HIGH ELECTRIC BILLS AND RENEWABLE ENERGY ON THE BIG ISLAND OF HAWAII

The Big Island of Hawaii has the highest cost of electricity ($.32 per KWH) of any place in the US. It also has half the energy consumption per household of any place in the US at 2500KWHs per year per household as compared to the national average of 4300KWH per year. The Big Island of Hawaii also has one of the highest rates of energy generated from renewable energy sources (39% of the Big Island’s billed electricity).

Hawaii has vast riches in renewable energy resources. Any one of the three major renewable sources of electricity: wind, geothermal or solar voltaic could produce 10 times more than all the foreseeable energy growth for the Big Island. The sunlight is so strong and shines so much of the day that any house with solar panels on its roof can easily generate the average Hawaii Island household electricity usage of 200KWH/month. Although solar hot water heaters make a great deal of sense and are the largest source of electric usage on the East side of the Big Island, only 1 in 4 houses have them installed.

Though the capital costs of installing a solar system is high, particularly compared to the average household income on the Big Island, individual usage of solar power is of a much greater economic benefit to BI residents then power by other renewable energy sources and here’s why.

The Federal Public Utilities Regulatory Policies Act (PURPA) requires utilities to purchase power from qualifying independent power producers at a price set by each State’s Public Utility commission. In Hawaii, which is restricted to electricity generated on each island, this power purchase price has been set using a formula which is tied closely to the cost of oil. Hawaii Electric Light Company (HELCO), the power utility on the Big Island, buys alternative energy from geothermal and wind independent power producers on the Big Island at the same KWH price as it costs to produce electricity using oil. This motivates external investors to develop power plants from alternative sources and sell it to HELCO which is profitable for them and good for the environment. It also provides diversification of power sources, reduces reliance on shipping in oil, and creates a more distributed power grid.

But the Big Island residents aren’t benefiting economically from the use of alternative energy and are paying ever higher electric bills as the price of oil escalates. The growing profits made by the independent power producers are sent off Island rather than benefiting the economy of the Big Island. If residents invest in solar hot water heaters and solar electricity they are immediately insulated from rising oil costs which have gone up 40% in the past year and are predicted to go up another 40% in the next 12 months. Once the capital investment has been made back (over 2-8 years) the solar power system will free up income of the Big Island residents. These dollars will remain on the Big Island in the pockets of the local residents.

THE FISH, THE FRUIT, AND LONG NAPS UNDER A CEILING FAN

What is the best part of life in the slow lane?

Is it eating fish caught fresh that morning everyday for breakfast?

Is it the freshly picked organic fruit - the ripe sweet papayas, the creamy bananas, the buttery avocados or is it the locally grown organic vegetables - the juicy tomatoes, crunchy cucumbers, and the best crispy lettuce we have ever tasted?

Is it the trade winds that blow warm moist air through the house all day?
Or is it the long lazy naps under a slowly moving ceiling fan on warm afternoons?
Is it swimming every day in the warm, sun heated pool and hanging out to talk story?

Or is it reading the tragic mainland news and feeling like it is some far off place that will not immediately affect us.

I think it is all of these and more that we will surely discover.
But one thing we know for sure is that the rat race to riches in Silicon Valley is overrated.

THE CONSPIRACY OF "YOUR NUMBER"

The latest scam promoted by investment firms is “What’s Your Number” and by that they mean how much money you need to keep living the lifestyle you currently have when you retire. Their question focuses on saving enough money to achieve your number. The investment banking firms love the concept and have ads about “Your Number”, books about “Your Number” and it is rapidly becoming a part of the Boomer culture. I call it a conspiracy because it focuses on the percentage of earned income being saved and set aside for retirement and ignores by far the most important factor, which is, how well are those savings performing as an investment; what was their yearly return? Investment brokers want to focus on the amount of savings being set aside for them to invest rather than the return on investment that they are earning with the savings portfolio.

The concept of “Your Number” exists in a static world, an unchanging place where it is only a matter of saving the exact amount of money and then you are done. In fact, the world is a volatile place with times of rapid inflation, times of stagflation, and times of usually great investment opportunities. A more useful question is how skilled are my investment advisors at getting me high gains with low risk to my savings? Do my current brokers spot the opportunities to invest in the Wal-marts, Microsofts, and Berkshire Hathaway’s of tomorrow? Are they focused on getting the highest return for themselves or for me? The easiest money a broker can make is to put all your savings in a mutual fund that pays them a high commission and roll it over yearly to keep their commissions coming in. While we were in Silicon Valley, working ridiculous hours, our broker made more money off of our saving then we did. He invested all our savings into mutual funds that in total performed less than 1% a year and yet his commissions were 6% of our portfolio a year.

The question is will you be able to live frugally enough to let your investments grow and have excess savings to weather times of inflation or times of low investment returns. Unless you have a guaranteed pension, the most important thing to focus on is improving your skills at investing and learning to reduce your cost of living so you can live happy lives with less money. The sooner you start practicing investing and measuring your resulting returns, preferably long before you retire or lose your job, the greater your understanding and realistic view of income from your investments will be.

After studying investing with an AAII group in Silicon Valley and switching to making investment decisions ourselves, we have improved our returns by 20 times, to 20% per year and reduced our brokerage costs to less than 1%. At the same time we have lowered the risk of losing all of our savings by not being at the effect of mutual fund managers controlling when to buy and sell and by not being impacted by massive numbers of Boomers cashing out of their mutual funds to get to their money or being forced to roll their 401K after being laid off. We have minimized the risk to our portfolio by investing in a highly diversified group of well managed, growing companies that we really believe in and feel good about owning.