Report Title:

Energy Conservation Initiatives

Description:

Authorizes the issuance of $100,000,000 in general obligation bonds to finance the incorporation of renewable energy efficient technologies in State facilities. Allocates $100,000 per year of the State's portion of geothermal royalties to DBEDT to fund hydrogen research. Appropriates $50,000 for a statewide energy audit. Requires an emissions task force to measure the State's power plant and motor vehicle emissions. Authorizes the Kahoolawe island reserve commission to develop and implement a strategy for the use of alternative energy resources. (SD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

288

TWENTY-SECOND LEGISLATURE, 2003

H.D. 2

STATE OF HAWAII

S.D. 1


 

A BILL FOR AN ACT

 

relating to energy conservation initiatives.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

SECTION 1. Hawaii is over ninety per cent dependent on imported oil, is physically isolated from outside sources of energy, and is vulnerable to economic disruptions in the world oil market. With existing technology, Hawaii can convert its solar and wind resources into a usable source of thermal or mechanical energy, electricity, and fuel. Geothermal energy is a proven source of electricity generation. Wave energy, ocean thermal conversion, and hydrogen fuel are other renewable energy sources available to Hawaii. The legislature finds that the paradoxical situation of being generously blessed with renewable energy and at the same time being critically dependent on imported fossil fuel can no longer be tolerated.

The health, security, and welfare of the State are inextricably linked to a concerted and deliberate effort to increase use of the State's renewable energy resources and its efficiency and sustainability.

The legislature finds that there are numerous means to energy self-sufficiency. The state government, as one of the largest consumers of electricity, must lead by example. With research and development, hydrogen could competitively serve as an alternative source of energy for fueling vehicles and generating electricity. Hawaii's geothermal resources, a proven source of power and revenues, can support the development of hydrogen. The successful use of the State's renewable energy is dependent on a plan that addresses all the critical energy components of Hawaii, including the use of tax credits as an incentive for increasing the use of renewable energy.

The purpose of this Act, known as the Energy Conservation Initiatives Act, is to, among other things:

(1) Authorize the issuance of $100,000,000 in general obligation bonds for energy efficiency programs in state facilities;

(2) Allocate $100,000 per year of the State's portion of the geothermal royalties to the department of business, economic development, and tourism to fund hydrogen research and development as an alternative energy source;

(3) Appropriate $50,000 for a statewide energy audit;

(4) Require the convening of an emissions task force to measure the State's power plant and motor vehicle emissions and develop comprehensive strategies to reduce emissions; and

(5) Authorize the Kahoolawe island reserve commission to develop and implement a strategy for the use of alternative energy resources to address the current and future needs of the island of Kahoolawe.

PART II

SECTION 2. The legislature finds that part II of Act 77, Session Laws of Hawaii 2002 (Act 77), requires the State to significantly improve its energy management in state facilities in order to save taxpayer dollars and reduce emissions that contribute to air pollution and global climate change. The energy, resources, and technology division of the department of business, economic development, and tourism has already identified a number of cost-effective energy efficiency and renewable energy technologies that can help to achieve the goals of Act 77, part II. Some of the recommended technologies are: sea water air conditioning, wind energy, solar thermal, and photovoltaics.

The purpose of this part is to provide low-cost financing to help launch these energy efficiency and renewable energy technologies.

SECTION 3. The director of finance is authorized to issue general obligation bonds in the sum of $100,000,000, or so much thereof as may be necessary, and the same sum, or so much thereof as may be necessary, is appropriated for fiscal year 2003-2004 for the following projects:

1. Sea water air conditioning (SWAC) $

Design and construct SWAC system

for Waikiki, downtown Honolulu, and Kakaako.

2. Wind energy system $

Design, site, and construct wind

farms on state lands.

3. Solar thermal technologies system $

Design and construct a solar thermal

technologies system for state facilities.

4. Photovoltaic system $

Design and construct photovoltaic

systems for state facilities and schools.

5. Additional energy efficient measures $

Purchase of more efficient lighting,

motors, air conditioning, energy

management systems, electric and hybrid

vehicles for State fleets, and building

commissioning.

