Part I
August was a bad month for the financial services industry. Exotic mortgages over the last several years have come home to roost. The result? The industry laid off more than 40,000 workers during the month and asked the federal government for a bailout, to which the White House replied, fix your own problem.
Countrywide Home Loans, the nation’s largest homeowner lending institution, with 17% of the market, or almost 1 out of every 6 home loans, is in trouble with borrowers who couldn’t repay their loans, and is negotiating a rescue from Bank of America. American Home Mortgage, the nation’s 10th largest mortgage lender, laid off 7,000 workers and filed for bankruptcy protection. Lehman Brothers, Capital One, 1st National Bank, and Accredited Home Lenders have all closed big mortgage companies. D.R. Horton, the nation’s largest builder, also suffered adversely when homeowners buying its homes became unable to keep up their mortgages.
Across the country, higher interest rates on new mortgage loans and loan denials to the poorest Americans threaten to exacerbate the housing market slowdown. Worker layoffs, home foreclosures, tighter credit and higher interest rates, create problems for others in the community. Laid off workers means less money circulated in local businesses. Home Depot and Wal-Mart reported that they are already feeling the pinch from the fallout.
If you are one of those affected by the layoffs or foreclosures, you already know what it feels like to be unable to pay for basic living needs.
This current economic crisis is a precursor to one that may happen in the not too distant future. Last month the International Energy Association announced that we will reach peak oil in five years because the global demand for fossil fuel has accelerated faster than expected. Gas prices in Hawaii have nearly tripled in the last five years, without the demand crunch. Hawaii depends on fossil fuel for more than 90% of its energy needs, making it vulnerable to the approaching global intersect of peak demand and peak oil production capacity.
Hawaii already has one of the highest costs of living, gas prices, and market priced homes in the United States. The unavailability of fossil fuels, would create conditions that we cannot afford. We need to become as much independent from fossil fuel as soon as we can. Averting the economic catastrophe means taking action now, before the demand and prices rise for the products needed. To illustrate, the solar powered civil defense alarms are purchased in staggered amounts by fiscal year. The cost has gone from $45,000 to $80,000 per system as demand increases and availability becomes scarce. The state of Hawaii should take advantage of purchasing the systems while suppliers are trying to break into the market and are open to negotiations.
Getting independent from foreign oil is great for Hawaii. Local businesses would benefit if we kept our hard earned dollars here rather than sending them out to foreign oil suppliers. Lower utility costs means more disposable income for residents and more profit for businesses. We can shield ourselves from spikes in gas prices, and the ripple effects such as business closures, lay-offs, and home foreclosures.
Transitioning away from fossil fuel is an achievable imperative. The key is in the aggregate: reducing local demand and increasing local production, hitting as many points as possible to achieve overall reduction in consumption and increase in self sufficiency. Here are some ideas on reducing Hawaii’s vulnerability to the five-years-away global energy crisis.
The Invisible Loan
Hawaiian Electric stands to benefit as much as anyone in the transition. After all, lowering demand means reducing the need to build more expensive fossil fuel plants, less blackouts, and having rates that consumers can afford to pay. Hawaiian Electric should take the lead using the CostCo approach – finding reliable, energy efficient products and making a large scale, graduated schedule purchase to obtain a discount in price significant enough to nearly match the combined federal and state credits. Tax credits typically cover half the cost of a single purchase system. To bring the cost down to nearly match the tax credits helps make the purchase affordable for homeowners.
HECO already issues rebates for energy efficient products. A transferable tax credit could be used as the upfront investment. HECO pays the vendor the down payment on the system and finances the rest. Upon the installation of the wind or solar energy system, the homeowner assigns her state tax credit to HECO. HECO accepts this as reimbursement for the down payment it fronted for the homeowner, then uses the homeowner’s transferred tax credit against its own tax liability.
Hawaiian Electric can then finance any remaining balance of the purchase to make it painless to get the system through an “invisible loan.” HECO would take the average of the previous six months electric bill, which the consumer continues to pay throughout the loan. Since the consumer is accustomed to paying that amount for electricity, she doesn’t “feel” the burden of any additional payment. The savings achieved through reduction in fossil fuel based electricity is applied toward the loan financed by HECO. This concept is how Munich, Germany is financing its city wide solar paneling of homes.
