Published in the Honolulu Star-Advertiser on August 11, 2019
Most Hawaii residents already know our state faces the highest electricity prices in the country. The reality is we import about 90% of our energy when including transportation and we remain the most petroleum-dependent state in the nation.
But many residents probably aren’t familiar with how the electric utility makes money or all of the factors driving prices higher.
Most companies make more money when they sell more of their product or service. The same used to be true for the electric utility, when more kilowatt hours of electricity meant more revenue. However, this model gave the utility an unfortunate financial incentive to resist energy conservation, efficiency and renewable energy, as these things would reduce electricity sales and, therefore, its profits.
Understanding this, the Hawaii Public Utilities Commission (PUC) instituted decoupling in 2010. Decoupling is just what it sounds like: breaking the connection between the amount of electricity the utility sells and the amount of money it makes. Today, the PUC determines what the required revenues are to compensate the utility for its services based mostly on its costs of doing business.
Decoupling has largely been successful by removing the financial incentive to resist energy efficiency and renewable energy. This is clearly evident in the vast amount of energy efficiency measures and renewable energy projects that have come online since 2010.
However, the Star-Advertiser editorial board has rightly pointed out that greater urgency is needed if Hawaii is to have a realistic chance of meeting our mandated 2045 deadline for generating 100% of electricity sales from renewable resources (“Making progress on clean energy,” Our View, July 22). Success hinges on “steadily pushing hard to transition to a cost-effective and diverse renewable portfolio.”
This is where electric vehicles (EVs) can accelerate progress. EVs essentially are energy efficiency measures and can be powered by locally produced renewable energy. In addition, an EV is about three times more efficient than an internal combustion engine (“ICE” vehicles are 17-21% efficient while EVs are 59-62% efficient), according to the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy.
Some drivers will still say EVs just aren’t for them. They may be surprised that other people’s EVs tend to lower everyone’s electric bill. This is because increasing the amount of electricity sold as people switch from gas to electric cars — all other things being equal — lowers the electric rate through decoupling.
The 9,699 passenger EVs on Hawaii’s roads today (1% of all vehicles) aren’t enough to produce this effect just yet, but it is real and it’s coming as long as EV adoption continues to increase. This is good for everybody, and even non-EV drivers should be happy to see more EVs on the road.
Ironically, despite decoupling, the utility, which is arguably in the best position to install more EV charging stations, still has weak incentives to prioritize this. Thankfully, Hawaiian Electric Company is promoting EV adoption through its Electrification of Transportation Roadmap, among other measures, perhaps because it recognizes the opportunity for a win-win.
As long as most of the electricity sales (price per kilowatt hour) to EV drivers goes through the decoupling mechanism, ratepayers in general will benefit by downward pressure on the price of electricity.
If we can carve out something modest — perhaps as little as a few cents per kilowatt hour for electricity delivered to EVs — that small incentive will become real money as more and more people switch to EVs. The utility will see that the easier it is for drivers to plug in, the faster they will adopt EVs and the faster we all will save both money and the environment.
In other words, don’t fully decouple utility earnings from something we should all want them to do. Selling more electricity to EVs moves us toward more efficient electrified transportation, while driving down our electric bills at the same time.
Murray Clay is president of Ulupono Initiative, which invests in locally produced food; clean, renewable energy; and better management of water and waste.