Hawaii Gas Releases Market Facts About Liquefied Natural Gas (LNG) for Hawai‘i
HONOLULU – Hawaii Gas, the state’s only regulated gas utility, has released the findings of its comprehensive 18-month bid process to explore alternative fuel solutions for the state, specifically for the supply of natural gas, brought to Hawai‘i in the form of liquefied natural gas (LNG), and for a third party to own and operate a floating storage and regasification unit (FSRU). Natural gas can be used as a lower-cost substitute for the company’s synthetic natural gas (SNG) as well as a cheaper and cleaner alternative to the oil-based fuels used by electricity producers and the ground and marine transportation industry.
“We support the State’s goal of 100 percent RPS (Renewable Portfolio Standards) by 2045 and believe there are multiple pathways to achieve this,” said Alicia Moy, president & CEO, Hawaii Gas. “Now that we have confirmed our earlier findings regarding the price and benefits of natural gas delivered to Hawai‘i, we look forward to sharing this information as part of the ongoing dialogue and analysis on how the state can achieve its goals in a cost-effective way for consumers.”
Hawaii Gas began exploring alternative fuels about five years ago to diversify its fuel supply and enhance reliability for its customers. From that discovery process, it learned that natural gas is a viable option for its customers as well as other industries, including power generation and transportation.
In Nov. 2014, Hawaii Gas invited LNG suppliers worldwide to submit proposals for the supply of LNG and a floating storage and regasification unit (FSRU), which is a ship that stores and converts natural gas from a liquid back into gas. The company received more than 20 proposals from global and national firms, and narrowed the field to select one company that can both supply and deliver LNG to Hawai‘i.
Hawaii Gas purposely limited the term of the supply agreements to 15 years with the ability to reduce the quantity of LNG purchased each year to not impede the transition to renewable energy. The proposals provided binding pricing for the supply of LNG and for FSRU services.
“We are pleased with the quantity and quality of the proposals, which confirm our earlier estimates for cost savings to customers,” said Joseph Boivin Jr., senior vice president of Business Development & Corporate Affairs, Hawaii Gas. “LNG provides substantial cost savings to our utility customers. It is also extremely cost-competitive with the low sulfur fuel oil and diesel used to produce electricity, and even more so when compared to the blended fuels that will be needed to meet new environmental compliance requirements in 2016.”
Hawaii Gas has developed the most reliable and lowest cost solution to bring natural gas to Hawai‘i without any impact to Hawaii’s roads or harbors. Infrastructure requirements are minimal and are estimated to cost $200 million, and consist of an offshore mooring system and buoy, an offshore FSRU, a subsea pipeline and 5 to 10 miles of land-based pipeline extensions. Infrastructure costs will be fully recovered within the 15-year term after which time LNG fuel supply will cease and the FSRU will be redeployed elsewhere by the company that owns it.
The LNG project requires federal approval from the Federal Energy Regulatory Commission (FERC) and State approval from the Hawai‘i Public Utilities Commission (PUC). These processes ensure the community has a voice on the use of natural gas in Hawai‘i and that those concerns are properly considered and evaluated. Based on discussion with FERC, Hawaii Gas believes the project can, with State and community support, obtain federal approval within 30 months.
Hawaii Gas can now confirm that natural gas will significantly reduce the cost of energy for its customers and the cost of fuel used for electricity producers. Natural gas will reduce its SNG utility customers’ bills by more than 25 percent.
Based on the actual amount and cost of fuel consumed on O‘ahu in 2015 to produce electricity, LNG would have saved electric utility customers $132 million in fuel costs. Hawaii Gas estimates that natural gas will reduce electricity utility customer fuel costs by some $1.3 billion, or approximately 30 percent over a 15-year period from 2019 to 2034, which is when we believe LNG can be delivered to Hawai‘i.
In addition, natural gas will reduce carbon emissions by 30 percent, which is roughly the equivalent of removing more than 250,000, or a quarter of Hawaii’s, passenger vehicles, from the road each year.
The next step is for Hawaii Gas to share this information with stakeholders who are interested in determining how natural gas can play a role in accelerating Hawaii’s clean energy future as the state transitions away from oil. The decisions we make today about our clean energy future will have far- reaching impact on Hawaii’s environment, people and future generations. We look forward to discussions and collaboration with others in our community.
About Hawaii Gas
Hawaii Gas is Hawaii’s only government-franchised, full-service gas company manufacturing and distributing gas in Hawai‘i. The company’s market includes Hawaii’s approximately 1.4 million residents and nearly 8 million visitors. Hawaii Gas manufactures synthetic natural gas, or SNG, for its utility customers on O‘ahu, and distributes liquefied petroleum gas, or LPG (propane), to utility, tank and bottled gas customers throughout the state’s six primary islands. Hawaii Gas is the first company to bring liquefied natural gas, or LNG, to Hawai‘i. It uses LNG as a backup fuel for its SNG distribution system. Hawaii Gas is a wholly owned indirect subsidiary of Macquarie Infrastructure Company. For more information, visit hawaiigas.com