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| Fig. 1: U.S. and Hawaii average electricity prices in cents per kilowatt hour from 2001 to 2019. [5] (Courtesy of the Hawaii State Energy Office) |
Located 2,400 miles from the U.S. mainland, the Hawaiian archipelago is the most geographically isolated island group in the world. [1] This seclusion and limited resource availability for power generation and infrastructure makes achieving energy independence difficult. Hawaii relies extensively on energy imports and consumes nearly seven times as much energy as it produces. [2,3] This dependence on imports from external energy suppliers is a key driver of Hawaii having the highest electricity rates in the United States. [4]
As shown in Fig. 1, the average price of electricity in Hawaii over the last two decades has consistently been over double the national average. [5] In September 2023, Hawaii's average electricity rate was 37 cents per kilowatt-hour, almost three times the national average of 13 cents per kilowatt-hour. [4] In the following report, we examine the makeup of Hawaii's electricity grid to understand its impact on electricity prices. While other factors affect Hawaii's electricity pricing dynamics, our exploration revolves around the significant role played by imported petroleum.
Table 1 presents a comprehensive overview of Hawaii's electric power generation between 2012 and 2022, categorized by primary energy source and measured in megawatt-hours (MWh). Throughout this period, electricity generation from petroleum consistently outpaced coal, geothermal, hydroelectric, biomass, solar, and wind.
Hawaii's electricity generation mix transformed over this decade, as evidenced by the near 60% decline in coal-generated electricity dropping from 1,537,340 MWh in 2012 to 647,758 MWh in 2022. Furthermore, electricity generation from wind nearly doubled with solar growing over 100-fold. [3] This substantial growth of renewables reflects Hawaii's commitment to diversify its energy portfolio and achieve energy independence. Despite these efforts, petroleum continues to comprise over 70% of Hawaii's electricity grid mix. [3] In turn, petroleum serves as a significant factor impacting Hawaii's electricity prices.
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| Table 1: Hawaii's Electric Power Generation in megawatt-hours (MWh) by Primary Energy Source from 2012 to 2022. [3] |
As shown in Fig. 2, Hawaii's average electricity rate tracks strongly with fluctuations in U.S. crude oil pricing. This relationship highlights petroleum's direct influence on Hawaii's electricity pricing given the state's heavy dependence on imported petroleum for electricity generation.
By examining the variations in crude oil and Hawaiian electricity prices in Fig. 2 alongside the average U.S. electricity prices in Fig. 1, it becomes evident that Hawaii's electricity pricing is significantly more volatile than that of the U.S. This heightened volatility is a direct result of Hawaii's reliance on petroleum. While the U.S. average electricity rate remained near- constant between 2008 and 2014, Hawaii experienced a sharp drop in 2009 and a rise in 2011 in line with U.S. crude oil pricing trends. [5] The absence of a strong correlation between U.S. average electricity rates and crude oil pricing suggests that the U.S. grid is less dependent on fossil fuels and thus more price stable. The volatility of Hawaii's average electricity price in Fig. 1 compared to the U.S. underscores the potential importance of a more diversified electricity mix in achieving greater price stability.
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| Fig. 2: Hawaii's Average Electricity and Gasoline Prices Compared to the U.S. Price of Crude Oil from January 2010 to 2019. [5] (Courtesy of the Hawaii State Energy Office) |
Hawaii's elevated and fluctuating electricity prices are significantly influenced by global oil market dynamics and the expenses associated with fuel imports. While petroleum dependence is a substantial factor, it's crucial to acknowledge that it is not the sole determinant shaping electricity rates in Hawaii. Other contributors include regulatory policies, advancements in infrastructure, technological advancements, and vulnerability to natural disasters.
As Hawaii continues to integrate renewable power into its electricity grid, its reliance on petroleum will continue to decrease. The intrinsic price-stability of renewable resources, given their predictable costs of maintenance and operation and absence of fuel expenses, suggests that Hawaii's shift towards a more diversified electricity portfolio will lead to more predictable and stable electricity prices over time.
© Haley Stafford. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "Hawai'i Facts and Figures," State of Hawaii, January 2023.
[2] "State Energy Production Estimates 1960 Through 2020," U.S. Energy Information Administration, 2022.
[3] "State Energy Consumption Estimates 1960 Through 2020," U.S. Energy Information Administration, 2022.
[4] "Electric Power Monthly - November 2023," U.S. Energy Information Administration, November 2023, Table 5.6.A.
[5] "Hawai'i's Energy Facts and Figures 2020 Edition," Hawaii State Energy Office, November 2020.