SECTION 4. The appropriation made for the capital improvement projects authorized by this part shall not lapse at the end of the fiscal year for which the appropriation is made; provided that all moneys from the appropriation unencumbered as of June 30, 2005, shall lapse as of that date.

SECTION 5. The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this part.

PART III

SECTION 6. Scientists have recognized hydrogen as a potential source of fuel for many years. Currently, hydrogen is used in industrial processes, rocket fuel, and spacecraft propulsion.

The legislature finds that Hawaii represents an excellent site to attract government and industry investment in hydrogen. With its high fuel costs and a wealth of renewable resources, Hawaii could attract advanced technology development companies for research, development, testing, and deployment. The University of Hawaii is recognized as a "center for excellence in hydrogen research" by the United States Department of Energy. These factors can lead to the development of a hydrogen-based economy where Hawaii produces more of its own environmentally clean fuels, thus reducing its dependence on fossil fuels, and resulting in job growth, reduced pollution, and a more robust state economy.

The legislature further finds that the use of geothermal royalties is a logical nexus for the promotion of hydrogen as an energy source and the State's efforts to increase and enhance hydrogen use in Hawaii.

Accordingly, the purpose of this part is to provide a dedicated source of funding for hydrogen research by requiring $250,000 per year of royalties received by the State from geothermal resources to be allocated to the department of business, economic development, and tourism for hydrogen research and development as an alternative energy source.

SECTION 7. Section 182-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The payments to the State as fixed by the board shall be specified; provided that:

(1) In the case of bauxite, bauxitic clay, gibbsite, diaspore, boehmite, and all ores of aluminum, the amount of royalties for each long dry ton of ore as beneficiated shall not be less than twenty-five cents or the equivalent of the price of one pound of virgin pig aluminum, whichever is higher, nor shall it exceed the equivalent of the price of three pounds of virgin pig aluminum;

(2) The rate of royalty for ore processed into aluminous oxide in the State shall be set at eighty per cent of the rate of royalty for ore not processed to aluminous oxide in the State; and

(3) The royalty shall be fixed at a rate which will tend to encourage the establishment and continuation of the mining industry in the State.

The prices of virgin pig aluminum for the purpose of determining the royalties under this section shall be the basic price on the mainland United States market for virgin pig, not refined, f.o.b. factory. The royalties shall be in lieu of any severance or other similar tax on the extracting, producing, winning, beneficiating, handling, storing, treating, or transporting of the mineral or any product into which it may be processed in the State, and shall not be subject to reopening or renegotiating for and during the first twenty years of the lease term.

In the event the lessee desires to mine other minerals, the lessee, before mining the minerals, shall so notify the board in writing, and the board and the lessee shall negotiate and fix the royalties for the minerals.

Any other law to the contrary notwithstanding, thirty per cent of all royalties received by the State from geothermal resources shall be paid to the county in which mining operations covered under a state geothermal resource mining lease are situated.

Notwithstanding any other law to the contrary, $100,000 per year of the State's portion of the royalties from geothermal resources shall be allocated to the department of business, economic development, and tourism to fund hydrogen research and development as an alternative energy source."

PART IV

SECTION 8. The legislature finds that energy is a critical determining factor in providing for economic prosperity, environmental well-being, and the desired quality of life for Hawaii residents and businesses. How energy is generated and distributed is changing, thus placing Hawaii at a very critical juncture.

Dee Hock, the former chief executive officer of VISA International notes, "If one is to properly understand events and to influence the future, it is essential to master four ways of looking at things: as they were, as they are, as they might become, and as they ought to be."

Short-term thinking and the present statutory scheme to regulate the energy sector do not work. A thoughtful, macro approach must be applied to move Hawaii's energy sector from the industrial age to the information age. The clarification and advancement of ethical, scientific, political, and economic knowledge must be articulated in policy and effectively carried out in regulation and implementation.

Hawaii’s energy and transportation sectors are largely dependent on fossil fuels. This dependency makes Hawaii's economy vulnerable because of oil pricing volatility and supply interruptions that are not under Hawaii’s control. The State must develop a set of policies that puts its own energy future more directly under its own control and does not leave it subject, to the degree it currently is, to the volatility of international energy markets. The use of fossil fuels raises concerns about pollution and issues of global climate change. In addition, energy security issues, illustrated by the events of September 11, 2001, must be addressed in the context of Hawaii's geographic isolation.

