Council, consultant clash on KESP

Editor’s note: After the recently unveiled Kaua‘i Energy Sustainability Plan — specifically its recommendation of a 50-cent fuel tax — drew criticism from some members of the Kaua‘i County Council, The Garden Island asked KESP consultant Douglas Hinrichs of Sentech Hawai‘i to respond to five questions. Those questions and Hinrichs’ answers, lightly edited for grammar, can be found below. An abbreviated version was published in Saturday’s print edition.

The Garden Island: The Kauai Energy Sustainability Plan draft drew some criticism that now is a bad time to implement a 50-cent fuel tax when people are struggling with unemployment, furloughs and a generally sluggish economy. Do you agree? When do you believe would be a good time to implement the fuel tax? Was the current economic climate taken into consideration when devising that specific recommendation?

Douglas Hinrichs: First, let me say that I really appreciate this chance to address some of the questions and concerns about the public draft of the Kaua‘i Energy Sustainability Plan.

Regarding the timing of the proposed fuel tax — any plan that does not take into account the economic climate into which it is being introduced is not worth its weight in salt. The Sentech Hawai‘i team was originally put together because it had a solid mix of professionals whose job it was to know in detail national and state energy and economic trends, for example in support of various sustainability projects, the Hawai‘i Clean Energy Initiative, etc. Once it was awarded the county contract to develop the Kaua‘i Energy Sustainability Plan, the team took several steps to ensure that it learned about Kaua‘i’s unique energy and economics situation:

By including Kaua‘i Planning and Action Alliance and Maurice Kaya on the Sentech Hawai‘i Team;

By convening 15 meetings with stakeholders and the general public;

By spending nearly a year analyzing the ground transportation and electricity sectors on Kaua‘i; and

By talking to countless numbers of every day folks on Kaua‘i who showed interest in what we were doing. We are very aware, for example, of the fact that many folks on Kaua‘i are working two or even three jobs to stay on top of things, that it’s not cheap to live in paradise.

This is not to suggest that our team knows everything — we’re still learning a lot after we rolled out the Plan to the public in early January. When we’re done with the final Plan in mid-February, our Team hopes to deliver a document that represents the will of most of the citizens and their elected leaders on Kaua‘i without imposing undue economic hardship on any one group.

Any time significant change is proposed, there’s bound to be some discomfort, dissatisfaction, and hardship, which is why the Team worked very hard to counterbalance any hardship with cost-effective alternatives to the status quo, to quickly alleviate any hardships. In the most recent version of the Plan are more frequent bus routes, incentives that would allow Kauaians to own/operate hybrid vehicles that cost less than half as much to operate as conventional vehicles, and so on. And the community is finding other ways to save fuel and money. Since the public rollout of the Plan, for example, the community has suggested that we include door-to-door vans to shuttle service industry workers between home and hotels.

Members of the community have also suggested a phased-in fuel tax, which may be an effective way to alleviate hardship, especially to working class folks who may be struggling financially.

Most politicians would be hard pressed to find a “good” time to introduce any kind of tax such as the proposed fuel tax, and bold political leadership is needed if Kaua‘i is indeed going to be a beacon of sustainable energy to the world. In a purely economic sense, however, investing in a local and sustainable energy future is a wise investment since it would:

Keep energy dollars local instead of shipping them abroad;

Create thousands of local jobs;

Let the community disengage from a global oil market that has exhibited high and volatile prices as recently as 2008;

Allow Kaua‘i to have control over future energy prices.

By paying (in early 2010) about $4 per gallon for gasoline with the additional fuel tax, the Kaua‘i community will reduce liquid fuel demand with better public transportation and vehicles that are twice as efficient as the current stock, support local ethanol and biodiesel production, and also be able to predict the cost of local ethanol and biodiesel. On the electricity generation side, an average homeowner would pay about 34 cents per kWh (which would be phased in as renewable energy projects came online) to stabilize electric rates into the future, and prevent rates of 50 cents per kWh (or higher) that he or she paid in 2008.

In this economic and “risk mitigation” light, Kauaians have a fundamental, soul-searching choice to make. They can:

Assume a measured, calculated risk by implementing this fuel tax (and finding a price support mechanism for renewable energy) and manage predictable energy prices while keeping most of their energy dollars on-island; or

Assume a risk completely out of their control and hope that oil prices stay manageable while sending most of their dollars abroad.

TGI: You said today that it’s not your job to implement the recommendations or get into politics. Do you believe that the fuel tax recommendation is politically “palatable”? Do you care if it is? Did you weigh the likelihood of implementation when devising the recommendations, or would you say the plan is conceived in, and for, an “ideal world”?

