In what may be a sign of things to come for Hawaii's economy, the state Energy Planning and Policy Branch is adding workers while most of state government is shrinking.

The office is hiring 18 workers with the help of federal funding and is an oasis of sorts within the Department of Business, Economic Development and Tourism, where 40 out of 96 positions are being eliminated.

Indeed, Hawaii's energy industry has been a bright spot in an otherwise dour time for the state's economy, with solar photovoltaic installation companies doing well and renewable energy firms looking at adding many megawatts of projects here. Energy may be a stealth economic engine for the state, one that has relied on tourism and military spending as its main locomotives.

"This is a big opportunity," said Ted Peck, head of the Energy Planning and Policy office, who says he is being approached several times a week by companies exploring setting up shop here.

"We have had a half dozen states and four countries call us and say we want to partner with you and learn with you."

Hawaii currently gets 90 percent of its energy from oil, a percentage that's greater than any other state. That includes paying about $3.5 billion for 50 million barrels of oil imported into the state.

The cost was higher last year when oil traded at more than $140 a barrel. Gov. Linda Lingle wants the state to cut its oil addiction and has set a goal of getting 70 percent of its energy from renewables by 2030.

That presents an opportunity for energy companies, whether they are offering new technologies or more prosaic solutions, such as changing to more efficient lighting or windows in air-conditioned office buildings.

"If Hawaii doesn't convert to a home-grown energy economy, then we'll continue to be a really high-cost state," said Karl Stahlkopf, a partner at Sennet Capital and former president of Hawaiian Electric Co.'s renewable energy business.

"We talk to people quite literally every day who have ideas, who have capital, who would like to look at coming to Hawaii."

$1B GRAB BAG

They are being attracted by more than a billion dollars up for grabs as the state looks to wean itself from a dangerous dependence on petroleum and make use of abundant sun, wind and surf to power electrical generation or make fuel.

"Do the math," said Peter Rosegg, Hawaiian Electric Co. spokesman. "Twenty percent less spent out of state for oil could keep over $1.2 billion here for job creation or other good uses."

It's thought the opportunity will grow if oil prices jump as some forecast they will over the next decade.

Other states want to develop similar sustainable-energy programs, but Hawaii may be the best positioned of any to achieve success given three factors: the abundance of natural resources, the reliance on oil for much of its electrical generation and transportation, and nation-high prices for electricity, diesel and natural gas. Gasoline costs are the second-highest behind Alaska.

In essence, energy firms are examining ventures here because the resources are available and the need to switch off oil is great. Chances for a payback are good given what's paid here.

Already the economic attraction can be seen with several windfarms dotting the Neighbor Islands and feeding electricity into grids.

More windfarms are planned, including at least two near Kahuku on Oahu, as well as huge projects on Länai and Molokai.

There are a number of biofuel projects in the works, with Pacific West Energy LLC moving forward with plans to build a 20-megawatt biomass-to-energy plant that would also produce ethanol on Kauai. It would employ 325 people.

"We see solar companies, renewable energy companies, biofuel companies, energy efficiency companies and others all eager to come here and be part of what is going on," Rosegg said.

"Some companies are already here, like Tesoro, which refines oil here and is looking very seriously for ways to transition to renewable energy as oil use declines. This is great."

General Electric Co. earlier this year announced it will test so-called smart-grid technology on Maui to help lower electricity use in a $14 million project.

ENERGY WAVE HERE

Hawaii is one of the sites where Better Place, an electric car service provider, wants to set up its infrastructure, while Lockheed Martin Corp. is developing a 10-megawatt project that will test ocean thermal energy conversion off Oahu.

The state also boasts tests of wave-power buoys and at least two firms doing research and development on algae-to-oil projects.

On the energy efficiency front, the state Department of Accounting and General Services has awarded an Energy Savings Performance Contract to Noresco LLC that's projected to save more than 6.3 million kilowatts per year in 10 buildings through increased energy efficiency, while employing 350 people.

Another energy savings contract was let last week by the Hawaii Public Housing Authority that will create 205 jobs over two years, Peck said.

"We've got a lot of companies wanting to come and invest," said Peck, explaining he knows of 13 entities proposing projects that would generate $1.3 billion annually in revenue.

He said there are at least 100 projects — they range from small to large — that have impetus for moving forward in the state.

"We have an opportunity to be the Silicon Valley for energy."

The U.S. Department of Energy has seen the need for, and opportunities in Hawaii for switching off oil, and pledged to help the state reduce energy demand and accelerate use of renewable, indigenous energy resources. The department has sent three people to work here on that goal.

In addition, $47.4 million of federal stimulus money for energy projects is estimated to generate 515 jobs.

"I haven't seen it characterized broadly, but intuitively you know it's (energy) going to be a huge job creator," Stahlkopf said.

CHALLENGES AHEAD

To be sure, there are some downsides.

The energy gold rush is attracting some fly-by-night firms and others that may not be able to deliver on promises. Peck said that's to be expected and wouldn't be happening if there weren't opportunities with the energy transition.

Moreover, there are hurdles to cross before many of the renewable projects can break ground.

Stahlkopf likes the idea of biomass crops such as sorghum that can be turned into biodiesel or other liquid fuels with technology that's been around for decades. But he said such projects must be able to obtain large tracts of land under 20-year leases, and water to grow the crops.

But such ventures would help boost a sagging agriculture sector that's diminished from losses in sugar and pineapple, he said.

Large-scale solar solutions would involve large tracts for solar farms. The 200-megawatt windfarm being proposed for Molokai by First Wind Holdings Inc., and a similarly sized project on Länai by Castle & Cooke Inc., would require the installation of an up-to-$2 billion transmission line to Oahu that would have to clear a host of approvals, including questions about how it would affect marine life.

"A lot of it depends as everything else does in rulings at the PUC and being able to get through the plethora of regulations that sometimes make it difficult to do things in water," Stahlkopf said. He said presently HECOmust go through a request for proposals to consider renewable energy projects of more than 5 megawatts.

HECO has had one such RFP out for 100 megawatts of generating capacity for more than a year. Stahlkopf said people realize some of the PUC's regulations need to be modified as the state pursues its energy goals.

But Stahlkopf and others believe the regulations will be streamlined in time while keeping protections for the public in place.

"I'm bullish longer-term," Stahlkopf said.

"I'm a firm believer that it can be done and that it will be done because it's the right thing to do."