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Economic Currents

Keep up to date with the latest UHERO news.

PV Growth in Hawai'i?

Public comments regarding Hawaiian Electric’s PSIP and DGIP were due last week. Here’s a recap of what Hawaiian Electric has proposed for rooftop solar PV.

Hawai'i is characterized with small island electricity grids and some of the highest rates of solar PV penetration in the world. With over 10% of O'ahu households having PV, exceeding that of any mainland utility, the Hawaiian Electric Company and its subsidiaries have recently stalled the interconnection of new systems. The Hawai'i Public Utilities Commission ordered that further study be completed that might facilitate the adoption of more solar PV in Hawai'i. Along with circuit and power system upgrades, Hawaiian Electric's Distributed Generation Improvement Plan (DGIP) devises an alternative rate design that increases the interconnection fee and makes it more favorable to the utility to allow more households to install solar PV. Hawaiian Electric projects that DG customers could triple to upwards of 900 MW, while reducing the cost shift to non-DG customers, which they estimate to the tune of $38 million in 2013, or $31 for each non-DG customer.

In Hawaiian Electric's proposed tariff structure, referred to as "Gross Export Purchase program," all residential customer groups—current Net Energy Metering (NEM) customers, “DG 2.0” customers, and “Full Service” customers (non-DG)—incur a fixed monthly charge of $55 and pay retail rate for any energy consumed from the grid. The idea of the Gross Export Purchase Program is to account for some combination of interconnection and grid service charges. The first major proposal is to switch the NEM program to one where customers are compensated at wholesale rates rather than retail rates (similar to KIUC and many other utilities). This is to account for, as Hawaiian Electric puts it, “the value of DG to the grid.” Following the duck-shaped load curve, the bulk of electricity generation from DG occurs during the day, while peak consumption occurs in the late afternoon/early evening. Under the current rate structure, DG providers are providing “cheap” electricity while consuming “expensive” electricity. Current NEM customers will be grandfathered according to their original agreement (i.e. the utility pays retail rate in credits which expire at the end of the calendar year). Future NEM customers, called DG 2.0, will pay an additional monthly fixed charge of $16 and any excess electricity generated would be compensated at the lower rate of 16¢/kWh, reflecting that of wholesale rates.


Source: Hawaiian Electric Companies, 2014. Hawaiian Electric Power Supply Improvement Plan (PSIP).

The second proposal is to quicken interconnection for what is termed the “non-export option.” It allows customers to offset their electricity use so long as they do not send excess generation to the grid. The non-export option includes several variations. There are those that operate in parallel with the distribution system (grid-interactive) and with or without customer-side energy storage; and those that are independent from the grid (non-parallel operation) and with energy storage. A type of parallel non-export system without energy storage is an over-installed system under Hawaiian Electric’s Standard Interconnect Agreement—where there is a possibility for energy to “leak” back to the grid, though the customer receives no compensation. On the other hand, systems configured for non-parallel operation serve only an isolated load, thereby negating any possibility for reverse power flow into the distribution network. As filed in Docket 2014-0130, non-parallel systems are therefore eligible to bypass the full screening process under Rule 14H. Systems that have the potential to operate in parallel may also be granted expedited approval if reverse power protection measures, such as stand-alone inverters, is installed.

Will it Increase PV Installations?

The underlying question remains—will PV installations increase under Hawaiian Electric’s proposal? Certainly the change away from retail to wholesale rates for NEM customers, along with technical upgrades, increases utility revenue and its incentive to allow for more PV system connections. It also decreases potential customers incentive to install solar PV – though arguably the return on investment has been remarkably high and customers are still likely to install even if incentives decline slightly. Moreover, there is an element of increased fairness to non-DG customers through the revised NEM rates (assuming savings are passed through accordingly). So the answer is, it depends. On the continued decline of PV system costs, tax credits, the cost of battery technology and electricity rates. Whereas a decline in battery technology costs might lead to increased solar PV yet fewer connections to the grid, declining electricity rates would have the opposite effect. Within Hawaiian Electric’s proposal, they also project substantial cost savings primarily due to the introduction of LNG. This, however, is a more long-term endeavor than the granting of near-term solar PV permits.