DH: To set the context correctly, the Sentech Hawai‘i team was selected, as part of a competitive solicitation, to develop a plan with specific recommendations that would convert the county’s current oil-dependent energy paradigm to one that is based on local and sustainable renewable energy and fuels. Within the “scope of work” parameters from the county, it was made clear that it was not our team’s role to implement the plan. It was also made clear that nobody wanted a plan that would end up never being used, but just forgotten on some dusty shelf.

The team most definitely considered how politically palatable and implementable the Kaua‘i-specific plan would be, at every step of the way. The fact that there’s a fair amount of “sticker shock” associated with the fuel tax is completely understandable, yet if Kaua‘i is to achieve 100 percent local energy sustainability, it won’t happen without political risk.

Yet, if the plan is carried out in full, its rewards should greatly outweigh its risks. Future generations will inherit a model of energy sustainability — while breathing cleaner air, paying less for energy, driving or riding to work in vehicles running on excess renewable energy or locally grown biofuels, and turning on their lights and TVs that are literally powered by the elements of nature that makes Kaua‘i the paradise that it is. But frankly, it will take some money to get from here to there — and the plan points to how other communities have achieved their goals with various levels of policies that deal with money such as fuel taxes, incentives, feed-in tariffs, and so on.

On the biofuels side, Kaua‘i has acres and acres of land that it can use to grow sugar, banagrass, jatropha, soybeans, or other crops that can be converted to ethanol and bioidiesel to replace gasoline and diesel derived from imported oil. Yet, landowners can make a lot of money by selling or leasing their land to condo developers, to grain crop growers, to a variety of purposes. If landowners are going to commit to growing biofuel crops, Kaua‘i needs a way to help them mitigate their risks, ensure a reasonable return on the millions of dollars needed, and ensure a market for their crops.

On the electricity side, sunshine may be free, but converting it to electricity is not. For example, concentrating solar power takes a large investment in the conversion equipment, thermal storage systems that allow generators to keep a reserve of energy (when the sun stops shining for short periods), biomass boilers that allow generators to have a backup source of heat, and in controls that allow that energy to be safely and efficiently integrated onto the grid.

It’s up to the community, of course, what path it chooses regarding its energy future. Yet, if Kaua‘i is serious about meeting its stated 100 percent local energy sustainability goals in 20 years, it will take some sacrifice, discomfort, and dissatisfaction as an entire paradigm is shifted, and rather quickly. Incremental change has not worked to date, and it will probably not work in the future.

TGI: Some council members said disincentivizing fuel consumption and automobile use is a good goal, but that stronger alternate transportation options need to be available before that can happen. I know you live in/near Washington D.C., a major city with an assortment of sidewalks, bike lanes, buses, taxis, trains and the Metro. Do you believe a community with as much sprawl as Kaua‘i can in the next 20 years offer a sufficiently robust public transportation system to make owning a car truly optional?

DH: Washington, D.C. and Kaua‘i are radically different in terms of their ground transportation needs, investments, capacity, and infrastructure so logically any ground transportation plan would have to be customized to these or other areas. While I live in DC, my work in Hawai‘i over the last 14 years has given me a strong sense of the unique transportation challenges it faces.

However, the larger KESP team lives, works and commutes in Kaua‘i daily and is very familiar with all the transportation advantages and challenges from Kaua‘i’s sprawling community. It’s important to note, too, that the plan assesses lessons learned from cities of many and varying characteristics, from Austin, Texas, to Portland, Ore., to Boulder, Colo.

Our team believes that Kaua‘i can greatly increase their public transportation options as viable alternatives to driving cars and pickups without prescribing that anyone abandon their car. The team greatly respects the rights of Kauaians to make their own transportation decisions, and as such the plan actually increases the variety of options that they can choose from by building the proposed “Sustainable Ground Transportation Fund.”

This Fund, built by the fuel tax, would help provide more transportation options including organized ride sharing; increased bus route frequency; door-to-door van shuttles for service industry workers; public buses that use 32 percent less, and school buses that use 65 percent less diesel. The team also considered other options such as improved bike paths, highway modernization, and smart growth projects, but found that these options were already underway.

TGI: Fuel tax proposals like the one recommended in the KESP draft have been described as “regressive” because the working-class drivers who cannot afford to purchase hybrid vehicles, even with thousands of dollars in county incentives available, are the ones who end up paying the tax, while more affluent drivers, who could afford to pay the tax, are also the ones who can afford to upgrade to fuel-efficient vehicles. Are you at all concerned about the social implications of a regressive proposal that taxes working-class and middle-class citizens more than upper-class citizens?

