Hawaii’s Renewable Energy Revolution

by Dave Fessler, Advisory Panelist

Hawaii: Pristine black sand beaches… surfing… spectacular volcanic eruptions… and miles of pineapple plantations. If you are like me, this is what comes to mind when you imagine Hawaii.

What may not come to mind, though, when you think of America’s 50th state are its energy resources – and specifically, the fact that it gets 77% of its power from oil-fired power plants. That’s a unique statistic within the United States. Coal-fired plants provide 14% of power, and the remaining 9% comes from renewable sources like wind and solar energy.

Suffice it to say, tourism is Hawaii’s largest industry, with agriculture playing a major role, too. And not unlike the rest of the country, the one thing needed to keep it all running smoothly is a reliable source of electricity.

Problem is, Hawaii is dependent on fossil fuels for more than 90% of its power – an issue that became shockingly clear when oil spiked to $147 a barrel last year. As a result, the Hawaiian Electric Company – the state’s main electric utility – was briefly forced to charge users more than 50 cents per kilowatt-hour – over five times the national average.

So what is the state doing to relieve this situation?

Hawaii Treads Down the Renewable Energy Path

For Hawaii, wildly fluctuating oil prices and potential supply disruptions leave it uniquely vulnerable. The state estimates that every 10% increase in oil prices reduces its GDP by 0.5%.

Clearly something had to be done. And there is some good news.

Because of its unique location and physical makeup, the Department of Energy (DOE) estimates that Hawaii can potentially meet 60-70% of its overall energy requirements through the use of renewable energy sources.

And last year, under an agreement between the DOE and the State of Hawaii, long-term plans were set in motion that will result in Hawaii getting 40% of its power from renewable sources by 2030.

This landmark agreement – and its ultimate implementation – is being viewed as a national experiment. If successful, it could ultimately be replicated in other parts of the country. And island nations could benefit, too.

Here’s how the DOE and Hawaii are doing it…

Hawaii’s Four-Track Renewable Energy Plan

A working group including members from both the DOE and Hawaii are addressing four main areas of renewable energy performance:

  • End-Use Efficiency: The goal is to achieve zero net-energy use buildings and communities, along with significant reductions in power usage by military bases.
  • Electric Generation: Significant expansion of renewable energy at both the state and local levels, and the facilitating of distributed renewable generation on a statewide basis.
  • Energy Delivery: Additional grid development and improvements to the existing grid in the form of smart-grid management, as well as grid energy storage that will optimize renewable energy sources.
  • Transportation: The formation of a long-term strategy for the implementation of the production, distribution and use of alternative fuels for transportation to acceleration the adoption of electric vehicles.

The group has produced two, five, and ten-year pans that have marked the initial actions necessary in order to kickoff the activities in each of the above energy performance areas.

Putting the Four-Track Plan Into Fast-Track Mode

With an agreement in place, Hawaii’s governor, Linda Lingle, has fast-tracked the plan.

She’s called on privately held California startup firm, Better Place, to install as many as 100,000 electric car-charging stations by 2012 – a project worth $100 million. The goal is to have car-charging stations pop-up all over the Hawaiian islands, with privately held Better Place supplying the batteries and recharging services.

This plan assumes that the major car manufacturers buy into the arrangement So far, Nissan-Renault has agreed to make vehicles that will work with Better Place’s network of stations. And I expect more car companies to announce plans to participate, too.

Of course, all this additional power to charge the cars has to come from the grid – and major grid improvements are already underway.

Supercharging Hawaii’s Electric Project

All of Hawaii’s six separate grids are in the process of being connected together via undersea electric cables. Once in place, Oahu will get its power through them.

And with all the renewable wind power and solar farms being planned as part of the increase in renewable energy generation, managing the fluctuations in supply and demand becomes a more daunting task than it is now.

As a result, General Electric (NYSE: GE) is right in the thick of the plan, developing ways to store energy via batteries and pumped hydro storage. This will allow the Hawaiian Electric Company to smooth out peaks and valleys in its overall energy supply-demand model.

Hawaii’s plan is just now getting underway – 2030 isn’t that far down the road. But as its interim successes become apparent to the rest of the country and the world, companies like GE and Better Place will certainly be in the catbird seat.

Good investing,

Dave Fessler

P.S. Hawaii isn’t the only place that is overly dependent on fossil fuels – far from it. With the global population growing and traditional energy resources becoming scarcer, many nations are pushing for ways to increase their alternative and clean energy sources. There’s one “pure play” on Earth, however, that has countries like China, Japan, and India scrambling for it. What’s more, one little-known energy firm has made this resource its core business – and an investment would give you direct access to this highly sought-after renewable raw material (it’s not solar or wind, by the way). It’s also a stock that could double in the next six months. Check out the details here.

Hawaii’s Renewable Energy Revolution

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