- Sherilyn Wee and Makena Coffman


Understanding the Links Between Local Ecological Knowledge, Ecosystem Services, and Resilience

UHERO’s Project Environment has received funding from the National Science Foundation to participate in an interdisciplinary, international project that spans the natural and social sciences as well as the terrestrial and marine spheres. UHERO is partnering with scientists, resource managers, cultural practitioners and private landowners in Hawaii and Fiji. The project has two distinct parts; the first examines the relationship between local ecological knowledge and social, economic, and ecological outcomes across twenty rural villages in Fiji. The second part of the project explores the effects of different management and climate change scenarios on ecosystem services and indicators of resilience in three Pacific island watersheds.

For Part 1 of the project, we will focus on twenty rural coastal communities across four districts in Fiji. The team will collect household and village-level data within each of the four districts on ecological knowledge, customary skills and intergenerational knowledge. This will be matched to new and existing data collected from nearby forests and reefs. The goal is to develop an index of local ecological knowledge, as well as an index of social-ecological resilience, and examine relationships between these new indices and other ecological, social and economic outcomes. Of particular interest is the influence of local ecological knowledge on our indicators of resilience.



In Part 2 we will conduct three in-depth case studies at the watershed level, focused on quantifying ecological, cultural, and economic values of various land/ocean uses and covers, and their implications for resilience to climate change. The three watersheds were chosen where collaborators have long-term studies to leverage strong existing relationships with landowners, resource managers and users. The watersheds include Kaupulehu on the leeward coast of Hawaii Island, Haena on the north shore of Kauai, and Kubulau on southwestern Vanua Levu.

In each watershed we will collect new terrestrial data on vegetative composition, canopy cover, and indicators of habitat connectivity. Marine ecological surveys will include reef fish assemblages, benthic cover, species composition, biomass, and trophic structure. Ecosystem and cultural services for land and ocean uses will be calculated based on existing data, ecological characteristics, participatory mapping, and interviews.

To understand what combination of land-use practices best enhance social-ecological resilience under different climate change scenarios, we will evaluate the levels and resilience of ecosystem services under multiple future scenarios of climate change and management. These scenarios will represent a range of likely future climates crossed with a range of possible management decisions for each of the three watersheds. After developing an understanding of the ecological, cultural, and economic benefits of each of the management scenarios, we will then assess the costs of various management regimes under different climate change scenarios. The team can then identify a series of “optimum” scenarios – those that appear to maximize resilience indicators and emphasize the cultural, economic and ecological values identified to be of interest to the community members, land managers, and other stakeholders.

Our dual focus on Hawaii and Fiji provides a spectrum of cultural values and land and ocean uses, from functional agroforestry and traditional subsistence fishing in Fiji, to systematic habitat conservation and restoration in Hawaii. As a result, we can capture a wide spectrum of land management paradigms and their potential outcomes under different climate change scenarios, and our results can inform decision making elsewhere in Hawaii, in the Pacific, and throughout coastal areas more broadly.

-Kim Burnett and Cheryl Geslani


UHERO Fellow Interview Series: Tim Halliday

Posted September 4, 2014 | Categories: Q&A, Blog

Sumner La Croix interviewed UHERO Fellow Tim Halliday about his Social Science and Medicine paper in July 2014. For more on this paper, see Tim's blog post here.

1. Tell us something about yourself ...

I earned my PhD from Princeton in 2004. I have been at UH-Mānoa since then. I am also a fellow at the Institute for the Study of Labor Economics (IZA) in Bonn, Germany. My research lies in the field of human resource economics, which encompasses labor, population and health economics and tends to be very data intensive. These days I have been working a lot on inequality in various guises. One recent project is on the evolution of wage distributions in the United States and Mexico since the latter part of the 1980's. Another uses Bayesian econometric techniques to estimate the inter-generational transmission of health status.