Currently, Hawaii's energy policy addresses these important concerns. However, Hawaii's existing regulatory structure, cost, and implementation methods place barriers to the effectuation of these policies. Therefore, the legislature reaffirms the State’s energy objectives of:

(1) Dependable, efficient, and economical statewide energy systems capable of supporting the needs of the people;

(2) Increased energy self-sufficiency where the ratio of indigenous to imported energy use is increased;

(3) Greater energy security in the face of threats to Hawaii’s energy supplies and systems; and

(4) Reduction, avoidance, or sequestration of greenhouse gas emissions from energy supply and use.

Two significant trends, decentralization and miniaturization, have already affected telecommunications and information technology. These trends now play an important role in changing the way electricity is generated and transmitted. Traditional large and centralized electrical generation plants that support economy of scale models are giving way to decentralized distributed power facilities that boost fuel efficiency, are environmentally clean and quiet, and are capable of providing premium power essential for promoting information technology. Further, the transmission and distribution grids no longer transmit power in one direction--from a centralized generating facility to the electricity consumer. Rather, distribution systems in particular now transmit power in multiple directions using concepts like net energy metering, which allows electricity customers to generate power and send any excess power back to the grid. Distributed power has the potential to create vast webs of energy suppliers and consumers.

Hawaii is ideally situated to take advantage of other technology advancements, such as hydrogen as an energy carrier and fuel cells, to maximize its renewable energy potential in the future and marry electrical distribution systems with the transportation sector. Such advancements move Hawaii a step closer to the vision of a hydrogen-based economy and its desired goals of energy self-sufficiency and energy security. However, this vision and these goals will be difficult to realize if regulatory barriers are not addressed in a timely manner.

For these reasons, an energy policy forum made up of energy stakeholders from throughout the State was convened in 2002 by the University of Hawaii. The energy policy forum is currently undertaking a series of studies to assess options for Hawaii's long-term energy future. These studies will look at long-term trends in fossil fuel supply; global warming; future environmental requirements on energy producers; energy regulations and incentives; alternative energy technology; energy efficiency; and social, cultural, and economic issues in Hawaii's energy policy. The energy policy forum will convene an energy policy summit in late 2003 and develop a set of recommendations on changes in energy and regulatory policy to actually move Hawaii toward the goals put forth in the State's energy policy.

In light of the availability of various generation and distribution energy systems, changing consumer preferences, environmental imperatives, technological advancements, security issues arising from September 11th, and information and recommendations to be compiled as a result of the energy policy forum, the legislature finds that a comprehensive statewide review, examination, and analysis of Hawaii's existing energy situation, in particular Hawaii's electrical transmission and distribution system, in relation to the State's energy objectives is in the best interests of the State.

The purpose of this part is to require the auditor to contract with a consultant to conduct a comprehensive statewide energy audit.

SECTION 9. Pursuant to chapter 103D, Hawaii Revised Statutes, and any law to the contrary notwithstanding, the auditor shall contract with a consultant to conduct a statewide energy audit consisting of a comprehensive statewide review, examination, and analysis of Hawaii's existing energy situation in relation to the State's energy objectives. The statewide energy audit shall:

(1) Evaluate the role, guiding principles, and policy framework of the public utilities commission in relation to:

(A) The State's energy objectives;

(B) Regulatory reform;

(C) Encouraging the development and integration of clean, efficient, reliable, and cost-effective energy technologies into the generation, transmission, and distribution system; and

(D) Developing a power system that integrates new technology in a cost-effective way, while taking environmental concerns into account;

(2) Evaluate the findings and recommendations of the

energy policy forum and its integration into:

(A) The State's energy objectives; and

(B) Regulatory reform;

(3) Evaluate the current regulatory system and monopolistic structure of the electric utilities as they relate to:

(A) Promotion of the State's energy objectives;

(B) The implementation of innovations made possible by technological advancements such as small scale power generation;

