An economic analysis of the Kilauea geothermal development and inter-island cable project

Abstract

In early 1989 the Pele Defense Fund requested that Northwest Economic Associates (NEA) update their 1987 economic analysis of the proposed Hawaii Geothermal Development And Inter-island Cable Transmission System Project. This report, the result of that request, once again compares the cost of building and operating 500 MW of geothermal power plants and a cable transmission system with the cost of building and operating 500 MW of oil-fired power plant generating capacity. This update also compares the geothermal project with a solar/oil hybrid generating system of the same size. The impact of energy conservation is also considered in terms of its potential as an energy resource and in its contribution to an energy development program for the state of Hawaii. This report develops low and high cost estimates for the project. In a project laced with as much uncertainty as this, a single cost figure is of little value. A range of values which attempts to account for some of the uncertainty seems a more logical approach to cost estimation. Our cost estimates include costs which should have been considered in the February 1988 Decision Analysts Hawaii, Inc. report for the State, but were not. The most obvious being a standard project cost contingency. Other costs not considered in the State report but included in this report are the following: 1) additional cost of the undersea cable to allow for slope changes on the sea floor, 2) cost of constructing the cable laying vessel which does not yet exist, 3) cost of helper vessels to assist in the cable laying, and 4) adequate insurance or plant replacement costs. A cost that neither the State report nor this report includes, but one that may be very important, is the cost of designing or protecting the plants to deal with geologic hazards. The added cost of strengthening plants, designing them for quick disassembly, or constructing protective barriers around them will be considerable. This report considers project costs as objectively as possible considering the great deal of uncertainty and high level of risk involved in the project. All costs are shown in 1990 dollars. Appendix C contains two criticisms of the February 1988 Decision Analysts Hawaii, Inc. report on the proposed geothermal project.