 2. Is this a good summary of your results: Unemployment kills!

More-or-less. This work seems to be suggesting that poor macroeconomic conditions do increase mortality risks but only for working-aged men. There is no such association for the elderly or for women. In some way, this makes sense since working-age men have the strongest attachment to the labor force. One important point is that this is one of the few studies that uses individual level data; others typically use aggregate state-level mortality rates which can be hard to measure. These studies actually show the opposite, namely, that poor macroeconomic conditions are associated with lower mortality, even, for the elderly. While we do not understand why there is this difference between the results at the differing levels of aggregation, we can say two things for sure. First, mortality is very easy to measure at the individual level; you are either alive or dead and that is easy to verify. On the other hand, a mortality rate for a given state is actually hard to measure because it is defined as the number of deaths in that state during a given period of time divided by the states population at a point-in-time. The fact that the denominator is moving is what makes this a challenge. Second, related work has shown that job displacement kills you. This work also uses microdata. It is a lot easier to reconcile my findings with this literature than the "recessions are good for you" literature with it.

3. Were you surprised to find such a big effect?

Yes, but there really isn't another study out there that does exactly what I did, so there is not a comparison that we can make. I find that a one percentage point increase in the unemployment rate results in about 24 more deaths per 100,000 workers which in epidemiological terms is quite large. However, the US economy has business cycles which means that the unemployment rate goes up and then comes down. So, over a prolonged period, on net, my estimates would indicate a smaller number of deaths since some years would be good, but that it is so responsive was surprising. Bottom line is that more work needs to be done using other large individual level data sets from the US to see what we get in other contexts.

4. How did you get interested in this topic?

When I was starting out in graduate school, I had initially wanted to work in development and much of my work is in developing countries. However, at that time, many of my advisers who had been working on savings and consumption started to think about health and how it fits into life-cycle economic behavior. This actually seemed like a natural progression since health is probably the most important component of human welfare. So, during one meeting with my adviser, Chris Paxson, she had mentioned Chris Ruhm's work on recessions and health tangentially. This work is pretty much the consequence of that specific interaction.

5. Are there policy implications?

Yes. In fact, Harvey Brenner of Johns Hopkins who is probably the godfather of this literature has testified before the US Congress on numerous occasions. Although I am not sure if knowing that recessions increase mortality risks makes good stewardship of the macro-economy any more of a moral imperative; perhaps it does but it would be important even without these mortality effects. These results would possibly affect other cost-benefit calculations. For example, environmental regulations will confer long-term benefits down the pike but one immediate cost that might be ignored could be these mortality effects if the regulations increase unemployment.

Actually, I presented this paper once and Edward Lazear, who was the second George Bush's chief economic adviser, was in the audience. He told me that the auto bailout, of which he was the chief architect, probably prevented the unemployment rate from going up a full percentage point. He said that my work tells how many lives this policy saved.


How Do We Measure Social-Ecological Resilience?

Two UHERO graduate researchers, Alex Frost and Cheryl Scarton, attended a field course about social-ecological resilience of island systems in Nadave, Fiji. Participants of the field course were students and environmental practitioners from places throughout the Pacifc like Fiji, Vanuatu, Micronesia and the Solomon Islands.

On day three of the field course, the group took an early morning boat ride to Viwa, an island community of 30 households that is largely food and water self-sufficient. The home stay experience immersed participants in a traditional village lifestyle to apply terrestrial and marine survey methodologies learned from previous days.

Based on western standards and traditional economic measure like income, labor, and production, Viwa would be considered impoverished. The residents’ primary income is through selling excess fish and crops at the market and organization of a home stay immersion program. The island has intermittent power at night from a diesel generator, water comes from a thoughtfully engineered catchment system, and the intermittent power limits access to television and Internet.