(C) The implementation of technologically-advanced facilities in place of existing and aging facilities or constructing facilities using older traditional technology; and

(D) The effectiveness in Hawaii of the electric utility monopoly versus other market models. This examination shall consider the unique position of Hawaii as not interconnected with a larger power grid;

(4) Conduct a review of rate-of-return regulations and performance-based regulations in advancing the State's energy objectives;

(5) Evaluate means to integrate large-scale centralized power systems with small-scale, distributed power systems in the context of the State's energy objectives;

(6) Consider the dilemma of cost-saving, on-site power generation by large power users and the resulting increase in cost to small businesses and residential ratepayers who remain on the grid;

(7) Challenge and question the basic assumptions underlying the State's energy objectives and policies for facility systems—energy in chapter 226, Hawaii Revised Statutes, and its application and implementation;

(8) Evaluate the role of the consumer advocate in relation to promoting the State's energy objectives;

(9) Review the functions, organizational structures, and staffing levels of all state and county agencies that directly and materially regulate energy;

(10) Examine federal funds received by the State and counties that directly and materially relate to the energy situation in Hawaii and determine methods to maximize the receipt of such federal funds;

(11) Establish methods for reporting and measuring compliance with the State's energy objectives and policies, or recommended energy objectives and policies; and

(12) Make recommendations, including:

(A) Any necessary policy changes to ensure the energy security of the State; and

(B) Proposed statutory or constitutional amendments that will ensure the energy security of the State.

SECTION 10. All departments, agencies, and offices of the State and any private companies or agencies receiving state funds shall cooperate fully with and provide assistance to the consultant with respect to its statewide energy audit, and shall respond promptly to the consultant's request in conducting the statewide energy audit, including requests for records and other information in the course of the audit.

SECTION 11. The consultant shall:

(1) Report its progress on the statewide energy audit to the governor and the legislature no later than twenty days before the convening of the regular session of 2004; and

(2) Submit its final report of its findings and recommendations to the governor and the legislature no later than twenty days before the convening of the regular session of 2005.

SECTION 12. There is appropriated out of the general fund the sum of $50,000 or so much thereof as may be necessary for fiscal year 2003-2004 for a statewide energy audit provided for in this part.

The sum appropriated shall be expended by the auditor for the purposes of this part.

PART V

SECTION 13. The legislature finds that existing law does not regulate electric power plants to control the emission of nitrogen oxide, sulfur dioxide, mercury, and carbon dioxide. These pollutants could be harmful to health if the amount of emissions are not regulated. The consequence is severe respiratory disease such as asthma and premature death. The electric power plants are the nation's number one air polluter and older power plants pollute up to ten times more than newer power plants. Reducing emissions from electric power plants will result in preventing disease and death, increased fuel efficiency and power reliability, reduced mercury contamination in fish and animal tissue, reduced acid rain, and global warming. With vehicle emissions rapidly becoming the largest source of air pollution in Hawaii, if Hawaii is to be a leader in the alternative energy industry, the State needs to look at progressive measures to incorporate clean burning fuels and renewable energy sources into its infrastructure.

SECTION 14. The department of health shall convene an emissions task force to measure the State's overall emissions from motor vehicles and power plants, and to propose strategies and legislation to reduce emissions.

The emissions task force shall include representatives from: the department of health, department of business, economic development, and tourism, public utilities commission, department of transportation, University of Hawaii, U.S. Environmental Protection Agency, Hawaii Automobile Dealers Association, Hawaii Auto Alliance, Hawaii Energy Roundtable, and Hawaiian Electric Company.

The emissions task force shall submit an interim report to the legislature on its progress by September 19, 2003, and a final report not later than twenty days prior to the convening of the regular session of 2004.

PART VI

SECTION 15. The Kahoolawe island reserve commission may develop and implement a strategy for the use of alternative energy resources to address the current and future energy needs of the island of Kahoolawe as follows:

(1) The establishment of ten data collection sites;

(2) The development of an alternative energy system for model encampment; and

(3) The continued evaluation of long-term alternative energy solutions.

PART VII

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect upon its approval; provided that sections 3, 4, 5, and 12 shall take effect on July 1, 2003.