As Hawaii policymakers seek to wean the state from fossil fuels, Hawaii Gas, the state’s regulated natural gas utility, is preparing for a major fight before the Honolulu City Council. 

Oahu lawmakers are considering an ordinance that would eliminate gas hot water heaters from new homes, or require Hawaii Gas to produce at least 90% of its gas from renewable sources, like waste.

The bill might seem like a modest step. But Hawaii Gas is taking a hard line against the measure, saying it could be the first step toward broader restrictions that could threaten its business model.

“Many people see this as a slippery slope to the ban on many other things,” said Jeannine Souki, Hawaii Gas’ director of government affairs and corporate communications.

If that’s true, the bill could pose a significant threat to the 115-year-old firm. While natural gas provides a tiny fraction of the energy Hawaii uses, it nonetheless plays an important role in the mix – especially for the hospitality industry.

Almost all of Waikiki’s 270-plus restaurants use natural gas for cooking, Souki said. In addition, she said, “approximately 100 hotels and resorts in Waikiki use gas for everything from heating water for showers, pools, cooking food at their restaurants, drying towels and sheets.”

Natural gas is so important to the tourism industry that former Honolulu Mayor Mufi Hannemann, who is now chief executive of the Hawaii Lodging & Tourism Association, testified against a bill proposed by state lawmakers earlier this year to push the company toward producing more renewable gas.

The industry was particularly concerned that a renewable gas requirement could hurt the ability of hotels to set up so-called “combined heat and power” or CHP systems, which use gas to generate electricity and then use leftover heat for things like heating water.

“This one will have a negative impact on large facilities such as our hotels that are currently using, or are in the process of installing, methods of generation such as combined heat and power (CHP) units,” Hannemann wrote.

Hawaii Gas also has support from builders and construction trade associations. They say the City Council measure will significantly drive up construction costs. Renewable energy advocates supporting the bill say the opponents have inflated the cost impacts to consumers.

Still, Hawaii Gas is so concerned that it has asked its 70,000 customers to join the fight.

In a September letter sent out with gas bills, the company’s chief executive, Alicia Moy, described the council measure as something that “would essentially eliminate your right to choose a gas water heater of any kind for your home.”

Moy encouraged customers to “be part of ensuring gas remains a clean and affordable choice for Hawaii homeowners and businesses.”

Other Cities Have Imposed Tougher Laws

Hawaii Gas has good reason to worry. Nationally, policy trends and new technologies are raising questions about the future of gas.

For example, while natural gas was once viewed favorably as a clean-burning alternative to fuels like oil and coal, municipalities like Berkeley, California, which is often a bellwether for progressive policies, have banned gas completely for some new construction projects. San Jose has done the same.

The plummeting cost of alternative energy technology is also posing a threat.

Last week, Forbes reported that costs of large-scale battery storage for power produced from solar farms are so low that it might not make economic sense to invest in natural gas production.

“New natural-gas plants risk becoming stranded assets (unable to compete with renewables+storage before they’ve paid off their capital cost), while existing natural-gas plants cease to be competitive as soon as 2021,” Forbes reported, citing a new study by the Rocky Mountain Institute, an energy think tank.

Locally, it’s not just renewable energy advocates and environmentalists who are pressuring Hawaii Gas.

In October, in a rare display of one regulated utility criticizing another, Hawaiian Electric Co.’s senior vice president for public affairs, Scott Seu, wrote a strongly worded op-ed piece published in the Honolulu Star-Advertiser supporting the City Council’s bill.

HECO has been at the center of a state policy to shift from fossil fuels to renewables, and the op-ed piece criticized Hawaii Gas for fighting proposed laws imposing similar standards for natural gas.

“No matter how much it describes itself as the Clean Energy Company,” Seu wrote, “Hawaii Gas has consistently opposed legislative efforts to require that they transition to renewable energy, arguing that the technologies for renewable gas are not sufficiently mature or robust.”

On a recent afternoon, Souki led a tour of the technology Hawaii Gas is using to create the sort of renewable gas Seu mentioned.

Most of the gas Hawaii Gas uses is synthetic gas produced from a byproduct of oil that’s imported into Hawaii and refined to make gasoline and other products. But Hawaii Gas also has a contract to convert human waste from the City and County of Honolulu’s Honouliuli Wastewater Treatment Plant into natural gas.

Set up amidst the city’s 1.8-million gallon circular tanks that collect waste, the renewable gas generating facility is a spaghetti of silver pipes and valves running between a variety of lime green tanks and pillars.

Souki was joined for the tour by Ross Tanimoto, an engineer with the Honolulu Department of Environmental Services.

As Tanimoto described it, the facility’s work is anything but glamorous.

“Basically, we’re undoing what the toilet does,” he said.

The challenge for Hawaii Gas is there are only so many toilets in Hawaii. The facility produces enough gas from Honouliuli annually for about 6,000 residential customers, or the equivalent of 15,000 barrels of oil, Souki said.

The company hopes to negotiate deals with the city to produce more from waste collected at the Honolulu Sand Island Wastewater Treatment Plant and Waimanalo Gulch landfill, Souki said. But that can only go so far, she says.

To renewable energy advocates, the Honolulu City Council bill is a modest step.

“We forget that there are larger strides being made by other communities,” said Josh Stanbro, executive director of the Honolulu Office of Climate Change, Sustainability and Resiliency.

“This isn’t us just going rogue out there,” he said, pointing to the measures in Berkeley and San Jose.

Stanbro’s responsibilities involve not just renewable energy. Also part of his portfolio is developing strategies for keeping Oahu affordable.

Solar water heaters do that better than gas ones in the long run, he said. Although he said the initial costs of solar systems are higher, the systems ultimately pay for themselves by saving consumers money.

“After three to four years you’re getting free hot water,” he said.

According to a document published by his office, the cost of installing a solar system in a new home is about $3,600 to $5,250, about $1,100 to $2,750 more than the $2,500 for a gas system.

According to the document, the $2,500 installation cost was provided by Hawaii Gas. The solar prices were based on “industry channel checks and are based on new construction” not more costly retrofits.

Stanbro said the office is eager to see data that could refute its estimates.

Hawaii Gas, meanwhile, says “the current estimated cost difference between a gas and a solar water heater is at least $7,000.”

Souki said the estimate came from sources including customers, builders and trade associations such as the Land Use Research Foundation of Hawaii.

Disputes over costs notwithstanding, Souki said, state and local policymakers should consider the overarching purpose of imposing tough standards on natural gas.

Given the relatively small amount of gas used in Hawaii and the fact that it burns cleaner than oil or coal, Souki said, “we have a very low carbon footprint.”

Hindering the use of gas, she said, will only hurt consumers and do little to help reduce emissions of carbon dioxide.

“The question I would ask is, ‘What is the goal?’” she said.

“Hawaii’s Changing Economy”  series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.