From a lens that focuses on social and natural capital versus human and financial capital, Viwa is ecologically and socially wealthy. There is strong community cohesion - every Monday is a rotating social work day, where residents take the time to help one family plant, weed or harvest. Everybody shares excess harvest and people have time for leisure and storytelling. They are always joking, laughing and singing. The knowledge of agroforestry and management of fisheries is passed down through observation and application between generations that do not harm the health of the soil and encourages biodiversity, both are key indicators of sustainability.

How resilient is Viwa island? The common definition of resilience is “the capacity of a system to absorb disturbances or shocks and adapt accordingly while still retaining the same function and structure (McClanahan et al. 2012).” Economically speaking, global financial collapse will probably not affect Viwa at all, but the increasing demand of marine resources from Asia is pressuring people to over harvest. Ecologically, it seems the biggest challenge is invasive species, but heterogeneity of the agroforestry system minimizes the spread of pests and disease, compared to monoculture agriculture. Additionally, they have social mechanisms in place to prepare for extreme events like hurricanes. The island is especially vulnerable to sea level rise, coral bleaching, and shifts in weather patterns (such as a long drought). The village residents are working to develop an extensive water infrastructure system in the future to connect water pipes with an adjacent island. Still, the village faces many social challenges. Younger generations are adapting to the expectations of the market economy by working off island, which leads to a loss of traditional ecological knowledge. Concurrently the growing island population requires further clearing of the land for more housing.

 Overall, the week-long intensive field course brought together faculty, students, and experts to disseminate and learn various methods and tools to measure social-ecological resilience. The forum encouraged network building between the University of Hawai’i and University of South Pacific. The variety of perspectives helped increase participant capacity to challenge existing mental models and assumptions. The experience inspired students to develop future interdisciplinary research on island resilience and identify opportunities to mitigate complex challenges that face Pacific nations, like the impacts of climate change.

- Alex Frost and Kim Burnett


UHERO 101.12: What is the Value of the Environment?

The Earth’s environment is divided into different combinations of living organisms and their nonliving surroundings: air, water and soil. These different organic communities are called ecosystems. Humans receive benefits from these ecosystems in the form of “ecosystem services”, a term that covers a range of benefits from artistic inspiration to soil detoxification. (See below for a list of example ecosystem services)*

In 1997 Robert Costanza and 12 other authors wrote an eye-opening article in Nature called “The value of the world’s ecosystem services and natural capital” (Costanza et al. 1997). It stoked interest in environmental valuation because of the $46 trillion/year value (in 2007 US dollars) it placed on the planet’s services. After factoring land use change the value of Earth's services in 2011 was updated to $125 trillion/year (in 2007 US dollars) (Costanza et al. 2014). The goal of Costanza et al. (1997) was not to commodify the environment, but more so to raise awareness to what these environmental benefits are worth in a capitalist market economy. The methods for arriving at these dollar figures were questioned and the valuation was controversial because some people are naturally inclined to ask…

How can you put a dollar value on the environment?

Putting aside the ethical question of assigning dollar values to experiences and connectivity with other people and nature, the below table sums up how previous academic research has addressed environmental valuation: 

 

These valuation methods are further described in Module 4, Session 2 of this training resource from The Economics of Ecology & Biodiversity (TEEB).

Prices of goods and services sold in markets can be used to arrive at a dollar value for certain aspects of the environment, but in the case that market values are not available, non-market based methodologies have been used to arrive at a value. Ecosystem service valuation is a relatively new field and researchers are collecting results from previous studies to help future researchers confirm what valuation methods work best for different ecosystem services (Ecosystem Services Valuation Database). A paper was written by De Groot et al. (2002) which includes a table of ecosystem functions and their compatibility with different valuation techniques to help guide in assigning a dollar value to ecosystem services. With some ecosystem services there are intrinsic values (such as existence values) that are hard to put into dollar terms. It doesn’t always have to be about money....

