Hawaii residential energy prices

 Largely AI generated.

Global energy context

Energy is produced or extracted in various forms in various places in the world. It is transported and processed or refined or otherwise made ready at various other places in the world. It is then distributed to your home or local gas station.  If the energy source for electricity is a fossil fuel, then the steps for that to transition from extraction to electricity generation plant also come into play.

Through many of these steps, world markets dictate the price. It is only in the tail end steps that local effects affect the price significantly. World market prices fluctuate daily due to movements in conflicts, natural disasters, sanctions, cartel actions, supply picture, demand picture, season, transport disruptions, etc.

Besides production costs and transportation or distribution costs, Government levies like tariffs, sanctions, regulatory costs, and federal/state/local taxes also factor in for the final consumer price.

Hawaii context

Hawaii residents get energy as natural gas piped in (much less common), electricity transmitted in by wire, and gasoline at the local gas station.

Hawaii's residential energy prices are among the highest in the United States, influenced by factors such as the state's reliance on imported fuels, limited local energy production, and unique distribution challenges.

Hawaii Retail energy prices

As of 2023, the average residential electricity rates in Hawaii are around 43.22 cents per kWh on Oahu, 43.31 cents per kWh on Maui, and 46.52 cents per kWh on Hawaii Island. These rates are significantly higher than the national average of 14.22 cents per kWh2. As of February 2025, Hawaii's average residential electricity rate is approximately 39.62 cents per kilowatt-hour (kWh), making it the highest in the nation.

Hawaiian Electric, the primary utility provider, has implemented a Time-of-Use (TOU) pricing structure effective January 1, 2025. This system charges different rates based on the time of day:

Daytime (9 a.m. - 5 p.m.): Rates range from 15.8 to 21.8 cents per kWh, depending on the island.

Evening Peak (5 p.m. - 9 p.m.): Rates range from 47.3 to 65.5 cents per kWh.

Overnight (9 p.m. - 9 a.m.): Rates range from 31.5 to 43.7 cents per kWh.

These rates vary by island, reflecting local energy supply and demand conditions.

Hawaii's natural gas prices are also among the highest in the U.S. In November 2024, the average consumer price was approximately $47.13 per thousand cubic feet, significantly higher than the national average. There is low usage however. Natural gas usage is primarily limited to the commercial sector for activities like cooking in hotels and restaurants. 

Hawaii Gas, the state's primary natural gas utility, has filed an application with the Public Utilities Commission (PUC) to increase its utility gas rates by about 17.7% across all islands. If approved, these changes are expected to take effect by mid-2025.

Gasoline prices in Hawaii are also notably high. In January 2025, the average price for regular gasoline was approximately $4.454 per gallon on Oahu, with prices varying across the islands.

Price breakdown

Here's a breakdown of the pricing structure for electricity and gasoline (the dominant energy types) from production to consumption:

Breakdown of Electricity Pricing in Hawaii:

1.     Fuel Costs: Approximately 67% of Hawaii's electricity is generated using petroleum, making fuel costs a significant component of electricity prices. Hawaii closed its last coal powered plant in 2022 and there are no natural gas plants or hydroelectric plants.

2.     Generation Costs: The use of imported oil for power generation leads to higher operational costs for utilities. In 2021, the average retail price of electricity was 30.31 cents per kilowatt-hour (kWh), a 10% increase from 2020.

3.     Transmission and Distribution: Hawaii's isolated island grids and the need to transport fuel and electricity over long distances contribute to higher transmission and distribution costs.

4.     Regulatory and Environmental Costs: Compliance with environmental regulations and the integration of renewable energy sources can add to the overall cost structure.

5.     Retail Markup: Utilities apply a markup to cover operational expenses and generate profit, which is reflected in the final residential electricity rates.

Breakdown of Gasoline Pricing in Hawaii:

1.     Crude Oil Costs: Global crude oil prices account for about 50% of gasoline prices.

2.     Refining Costs: Refining crude oil into gasoline adds approximately 25% to the cost.

3.     Distribution and Marketing: Costs associated with transporting gasoline to Hawaii and marketing contribute around 11% to the price.

4.     Taxes: Federal and state taxes make up about 14% of the gasoline price.

5.     Retail Markup: Gas stations apply a markup to cover operational costs and profit margins, influencing the final price at the pump.

Factors Influencing Energy Prices in Hawaii:

• Geographic Isolation: Hawaii's location necessitates the importation of most energy resources, leading to higher transportation costs.
• Limited Local Energy Production: The state has minimal local fossil fuel production, relying heavily on imports for electricity generation and transportation fuels.
• Renewable Energy Integration: While Hawaii is increasing its use of renewable energy sources like solar and wind, the transition involves infrastructure investments that can impact pricing.
• Market Volatility: Global events such as geopolitical conflicts, natural disasters, and economic shifts can cause fluctuations in energy prices.
• Regulatory Environment: State policies aimed at reducing carbon emissions and promoting renewable energy can influence energy pricing structures.
• Rooftop solar impact: Adoption is increasing, but there are some challenges to effectively inject excess energy from rooftop solar back into the grid. Also, it reduces electricity demand from the grid, but the utility has fixed costs non-withstanding, that now has to be charged to fewer non rooftop solar customers, increasing costs for them.
• Maui wildfire: Hawaiian Electric has to somehow recoup the damages they had to pay for the Maui wildfire.

In summary, Hawaii's residential energy prices are shaped by a combination of global market dynamics, local production capabilities, transportation logistics, and regulatory factors. These elements contribute to the higher costs experienced by consumers in the state.