Economic Impacts of Inter-Island Energy in Hawaii

Makena Coffman () and Paul Bernstein ()
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Makena Coffman: Department of Urban & Regional Planning; UHERO, University of Hawaii at Manoa
Paul Bernstein: Operations Reserach

No 2013-16, Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa

Abstract: This study assesses the economic and greenhouse gas emissions impacts of a proposed 400MW wind farm in Hawaii. Due to its island setting, this project is a hybrid between an onshore and offshore wind development. The turbines are planned for the island(s) of Lanai and, potentially, Molokai. The project includes building an undersea cable to bring the power to the population center of Oahu. It is motivated by 1) Hawaii�s high electricity rates, which are nearly three times the national average, and 2) its Renewable Portfolio Standard mandating that 40% of electricity sales be met through renewable sources by the year 2030. We use an economy-wide computable general equilibrium model of Hawaii�s economy coupled with a detailed dynamic optimization model for the electric sector. We find that the 400MW wind project competes with imported biofuel as a least-cost means of meeting the RPS mandate. As such, the wind project serves as a �hedge� against potentially rising and volatile fuel prices, including biofuel. Though its net positive macroeconomic impacts are small, the estimated reduction by 9 million metric tons of CO2 emissions makes the project a cost-effective approach to GHG reduction. Moreover, variability in imported fuel costs are found to be a much more dominant factor in determining cost-effectiveness than potential cost overruns in the wind project�s construction.

Keywords: Wind Energy; Hawaii; Renewable Portfolio Standard; Computable General Equilibrium (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-09
New Economics Papers: this item is included in nep-ene and nep-ppm
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