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Why This Surprising Partnership Is Leading the Way for Renewables

by | published September 22nd, 2015

As we’ve previously discussed here in Oil & Energy Investor, major infrastructure for solar and wind power networks is complete, while the cost of generating power from either has reached grid parity with traditional sources of electricity.

And now there is a new centerpiece for the accelerating move to renewables…

Hawaii.

The state has opted to go all out on alternative energy. In May its legislature overwhelmingly passed a plan to move to complete independence from fossil fuels for power generation. Governor David Ige has put a goal on all of this: 100% by 2045.

Already, as the governor remarked in late August, “The state is creating a number of research institutions and working with a consortium of private companies in what it calls an ‘Energy Excelerator,’ which has generated $400 million in investment.”

But Hawaii has an unusual partner in moving away from its reliance on oil and natural gas:

The United States military.

What’s happening in Hawaii may allow us to make some nice money from a state deciding to go green… and from the military’s need to go off the grid…

New Oil- and Gas-Free Initiatives

You see, because of rising security concerns, the Navy, Army, and Air Force are dead set on generating one gigawatt each of their own energy from sources not based on the traditional grid.

The Navy wants to accomplish this in the next 18 months.

When the power goes out, whether because of an intentional attack or severe weather, military bases need to keep running. Relying on power from the traditional grid undermines their mission.

That’s where Hawaii comes in…

Most of the state’s existing power plants are in vulnerable areas, if not from enemy attack, then certainly from uncontrollable weather events.

A first initiative has produced two developments. One is the successful U.S. Navy initiative to produce electricity from tidal power. Marine Corps Base Hawaii on Oahu is getting some of its power from the first wave energy generator to be connected to a power grid in North America.

The second development is the Army’s move into biofuels. Amanda Simpson of the Army Office of Energy Initiatives has said that “The planned biofuel electricity plant at Fort Schofield is the only power plant in the islands to be built inland.”

Hawaii is likely to become a focus for a range of startups and combined private-public sector renewable energy projects moving forward. There is even talk underway of developing a recharging grid on several of the islands solely for the use of electric vehicles.

This last one may take some doing and points to the ongoing realization that a totally “oil- and gas-free” environment must confront transport sector energy needs.

Why Renewables Aren’t Declining

This marks a huge change from just last year.

Back then, residents of North Dakota, Western Texas/Eastern New Mexico, and the panhandle region of Ohio, West Virginia, and Pennsylvania had been leading the call for energy independence.

Only a year later, these basins are witnessing large reductions in forward capital expenditure commitments, a spike in energy debt likely to result in massive numbers of bankruptcies among small operating companies, and double-digit unemployment with higher levels on the way.

There are still a number of opportunities to make money in energy, even in oil and natural gas. The volatility hitting in waves, spurred on by over-aggressive (and largely self-serving) tides of shorts intent on driving prices below what market dynamics justify, along with the increasing usage of questionable derivatives, has certainly accentuated the concern.

In the past, a reduction in crude oil and natural gas prices would have prompted a rise in the usage of both and a corresponding decline in interest to invest in alternatives.

Well, despite some choppy bouts with demand figures, the decline in prices has resulted in an increase in usage of oil and gas.

On the other hand, the other shoe hasn’t fallen: Renewables haven’t suffered.

In fact, as we’ve discussed here in Oil & Energy Investor on several occasions, this time around renewables have actually improved.

And on the back of this rise in renewables, Hawaii is fast becoming the new leader in energy independence…

This will present us with opportunities to make a profit, as Hawaii goes green and the military goes off the grid (or at least the kind of grid we have come to expect).

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  1. Naveen Sreedevan
    September 22nd, 2015 at 21:54 | #1

    Hi Kent,
    I recently quit all my stock market position after the pessimistic picture potrayed by Harry Dent, Mike maloney, Jim davidson and Dennis Gartner.
    this is what I learnt from these experts and I think they are proving to be right
    1. Stock market volume in USA(dow/nasdaq) has dropped by more than 50% since 2009. this mean retail investors are nt interested.
    2. Baby boomers are retiring -everyay 10k retiring since 2007
    3. Blackstone rigging housing market with $7.5 bln investment and have bought nearly 40k homes.
    4. interest rates will rise and this will cause mortgage rates to go up to 7% -8% thereby causing home prices to fall 30% else no one will take mortage loans. This will therefor cause housing bubble to burst.
    5. velocity of money is down sharply -meaning people are not spending like in 1990s. Which mean US govt will get less taxes.
    6. Maring money in USA stock market at very high level
    7. Gartner says Saudi can produce oil even if crude is less than $10 a barrel. Which means Saudi wins this game of ‘oil money’ poker and oil can drop to less han $20 if not $10.
    There are many more sad stories.
    Having said that, I am keen on investing in Oil/energy stocks in my country (lng petronet)but waiting for market to correct further.
    Thank you.

  2. John Hoskins
    September 22nd, 2015 at 22:13 | #2

    You’d indicated LNG could be the stock of the century and I’ve made it my largest holding at an average price of $72.03/share. It is now trading lower. What’s happening?

  3. Naveen Sreedevan
    September 22nd, 2015 at 22:22 | #3

    kENT, I think you should listen to this presentation by Davidson on ‘5 economic cracks’ that can tank markets.
    http://pro.strategicinvestment.com/NDPCOL9/LNDPR930/?h=true

    I think demand will slow as China economy GDP growth is now less than 5% from 8% they reported last year.

  4. Ramon Benavides
    September 23rd, 2015 at 08:46 | #4

    Dr. Moors,
    Thank you for the update. As a biomass based diesel renewable fuel expert, I concur with your assessment. Over the last 5 years, I have been boots on the ground every 6 months in Hawaii as part of my re-creation cycle but also having a keen eye on the islands. The Navy is very, very, serious in this endeavor. Here is why. Nearly all electricity is generated with petroleum driven generation. While there is a robust effort underway for solar, wind has faltered and geothermal is significantly mismanaged. In December of last year, the price per kwh was $.30. In July of 2015 six months later, the price per kwh was $.46. Hawaiian Electric, Helco, was bought out by Florida Based NextExtra. From a long term perspective this was a very wise move. After all, where can one go for power?

    Nearly three years ago a very distinguished energy lobbyist friend of mine called me and said I needed to be at his firm the following week for a Naval Department Energy Data Download presentation. At first I hesitated,due to scheduling, but then after some thought, I rearranged my plans. I am glad I did! This was the most insightful presentation on energy I have ever attended.
    It provided me with a 50 year energy forecast and their goals.
    1) All naval vessel hull and propulsion (hybrid) designs are being reconfigured for maximum efficiency. This has paid off for one new class of vessels already as the first design achieved a whopping 40% reduction in fuel consumption. This means mission times are increased 40% longer.
    2) The entire CONUS Naval Base system is on smart grid now.
    3) Green Fleet will be ready by 2016
    4) The Navy is and will be energy independent at all facilities with on installation power generation to prevent interruptions caused by utility cyber attacks.
    It was very interesting to note that the Navy has led the entire country in energy and most do not know it. As an example, they were leaders in Wind, Coal to Steam, Nuclear and soon Renewables-liquids, gases and solids.

    To them-Hawaii is just another proving ground. But you and I know that it is much larger and this will shift energy policy in the near future. Imagine having the worlds first and only green fleet.

    Thank you for your article.

  5. Russ Nash
    October 1st, 2015 at 05:43 | #5

    Ramon, keep us in the loop with your comments. You appear to have some interesting perspectives

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