“The Achievable Imperative”
By Hawaii State Senator Will Espero
First of a two part series
August was a bad month for the financial services industry. Exotic mortgages over the last several years have come home to roost. The result? The industry laid off more than 40,000 workers during the month and asked the federal government for a bailout, to which the White House replied, fix your own problem.
Countrywide Home Loans, the nation’s largest homeowner lending institution, with 17% of the market, or almost 1 out of every 6 home loans, is in trouble with borrowers who couldn’t repay their loans, and is negotiating a rescue from Bank of America. American Home Mortgage, the nation’s 10th largest mortgage lender, laid off 7,000 workers and filed for bankruptcy protection. Lehman Brothers, Capital One, 1st National Bank, and Accredited Home Lenders have all closed big mortgage companies. D.R. Horton, the nation’s largest builder, also suffered adversely when homeowners buying its homes became unable to keep up their mortgages.
Across the country, higher interest rates on new mortgage loans and loan denials to the poorest Americans threaten to exacerbate the housing market slowdown. Worker layoffs, home foreclosures, tighter credit and higher interest rates, create problems for others in the community. Laid off workers means less money circulated in local businesses. Home Depot and Wal-Mart reported that they are already feeling the pinch from the fallout.
If you are one of those affected by the layoffs or foreclosures, you already know what it feels like to be unable to pay for basic living needs.
This current economic crisis is a precursor to one that may happen in the not too distant future. Last month the International Energy Association announced that we will reach peak oil in five years because the global demand for fossil fuel has accelerated faster than expected. Gas prices in Hawaii have nearly tripled in the last five years, without the demand crunch. Hawaii depends on fossil fuel for more than 90% of its energy needs, making it vulnerable to the approaching global intersect of peak demand and peak oil production capacity.
Hawaii already has one of the highest costs of living, gas prices, and market priced homes in the United States. The unavailability of fossil fuels, would create conditions that we cannot afford. We need to become as much independent from fossil fuel as soon as we can. Averting the economic catastrophe means taking action now, before the demand and prices rise for the products needed. To illustrate, the solar powered civil defense alarms are purchased in staggered amounts by fiscal year. The cost has gone from $45,000 to $80,000 per system as demand increases and availability becomes scarce. The state of Hawaii should take advantage of purchasing the systems while suppliers are trying to break into the market and are open to negotiations.
Getting independent from foreign oil is great for Hawaii. Local businesses would benefit if we kept our hard earned dollars here rather than sending them out to foreign oil suppliers. Lower utility costs means more disposable income for residents and more profit for businesses. We can shield ourselves from spikes in gas prices, and the ripple effects such as business closures, lay-offs, and home foreclosures.
Transitioning away from fossil fuel is an achievable imperative. The key is in the aggregate: reducing local demand and increasing local production, hitting as many points as possible to achieve overall reduction in consumption and increase in self sufficiency. Here are some ideas on reducing Hawaii’s vulnerability to the five-years-away global energy crisis.
The Invisible Loan
Hawaiian Electric stands to benefit as much as anyone in the transition. After all, lowering demand means reducing the need to build more expensive fossil fuel plants, less blackouts, and having rates that consumers can afford to pay. Hawaiian Electric should take the lead using the CostCo approach – finding reliable, energy efficient products and making a large scale, graduated schedule purchase to obtain a discount in price significant enough to nearly match the combined federal and state credits. Tax credits typically cover half the cost of a single purchase system. To bring the cost down to nearly match the tax credits helps make the purchase affordable for homeowners.
HECO already issues rebates for energy efficient products. A transferable tax credit could be used as the upfront investment. HECO pays the vendor the down payment on the system and finances the rest. Upon the installation of the wind or solar energy system, the homeowner assigns her state tax credit to HECO. HECO accepts this as reimbursement for the down payment it fronted for the homeowner, then uses the homeowner’s transferred tax credit against its own tax liability.
Hawaiian Electric can then finance any remaining balance of the purchase to make it painless to get the system through an “invisible loan.” HECO would take the average of the previous six months electric bill, which the consumer continues to pay throughout the loan. Since the consumer is accustomed to paying that amount for electricity, she doesn’t “feel” the burden of any additional payment. The savings achieved through reduction in fossil fuel based electricity is applied toward the loan financed by HECO. This concept is how Munich, Germany is financing its city wide solar paneling of homes.
The Fast Track
Businesses that are designed to be energy independent are best positioned to shield themselves and stay afloat when the energy crunch happens. Each county should develop a preferred permit processing track, the “fast track” to motivate developers to be energy independent. Projects that both reduce energy consumption and produce their own energy would jump the queue in consideration and be given an expedited review. Fast tracking gives companies the economic advantage of getting their construction started faster before competitors, and their businesses up and running quicker so they can start making money sooner. Exemptions from application and processing fees, and if possible, tax exemptions or credits should be granted as further incentives. The double requirement of consumption reduction and energy self production is essential.
The design could incorporate microgeneration systems based on waste oil or other waste products (such as Harley Davidson and Wendy’s on Nimitz); wind turbine or photovoltaic systems; green chargers for the company fleet (UC Berkeley); seawater or temperature balanced or other type of air conditioning with occupancy sensors (John A. Burns School of Medicine, SeaFirst Bank in Seattle); LED lights and occupancy sensors; low water toilets and water control mechanisms (lower water use means less electricity needed for water treatment farther down the line); natural ventilation and lighting.
Increasing Energy Efficiency
California’s high energy efficiency standards have saved the state from having to build the equivalent of 20 power plants over the years. Hawaii should adopt the same high energy efficiency standards. California is increasing the breadth of those standards by tackling the “vampires” – appliances such as setboxes and cell phone chargers, appliances with clock functions, and standby appliances, that draw energy even when the product is not in use. The International Energy Association is aiming for a one watt efficiency level. Japanese cellular phones already have built into their circuitry a chip that stops the draw of electricity when the phone is unplugged for use. By passing laws mandating energy efficient products, Hawaii can join California in avoiding the need to build additional power plants.
Part 2 will be featured on Sunday, September 9, 2007.
Senator Will Espero represents the 20th Senatorial District (Waipahu, Ewa, Ewa Beach and West Loch) on the Island of Oahu. He also serves as the Chair of the Senate’s Public Safety Committee.