Access to the Grid is Key in Cable Debate04/20/2012
Full disclosure: I am not an economist, I still count on my fingers.
So when Representative Jessica Wooley (D, District 47) pointed to the work of several economists to support her opposition to the undersea cable bill (SB 2785) during the House debate on April 10, it caught my attention. Many, many of us have been trying for years to nail down those pesky numbers on the real cost of the cable. What had the economists said to cause her to vote “No”?
I started with a lecture given at UH Manoa on March 13 by Economist and Nobel Laureate Joseph Stiglitz. He discussed three key “man-made impediments” to a more sustainable economy here in Hawaii: the Jones Act (restricting shipping between American ports to American ships), the lack of competition in inter-island transportation, and (surprise!) our extremely high electricity prices.
Stiglitz called our high rates extremely “impressive,” given that “you have a really big energy source here, called the sun.” A decrease in large-scale outmoded centralized generation, coupled with substantial growth in renewable energy, he said, should have made our energy price differential come way down.
According to Stiglitz, we are not enjoying falling prices here in Hawai`i because access to our grid is restricted. This is a problem not unique to Hawaii, but the impact is more severe, he said, due in part to our geography, “which you cannot change. But you could have PV panels on rooftops and sell power to the grid,” thereby lowering the costs “to a fraction of what you are paying today.” So while “other countries are solving this problem by having energy supplied by small producers, democratizing energy production,” he noted that the “established electricity industry doesn’t like this idea because it means their profits will disappear.”
Far too few people, in my humble opinion, are paying attention to this: IT’S ALL ABOUT ACCESS TO THE GRID.
It’s a well-known fact that many of us have been standing in line for quite some time to access the grid and have been turned away. According to HECO (our monopoly - Stiglitz’s words, not mine – utility), this is because the grid is saturated. But rather than trying to “democratize” the grid, it appears HECO’s solution, at least for Moloka
i and Lanai, is to encourage “foreign” (not Hawaii-based) corporations to build massive industrial-scale wind power plants (maintaining the old centralized model) and send the power via a billion dollar undersea cable to O’ahu.
One of the corporate interests targeting Molokai is SteelRiver Infrastructure Partners, “an independent investment management firm.” SteelRiver’s non-executive director, Mike Garland, is CEO of Pattern Energy Group LP, the new name for bankrupt Babcock and Brown’s North America Infrastructure Group. You may recall that last year, Michael Cyrus of SteelRiver had this to say about those who began to question the wisdom of billion-dollar industrial wind on Molokai and Lanai: “You have to go through this process of noise, where you let people feel that they had a platform to speak, but you can’t let the noise distract you.”
Then there’s Bio-logical Capital who is partnering with Pattern to do ... well, something on or to Molokai, but the exhaustive search I conducted reveals that they haven’t really ever done anything. We did hear from friends at the Capitol that Bio reps were positioning the company as a non-profit. To the contrary, Bio “offers investors the opportunity for strong cash flows from renewable energy, real estate, sustainable agriculture, ecosystems service payments (carbon trading maybe?),” which doesn’t sound very not-for-profit to me. I will note that their partnering with Pattern to build a massive wind power plant appears to directly contradict their website’s offering that, “Traditional models with massive centralized energy generation plants have high infrastructure costs and result in lost energy in transmission from the plant to the end user.”
So let’s be clear about this. If the problem is access to the grid, and those favored to gain access to the grid will do so in a way that perpetuates a centralized, monopolistic energy distribution system, what will the people of Hawai`i get?
Echoing Professor Stigliz, local economist Jim Roumasset thinks that “high subsidies funded by tax and rate payers, monopolistic pricing, and picking-the-winners will shrink the economy. Since labor’s share of an economy’s product remains roughly constant, this means that employment or wages or both will decline as a result of these policies.” He says following “correct economic policies” would result in “adoption of renewables in due time, possibly with natural gas acting as bridge” to a low-cost renewable future.
But with the current scheme? “As I understand it, the taxpayer could pay up to 70% of the cost of the system via tax credits, but they get zero equity. The cable construction company could then turn around and sell the cable system to HECO, which under the current regulatory system could in turn greatly increase HEI profits. This is Robin Hood in reverse – take from the poor consumer/taxpayer and give to the rich contractors and power companies. It would be much cheaper to just give them a chunk of tax revenues directly, with no strings attached.”
I’m beginning to understand why Representative Wooley voted as she did.
Now if we can just get the rest of the Democrats in the Ledge to pay attention to the economists.
About the author: Sally Kaye, a full time resident of Lana`i, is an editor and former prosecutor.