There is more than one way to value the environment

Ecosystem services do not have to be valued in terms of dollars. Any unit can be the common denominator such as time, energy, or freshwater, for example. Environmental valuation differs from financial valuation in that it is rarely done to account for an entity’s profit, it is done to account for alterations humans have made on the environment, or to help decision makers evaluate consequences of their actions. Farber et al. (2002) defines valuation as an assessment of trade-offs toward achieving a goal such as reduced carbon emission, increased habitat or improved water quality.

An important concept to keep in mind is that people do not directly benefit from ecosystems without human, social and built capital. The valuation of the environment’s natural capital must be parsed out from the entire interaction between people, communities and their built environment. It is only through institutions as well as human management and invention that we extract benefit from nature (Costanza et al. 2014). The scope, precision, techniques and units used in an environmental valuation depend on the purpose. Ecosystem service valuations are done at different spatial scales to suit different objectives such as raising awareness, national income and well-being accounts, specific policy analyses, land use planning, payment for ecosystem services, full cost accounting and common asset trusts. For more information on the field of ecosystem service valuation check out references below:

Ecosystem Services:
The Ecosystem Services Partnership
The Economics of Ecosystems & Biodiversity Initiative

Referenced Papers:
Costanza, Robert, Rudolf de Groot, Paul Sutton, Sander van der Ploeg, Sharolyn J. Anderson,
          Ida Kubiszewski, Stephen Farber, and R. Kerry Turner. 2014. “Changes in the Global
          Value of Ecosystem Services.” Global Environmental Change 26 (May): 152–58.           doi:10.1016/j.gloenvcha.2014.04.002.

De Groot, Rudolf S., Matthew A. Wilson, and Roelof MJ Boumans. 2002. “A Typology for
          the Classification, Description and Valuation of Ecosystem Functions, Goods and           Services.” Ecological Economics 41 (3): 393–408.

Farber, Stephen C., Robert Costanza, and Matthew A. Wilson. 2002. “Economic and
          Ecological Concepts for Valuing Ecosystem Services.” Ecological Economics 41 (3):
          375–92.

Robert Costanza, Ralph D’arge, Rudolf de Groot, Stephen Farber, Monica Grasso, Bruce
          Hannon, Karin Limburg, Shahid Naeem, Rpbert V. O’Neill, Jose Paruelo Robert G.
          Raskin, Paul Sutton & Marjan van den Belt. 1997. “The Value of the World’s Ecosystem           Services and Natural Capital.” Nature 387 (May): 253 – 260.

 - Cheryl Geslani

*(List comes from the Ecosystem Services Valuation Database)

Air quality regulation Fish Pollination of crops
Animal genetic resources Flood prevention Prevention of extreme events [unspecified]
Artistic inspiration Fodder Provisioning values [unspecified]
Attractive landscapes Food [unspecified] Raw materials [unspecified]
Biochemicals Fuel wood and charcoal Recreation
Biodiversity protection Gas regulation Refugia for migratory and resident species
Biological control [unspecified] Genetic resources [unspecified] Regulating [unspecified]
Biomass fuels Hunting / fishing River discharge
Bioprospecting Hydro-electricity Sand, rock, gravel. Coral
C-sequestration Industrial water Science / research
Capturing fine dust Inspiration [unspecified] Seed dispersal
Climate regulation [unspecified] Irrigation water [unnatural] Soil detoxification
Cultural use Maintenance of soil structure Soil formation
Cultural values [unspecified] Meat Solar energy
Decorations / Handicrafts

Microclimate regulation

Spiritual / Religious use
Deposition of nutrients Natural irrigation Storm protection
Disease control NTFPs [food only!] TEV
Drainage Nursery service Timber
Drinking water Nutrient cycling Tourism

Dyes, oils, cosmetics (Natural raw
material for)

Other ESS Various
Ecotourism Other Raw Waste treatment [unspecified]
Education Pest control Water [unspecified]
Energy other Pets and captive animals Water Other
Erosion prevention Plants / vegetable food Water purification
Fibers Pollination [unspecified] Water regulation [unspecified]
Fire prevention    

 


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