Hawaii Businesses Face Continued Energy Cost Uncertainty as Renewable Project Falters

A recent opinion piece in the Hawaiʻi Tribune-Herald strongly suggests the Honua Ola biomass energy project will not proceed, signaling a prolonged period of uncertainty regarding Hawaii's energy future and cost stability.

While not a formal policy announcement, the commentary reflects a significant viewpoint likely to influence ongoing energy discussions and regulatory decisions at the state level. The potential demise of Honua Ola, intended to provide a stable, renewable baseload power source, means Hawaii may continue to rely heavily on more volatile fossil fuel imports for electricity generation, directly impacting business operating costs.

Who's Affected

Small Business Operators: Businesses across retail, restaurant, and service sectors are particularly vulnerable. Fluctuating energy costs directly impact overheads, potentially squeezing already thin profit margins. Without a stable, affordable energy source, planning budgets for the next 1-3 years becomes more challenging.

Tourism Operators: Hotels, tour companies, and vacation rentals depend on consistent power to maintain guest services. Increased energy expenses can be passed on through higher room rates or activity prices, potentially impacting Hawaii's competitiveness as a destination. If energy costs rise significantly, it could dampen demand or necessitate cost-cutting measures that affect the visitor experience.

Real Estate Owners: Property owners and developers need reliable and cost-effective energy for commercial and residential properties. Uncertainty in energy policy can affect tenant retention and the viability of new developments, especially those with high energy demands.

Agriculture & Food Producers: This sector faces direct impacts from energy costs, which influence irrigation, processing, and transportation. Higher energy prices can lead to increased food production costs, potentially affecting local food security and supply chains.

Entrepreneurs & Startups: For startups, especially those in manufacturing or technology with significant energy needs, unpredictable energy costs can be a significant barrier to scaling. Access to affordable and reliable power is crucial for business model viability.

Investors: Investors in Hawaii's economy will view continued reliance on volatile fossil fuel markets and the failure of large-scale renewable projects as a persistent risk factor. This may deter investment in energy-intensive industries or necessitate a higher risk premium for existing businesses.

Second-Order Effects

The failure of projects like Honua Ola, coupled with ongoing reliance on imported fossil fuels, contributes to a higher cost of living and doing business in the islands. Higher energy bills for businesses can lead to increased prices for goods and services, further straining consumer budgets. This, in turn, can reduce local spending and make it harder for small businesses to retain staff, potentially leading to wage pressures or necessitating creative benefits packages. For tourism, higher operational costs might be absorbed or passed to consumers, affecting demand during economic downturns. The ripple effect extends to the 'Jones Act' costs for shipping, as fuel prices influence freight rates for goods essential to local commerce.

What to Do

Given the uncertainty surrounding Hawaii's energy landscape, businesses should adopt a proactive stance. The following actions are recommended:

For Small Business Operators & Tourism Operators:

Monitor Energy Prices: Track trends in oil and natural gas prices, as these will likely dictate electricity costs in the short to medium term. Subscribe to alerts from the Public Utilities Commission (PUC) and Hawaii Energy for policy updates.
Invest in Energy Efficiency: Conduct an energy audit to identify potential savings. Implement measures such as LED lighting upgrades, improved insulation, and energy-efficient appliance replacements. Hawaii Energy offers incentives for such upgrades.
Explore On-Site Renewables: For businesses with suitable roof space or land, investigate the feasibility and ROI of installing solar photovoltaic (PV) systems with battery storage. Consult with local solar providers for personalized assessments.

For Real Estate Owners:

Factor Energy Costs into Leases: When negotiating new leases or renewals, clearly outline responsibilities for energy costs and consider incorporating energy efficiency clauses.
Evaluate Property-Level Solar/Storage: Assess the potential for installing renewable energy systems on commercial properties to reduce common area electricity costs and potentially increase property value.

For Investors:

Analyze Sector-Specific Energy Risk: For portfolio investments, assess the direct and indirect exposure to energy price volatility for companies operating or headquartered in Hawaii.
Monitor Policy and Regulatory Changes: Keep a close watch on the Hawaii PUC and legislative actions related to renewable energy procurement and grid modernization. Shifts in policy could signal new investment opportunities.

For Entrepreneurs & Startups:

Integrate Energy Costs into Business Plans: Accurately forecast energy expenses, considering potential volatility, when developing your financial projections and seeking funding.
Prioritize Energy Efficiency for New Ventures: Design operations and choose equipment with energy efficiency as a key consideration from the outset.

For Agriculture & Food Producers:

Investigate Renewable Energy for Operations: Explore solar or other renewable solutions for farm equipment, irrigation pumps, and processing facilities. Consult with agricultural extension services for guidance on relevant grants or programs.
Optimize Logistics: Review supply chain and distribution routes to minimize fuel consumption and associated costs.

Timeline: There is no hard deadline for these actions, as energy cost management is an ongoing operational concern. However, the continued debate and potential finalization of the Honua Ola project mean that monitoring energy policy and implementing efficiency measures should be prioritized in the next 3-6 months.