The Fast Track
Businesses that are designed to be energy independent are best positioned to shield themselves and stay afloat when the energy crunch happens. Each county should develop a preferred permit processing track, the “fast track” to motivate developers to be energy independent. Projects that both reduce energy consumption and produce their own energy would jump the queue in consideration and be given an expedited review. Fast tracking gives companies the economic advantage of getting their construction started faster before competitors, and their businesses up and running quicker so they can start making money sooner. Exemptions from application and processing fees, and if possible, tax exemptions or credits should be granted as further incentives. The double requirement of consumption reduction and energy self production is essential.
The design could incorporate microgeneration systems based on waste oil or other waste products (such as Harley Davidson and Wendy’s on Nimitz); wind turbine or photovoltaic systems; green chargers for the company fleet (UC Berkeley); seawater or temperature balanced or other type of air conditioning with occupancy sensors (John A. Burns School of Medicine, SeaFirst Bank in Seattle); LED lights and occupancy sensors; low water toilets and water control mechanisms (lower water use means less electricity needed for water treatment farther down the line); natural ventilation and lighting.
Increasing Energy Efficiency
California’s high energy efficiency standards have saved the state from having to build the equivalent of 20 power plants over the years. Hawaii should adopt the same high energy efficiency standards. California is increasing the breadth of those standards by tackling the “vampires” – appliances such as setboxes and cell phone chargers, appliances with clock functions, and standby appliances, that draw energy even when the product is not in use. The International Energy Association is aiming for a one watt efficiency level. Japanese cellular phones already have built into their circuitry a chip that stops the draw of electricity when the phone is unplugged for use. By passing laws mandating energy efficient products, Hawaii can join California in avoiding the need to build additional power plants.
Part II
Why should we spend money to save energy? Because…gas pump prices have nearly tripled since 2002 while oil companies continue to report profits of $700-800 billion each….Hawaii depends more on foreign oil for its energy and has higher rates than any other state…as we near peak oil production, the oil companies are going to explain further increases in fuel costs as due to the need to spend billions in drilling beautiful natural landscape….the investment saves substantial sums over the long term, freeing up financial resources….taking action now is the only real way to shield Hawaii from higher prices in the coming long-term foreign oil crunch.
Achievable? Berlin’s energy efficiency measures in 600,000 apartments resulted in a 50% drop in city energy use. Parts of Germany use savings from the drop in oil-based electricity bills to pay for its mass scale solar panel installation.
Kudos to...
Hawaiian Electric for allowing a solar system to be built and operated at its Ward Avenue facility. Although it will only be 155 kw (roughly enough for 700 households), it’s a step in the right direction. Woking Burrough, England, and many parts of Germany use district systems (combined heat and power, fuel cells, and other types of renewables) with the added advantage of increased efficiency due to shorter transmission distances.
Forest City, which manages Navy and Marine housing on Oahu, for its ENERGY STAR homes with solar water heaters; efficient air conditioners; CFL light bulbs; high efficiency, double paned windows; and insulation in excess of local building codes. The “Low E” windows and highly insulated roof and walls keep heat out of the home so that homes stay cool with less air conditioning. Centrally situated solar power systems are in the works to power clusters of homes. Forest City designs preserve natural cooling elements by incorporating shade trees. Tree cuttings become mulch, and structural backfill is made using recycled concrete from torn down buildings. These practices conserve natural resources and divert tonnage from landfills.
Harley Davidson for energy efficiency. Solar panels supply most of its electricity. A huge fan reduces building temperature by three degrees with hardly any electricity. Condensation from the air conditioners is channeled to water the lawn and wash motorcycles. Neighbor Wendy’s waste cooking oil is mixed with diesel to operate a generator that supplies lights and power.
Pacific Biodiesel, which recycles used cooking oil and saves over 40 tons per month of it from being poured into Maui landfills. Its fuel operates well in a conventional diesel engine with very few or no engine modifications and is used in generators of all sizes, commercial diesel equipment, vehicles, and marine vessels. Besides the huge landfill reduction benefit, this environmentally friendly fuel reduces tailpipe emissions, visible smoke and noxious odors.
