public Utilities Commission, build one new power plant and convert others to operate on LNG as well as on other fuels so the facilities can shift later from LNG to cleaner fuels such as hydrogen and ammonia that aren’t commercially viable today.

The agency studied the potential of several fuels to replace oil in power plants statewide, including local renewable natural gas, biodiesel, hydrogen, e-methane, e-ammonia, e-diesel and e-methanol.

Imported LNG was deemed to be the most viable, but only for Oahu. HSEO estimated that its recommended plan would cost about $1.4 billion and generate about $1.5 billion in savings.

HSEO said in its report that current Hawaiian Electric plans could result in higher electricity prices by running power plants on biofuels unless the company continues to rely on oil-based fossil fuels.

The agency produced its study at the direction of Gov. Josh Green, who in 2024 said LNG should be reconsidered along with other fuels as a possible “near term” interim option to replace oil as a fuel to produce electricity as utility companies work toward deriving 100% of their power from renewable sources by 2045 to meet a state goal.

“I think that there has to be some form of bridge between now and 2045 if we truly want to lead on renewable energy,” Green said in May during the 11th annual Hawaii Energy Conference on Maui. “If we can get to a future with a different bridge that decreases our reliance on classic fuel — oil, diesel — but gets us there in a healthier way, I think we have to look at it.”

Environmental and clean- energy groups, including the Sierra Club of Hawaii and Blue Planet Foundation, have long opposed LNG imports for power generation due to carbon emissions and concern that expansion of renewable energy would suffer.

The HSEO study was released Jan. 28, the same day Green issued an executive order to promote and expedite renewable energy development in Hawaii.

Green’s order directs state departments to streamline and accelerate permitting for renewable energy projects to reduce costs and development timelines. The order also moves up the 100% renewable energy goal to 2035 from 2045 on the neighbor islands, where the transition is further along than on Oahu.

“Hawaii needs to take some drastic steps to reduce energy costs, which have continued to rise and have contributed to the high cost of living for our people,” Green said in a statement announcing his order. “We know that high energy costs in Hawaii are due to our reliance on burning oil for electricity and old infrastructure, which is really unacceptable. We can and must do more to get this under control.”

Hawaiian Electric officials said in a statement that they appreciate HSEO’s analysis and the governor’s stated desire to accelerate Hawaii’s energy transition to renewable and carbon-free energy.

The company also criticized what it called a “stop-and-start public policy loop” that prevented earlier adoption of power plants run on LNG.

Hawaiian Electric noted that Gov. Linda Lingle, a Republican who led the state from 2002 to 2010, opposed LNG for power generation. Then the company spent four years and millions of dollars pursuing an LNG transition under Gov. Neil Abercrombie, a Democrat who directed Hawaiian Electric to include natural gas in its energy portfolio as part of a state energy policy imperative.

A 2013 report commissioned by the Hawaii Natural Energy Institute, a University of Hawaii research unit, estimated that the cost of power at two Hawaiian Electric power plants on Oahu could drop by 40% to 55% with a shift to LNG from low-sulfur fuel oil.

In 2014, Hawaiian Electric had a plan that involved achieving 65% of power generated by renewable energy by 2030, converting fossil fuel power plants to run on LNG at a cost of roughly $200 million and cutting customer bills by 20%.

Yet Gov. David Ige, a Democrat who succeeded Abercrombie in 2014, blocked the use of LNG because he said it would distract from renewable energy investments.

“Any time and money spent on LNG is time and money not spent on renewable energy,” Ige said in 2015.

Green, a Democrat who was lieutenant governor under Ige, became governor in 2022.

Now state energy officials are recommending that LNG be a big part of the transition to 100% renewable energy by 2045.

Hawaiian Electric said that if the strategy put forth by HSEO is pursued, then it must be “locked in” and accompanied by durable policy decisions that ensure consistency and clarity, especially for investors who will be asked to provide billions of dollars of capital to refurbish and replace infrastructure.

HSEO’s study was a technical feasibility analysis. It did not include outreach and engagement with key stakeholders, communities or regulatory agencies that would be essential in determining the ultimate viability and implementation of the agency’s recommendation.

The agency said public engagement will play a key role in any future project planning moving forward, and that public engagement could include community meetings and workshops. Stakeholder collaboration also is planned.