Hawaii's LNG Decision: A Tale of Misleading Savings Claims

Hawaii is considering whether to invest billions in infrastructure to import liquefied natural gas (LNG) for its power plants or continue using oil. Both options require upgrading or replacing the aging generation fleet, and while LNG market prices are lower than oil, importing it requires new infrastructure.

A study by the Hawaii Natural Energy Institute (HNEI) found that LNG is likely to have only a small impact on electricity rates, either upward or downward, depending on timing and final cost of the infrastructure. Proponents argue that switching to LNG could save ratepayers over 15% and cut CO2 emissions by 40%, but these claims were widely reported without evaluating their accuracy.

After significant errors in a study by the Hawaii State Energy Office (HSEO) were identified, HNEI built its own benefit-cost model to evaluate more than 70 scenarios for O'ahu. When using the same assumptions as HSEO's revised report, HNEI's model shows slightly greater total savings but a much more modest ratepayer savings of less than 3%.

The varying forecasts are due to errors in converting operational cost savings to rate savings. If applied only to electricity generated from LNG, the results are in close agreement between HSEO and HNEI, yielding savings of approximately 1 cent/kWh or about 3% of the average bill.