Dive Brief:

• Hawaiian Electric Co. has proposed a major plan to import liquefied natural gas from Canada and retrofit oil-burning power plants to operate on it, promising that the fossil fuel would be completely phased out before the state must meet its 100% renewables goal in 2045.
• The plan, expected for over a year, hinges on approval of the company's acquisition by Florida-based NextEra Energy. Hawaii Gov. David Ige (D) opposes both the merger and the LNG import plan, but state regulators will have the final say.
• The utility says NextEra's assistance would be critical to executing plan, and estimates potential customer savings could reach $3.7 billion while reducing oil imports by more than 8 million barrels annually starting in 2021.

Dive Insight:

Hawaiian Electric this week proposed a major plan for overhauling its fuel supply over the next two decades, which it says would save customers significantly on their electric bills while helping the utility transition to 100% renewable energy by 2045. 

But it's not a simple proposal, because it flies in the face of two things Gov. Ige has opposed: HECO's proposed merger with NextEra, and additional fossil fuel imports.

"We know Governor Ige has expressed opposition to importing LNG," Ron Cox, Hawaiian Electric vice president for power supply, said in a statement. "However, we have just reached contract terms with a supplier after a long negotiation and now have much more than a theoretical plan for the governor, Public Utilities Commission, energy stakeholders and the public to consider."

Hawaiian Electric estimates the natural gas contract and greater efficiencies from modernized generation could save electricity customers from $850 million to $3.7 billion through 2045, but those savings would depend on future oil prices. 

During that time, oil imports would be reduced 80%, beginning within five years. And the change would yield near-term environmental benefits as the state looks to a longer-term renewable future. HECO said the switch to LNG would help reduce over 4 million tons in carbon dioxide emissions.

It would also help integrate increasing amounts of intermittent renewable resources, Colton Ching, vice president of energy delivery, said at a March conference in Maui.

“We believe that if done right, under a certain set of circumstances, we can bring LNG at a cost cheaper than where we see oil being," Ching said, "and during that process the qualities of natural gas modern generating technologies ... actually help us operate the system with lots of variable generation whether it's wind or solar."

Despite the governor's stated position, the head of his state energy office said during the same panel discussion that he's open to seeing new proposals. 

“The governor has often said that he is open to seeing new data, but what Gov. Ige has said is that massive infrastructure investments that are long-term … that’s a distraction," said Mark Glick, head of the Hawaii Energy Office. 

Whether Ige likes the proposal or not, the final decision will be left to state regulators, who are also currently considering the proposed acquisition of Hawaiian Electric by NextEra. The utility warned this week that the LNG contracts, proposed with Fortis Hawaii to bring LNG from Canada, are contingent on approval of the deal.

HECO is also asking state regulators for authorization to construct a combined-cycle gas unit at the Kahe Power Plant, which currently runs three oil-fired units.

"This project requires substantial upfront financial support and expertise that NextEra Energy can provide," the company said. "If the merger is not approved, the Hawaiian Electric Companies would still be interested in pursuing on their own the benefits of LNG for customers, but the companies would need to negotiate a new contract which likely would mean lower, delayed savings for customers and delayed benefits for the environment."

Hawaii regulators have until June 3 to make a decision on the HECO-NextEra merger. If the deal is not approved by then, HECO can exit and collect a $90 million penalty plus $5 million in costs from NextEra. It can also agree with NextEra to extend the deadline and wait for a decision from the commission.

Along with the merger, the future of the LNG import plan will also depend on how regulators view HECO's Power Supply Improvement Plan, a broad vision for the transition to 100% renewables filed with the PUC in April.

In that document, the utility acknowledged that it does not yet have a clear idea for which resources will replace natural gas generation when it is retired ahead of 2045. A chart in the PSIP filing identifies them simply as "future alternative resources":

“At the conclusion of the 20-year LNG contract, alternative fuels to provide the remaining power to the island during this 70% RPS period were considered,” the filing reads. “Potential fuels include to provide this energy include LNG, oil, biofuels, or a mix of all three. Under the current fuel prices forecasts, oil is cheaper than biofuels so it was selected as the fuel until the use of biofuels was necessary in 2045 to meet the 100% renewable energy.”