Sharing the Effort -- Utility companies have renewable energy targets (RPS--renewable portfolio standard), and bear the cost of constructing these systems. One possible incentive is to allow the standard to be met by the aggregate of individual microgeneration systems. That is, if the standard is that 10% of electricity must be produced by renewable energy, instead of HECO spending huge amounts to build a wind farm to generate that 10%, individual systems could be aggregated and counted toward that 10%. This gives HECO an incentive to negotiate large scale discounts, promote, finance, and in other ways help consumers and businesses to purchase their own systems.
Save the Gas for the Airplanes -- Alternative energy vehicles enjoy high mileage, low gas costs, and protection against increases in gas prices. San Diego’s refuse trucks are fueled by gas made from converted methane from its landfill – gas which it makes available to the public. California encouraged hybrid cars by allowing them to ride in the HOV lanes. Senator Ron Menor this year introduced a bill to create a clean fuel revolving fund to give rebates on purchases of alternative fuel or hybrid vehicles, and exempt these purchases from the GET. Senator Hanabusa introduced a bill that allows hybrid or alternative fuel vehicles to ride in HOV lanes, get free on-street parking, and a carryover-eligible purchase tax credit. Biogas powers some trains in Sweden. The Union of Concerned Scientists installed a “green charger” for its electric vehicles. Fueled by non-fossil fuels, the electric cars are the cleanest power on the road
Changing the Way Architects and Engineers Think -- Architects and engineers should incorporate energy efficiency and self-sufficiency in design. Why? Because keeping a client’s utility bills low through integrated renewable energy systems and low consumption means more dollars going to profit or disposable household income. Separate lighting switches for different areas; light sensors that shut off lights when no one is in the room; air conditioning sensors that turn off the A/C when the room is vacant for an extended period; lowering water use through mechanical water faucets and efficient shower heads; seawater air conditioning or air balanced room temperature systems; natural lighting and ventilation; and appliances with auto-hibernate/off features, will help keep a client’s electrical bills low. Vertical wind turbines, photovoltaic panels, waste-fuel electricity generators, or other microgeneration systems can help shield clients from increases in electricity rates.
Speaking of Homes -- California now requires photovoltaic panels as a standard option on new homes. Oregon will be offering a tax credit of up to $1500 for home fuel cell electricity generators when they come on the market. South Australia is proposing legislation to encourage home photovoltaic power systems by rewarding homeowners with double credit for energy fed back into the system.
Landfill and Sewage Powered Electricity Generation -- Banbury, England, and San Diego use methane from sewage treatment to generate electricity. San Diego’s treated wastewater powers a 1.35 megawatt hydroelectric plant. North Carolina and Toronto, Canada, use methane from landfills to generate electricity.
LED Lighting --- LEDs are brighter, last much longer, and are far more energy efficient than regular light bulbs. Portland, Oregon, is saving more than a quarter million dollars each year from its retrofit of its traffic signal lights with LED lights. San Francisco’s LED traffic signals save $1.2 million a year for the city. Syracuse, New York, is replacing its street lighting and traffic signals with LED. The burrough of Woking, England, converted its street and roadway lighting to LED and recouped its cost in the first year in electricity savings.
Municipal Efforts – Photovoltaic systems on San Diego facilities generate 18 megawatts of power. San Francisco has installed one of the largest city owned solar power systems in the US, and its energy efficiency projects save the city nearly $11 million per year in energy costs, and made it possible to close aging power plants rather than spend money renovating them.
Japan Is Ahead of the Game Again -- In 2000, the Japanese government compelled big phone companies to open up wires to jump start Internet providers. Broadband exploded. The low cost, ultra high speed, high definition applications are being used to help Japan meet its goal of doubling its telecommuting workforce. Health clinics in remote areas can now, with the right fiber connections and equipment, gain access to medical expertise located in big cities via Broadband. How does this help energy independence? No need to use cars to drive the distance. The Bush Administration should get on board so the US doesn’t get too far behind.
We’re putting together legislation for the next Session in January. Please let me know if you think these will help reduce the Hawaii’s vulnerability to rising oil prices.
Sen. Will Espero, D-Ewa, can be reached at mailto:senespero@Capitol.hawaii.gov