DH: The implications of the plan’s fuel tax on working class, middle, and affluent citizens were seriously considered when developing the plan’s increased fuel tax recommendations. Our team is very sensitive to the fact that working class folks could potentially, although only temporarily, bear a disproportionate tax burden.

From recent history, the team is also aware that people at all income levels found inventive ways to conserve gasoline when it cost between $4 and $5 per gallon during the oil price run-up in 2008. The incentives that our team is recommending to make hybrid vehicles comparably priced to conventional internal combustion engines would make that decision less costly. It’s also important to note that the plan doesn’t suggest every citizen rush out and buy a new car in 2010, 2011, or ever. After an initial cycle of hybrid or flex fuel vehicles is traded in, used vehicles will presumably be more affordable for the working and middle classes if they choose to buy a vehicle.

Our team looked at several tax and program options for the ground transportation sector — including the ones that the county or state had jurisdiction over (e.g., the General Excise Tax, the Vehicle Weight Tax, the KIUC Franchise Tax, the TAT); and other options such as an Oil Barrel Tax, a Cash-for-Clunkers, and others. Each had their upsides and downsides, as well as program administrative costs.

The simplicity of a flat tax that is directly proportionate to the amount of a commodity consumed (gas or diesel) is by many standards the most fair, straightforward and transparent approach to disincentivizing the commodity. Nevertheless, the team is very amenable to continuing a dialogue that may forge a path toward alleviating even a temporary burden from the working class (with perhaps a revolving fund to help buy down vehicle purchases), while ensuring that enough funds are raised to accomplish the paradigm shift from imported oil to local energy sustainability.

TGI: Councilman (Tim) Bynum seemed to use his criticism of the fuel tax proposal to undermine his faith in the KESP draft and your work as a whole, tying the fuel tax to the lack of wind energy analysis. Councilman (Jay) Furfaro told me today he does not agree with the fuel tax proposal but sees it as merely a funding mechanism for the other transportation-related recommendations in the plan. Are either of them correct? Should the plan be taken in its entirety, or can each proposal be taken on its own? Does the fuel tax proposal make sense in a vacuum, as a disincentive for fuel consumption, or is it only useful if considered alongside other recommendations? And do those recommendations make sense with other funding mechanisms like the county General Fund, grants or the federal stimulus, or only if the fuel tax is implemented?

DH: Most or all of the Sentech Hawai‘i personally agree with Councilman Bynum’s enthusiasm for wind, and I for one applaud his efforts to find some “common ground” approaches to getting more wind energy systems sited on Kaua‘i. Wind is one of the more cost-effective and clean renewable energy options out there, and Kaua‘i has tremendous wind potential.

The wind industry is growing at an exponential rate and advanced voltage regulation technologies on some of the turbines from Europe allow safer wind energy integration onto the grid. Large storage and control systems allow for higher dispatchability from an ISO perspective.

Yet part of what makes Kaua‘i the inimitable paradise that it is includes it rare and endangered species, including the Newell Shearwater. As the apparent standoff between wind developers and people dedicated to preserving endangered species became apparent to the team, it suggested compromises such as more aggressive Habitat Conservation Plans, high replacement ratios for bird takes, micro-siting in areas with wind potential but few birds, operational changes including turning the turbines off at night during migration periods, and even off-shore wind turbines.

Unfortunately, as it turns out, none of these “common ground” approaches can trump Federal legislation that protects endangered species — no matter how cost-effective and desirable wind energy is.

The fuel tax has received the most attention of any of the plan’s recommendations, yet the fuel tax — to make sense — has to be put into context, within the full set of the plan’s recommendations, for its full impact and objectives to be appreciated. The fuel tax is meant to disincentivize gas and diesel demand through:

Encouraging folks to find creative ways to drive fewer miles (like they did when gas climbed to between $4/gallon and $5/gallon in 2008);

Sharing rides with their neighbors;

Taking the bus more — especially if the buses ran more often;

Taking a shuttle van to the hotel where they work (if they work in the visitor industry); and

Replacing their current car or pickup with affordable hybrid electric vehicles that could cut their fuel bill in half.

And many of these alternatives would be available almost immediately if the fuel tax is passed — and the amount of money available for those alternatives would of course depend on the actual fuel tax. But the fuel tax would also allow the community to invest, on the supply side, in an ethanol and flex fuel vehicle paradigm that is working very well in Brazil.

In a similar fashion, the fuel tax would also help offset the costs to produce biodiesel from locally grown crops for use in commercially available vehicles. Cars such as the VW Jetta are winning environmental awards, as well as getting 42 mpg; many pickup truck owners are already using biodiesel in their trucks; and a new fleet of biodiesel-hybrid heavy trucks is on the market.