REPORT FROM HAWAIIAN ELECTRIC– Hawaii Electric Light Company today asked the Hawaii Public Utilities Commission (PUC) for approval of a new biofuel supply contract with Aina Koa Pono. Under the agreement, Aina Koa Pono would provide 16 million gallons per year of renewable biofuel to replace fossil fuel used at the Keahole Power Plant on Hawaii Island and other plants in the future. An additional 8 million gallons will be produced for sale to Mansfield Oil Company, a privately-owned fuel distributor.
Aina Koa Pono, which is building a processing facility in Kau, will provide biofuel over 20 years at a fixed price formula, providing economic security from volatile oil prices. The new contract will save electricity customers $125 million over 20 years when compared to an earlier contract which was not approved by the PUC.
The use of renewable biofuel, along with many other renewable energy projects, will also help Hawaii meet the legal requirement that 40 percent of electricity come from renewable sources by 2030. The 16 million gallons of biofuel each year represents close to 100% of the Keahole plant’s present annual fossil fuel use.
Aina Koa Pono has entered into an agreement with Edmund C. Olson Trust II and the Mallick Trust to farm over 12,000 acres of under-utilized private agricultural land in Pahala that was once part of Kau Sugar Company. Aina Koa Pono will initially harvest and process existing invasive plants, eucalyptus trees and local green waste such as macadamia nut husks, tree trimmings, coffee pulp and hulls.
Aina Koa Pono is working with the Hawaii Agriculture Research Center to select the most appropriate non-invasive perennial crops to farm and convert to biofuel, such as long-term tree crops, sweet sorghum varieties, non-seeding napier grass and other tested sterile grasses. Aina Koa Pono is also consulting with Hawaiian Islands Land Trust regarding appropriate biofuel crops.
“We are committed to being a good neighbor and steward, producing sorely needed renewable, clean fuel and bringing jobs and economic opportunity where they are greatly needed. We respect the community and its cultural character and believe that over time we will earn its trust,” said Chris Eldridge, Aina Koa Pono partner.
Construction is expected to require 400 workers over three years. The farm and processing plant will bring about 200 agricultural and processing jobs to Kau, create new businesses to support the industry, and generate substantial tax revenues, Eldridge said. The operation can provide other farmers a revenue stream from their agricultural waste. Farmers can also benefit from the charcoal by-product that is an environmentally sound fertilizer.
Aina Koa Pono has engaged R.M. Towill and SMS Research to conduct broad community outreach in Kau to identify issues and concerns of local residents. These voluntary efforts will include assessing how the operations and processes will affect the environment in and around Kau.
The PUC did not approve an earlier contract between Hawaii Electric Light Company and Aina Koa Pono, citing concerns about price and other considerations. The new contract contains a reduced price and other changes to be reviewed by the PUC with input from the Consumer Advocate.
“We have renegotiated the AKP contract to meet the PUC’s concerns and believe there is significant value to Hawaii of this and future biofuel contracts,” said Jay Ignacio, Hawaii Electric Light Company president. “If Hawaii is to reach our clean energy goals and get off oil, we need to pursue all possible renewable resources, including biofuel which can be a bridge to future technologies. Locally grown and processed biofuel can be used in existing power plants at costs that can help us stabilize volatile petroleum-based electricity prices. It can keep Hawaii green and create jobs rather than sending millions of dollars out of state for energy.”
The filing asks the PUC to approve sharing the cost difference between locally grown and produced renewable biofuel and the fossil fuel it replaces among customers of Hawaii Electric Light Company and Hawaiian Electric Company. If the proposed surcharge were in place in 2015, the estimated incremental cost spread among Hawaii Island and Oahu customers based on fuel price projections could be about 2/10th of one cent or from $0.84 to $1.00 per month for a residential bill of 500 to 600 kilowatt-hours. The surcharge would not begin until AKP begins deliveries of biofuel and will decrease over time as petroleum-diesel prices rise.
“Hawaii Island already has the highest level of renewable energy in the state, getting more than 40% of its energy from renewable sources. Renewable energy requirements are calculated on a consolidated basis for all our service territories, so Oahu has benefited from Hawaii Island’s leadership,” said Robbie Alm, Hawaiian Electric executive vice president.
“This contract provides for future delivery of AKP biofuel to other islands. It’s reasonable that the cost of advancing a local biofuel industry in Hawaii be shared among more than just Hawaii Island customers. Fossil fuel prices are expected to continue their erratic upward climb, so in time the cost of AKP biofuel is expected to be less than the cost of the oil it displaces,” Alm said.
Aina Koa Pono has partnered with Mansfield Oil Company (mansfieldoil.com) to handle its distribution and supply arrangements for the biofuels produced by the Kau plant. Mansfield will also purchase some 8 million gallons of biofuel per year for sale and distribution first in Hawaii and then on the mainland. Mansfield, which is privately owned, is one of the nation’s largest distributors of fuel and operates an integrated network of refiners, terminals, carriers and retailers throughout North America.
Aina Koa Pono will use a unique technology licensed from Sustainable Biofuels Solutions, LLC (SBS). This thermal microwave depolymerization (Micro Dee) technology is currently in use at a demonstration plant in North Carolina, which has been operational since early 2012. Micro Dee accelerates the natural decomposition and metamorphosis of biomass to crude liquid to just 50 minutes, Eldridge said.
AECOM (aecom.com), a global engineering and technical services company, is completing tests of this technology. Results have met or exceeded projections and AECOM has
Aina Koa Pono is a Hawaii-based, locally owned biofuels company committed to producing locally grown and processed liquid biofuel for power generation and transportation. For more information, visitainakoapono.com
Hawaii Electric Light Company and Maui Electric Company are subsidiaries of Hawaiian Electric Company. Together they serve more than 95% of the population of Hawaii on the islands of Oahu, Hawaii, Maui, Lanai and Molokai. Hawaiian Electric is a subsidiary of Hawaiian Electric Industries (NYSE: HE). For more information, visit heco.com.
Reader comment submitted:
Could someone please explain why rate payers should guarantee AKP $200 a barrel for this fuel oil when current fuel prices are around $107 a barrel? It makes no sense particularly when the price for natural gas is plummeting. Wouldn't it be cheaper to build a clean burning natural gas fired generating unit on the Big Island than pay AKP $200 a barrel for its oil?
Richard Ha on behalf of the Big Island Community Coalition, addressed this issue recently in the HNL Star Adv. Here's his commentary in case your readers missed it:
HNL STAR ADVERTISER
HELCO deal would be costly for Oahu electricity ratepayers
By Richard Ha
POSTED: 01:30 a.m. HST, Apr 30, 2013
The Public Utilities Commission is considering approving a contract between Hawaii island's HECO-owned utility (HELCO) and a partnership known as Aina Koa Pono (AKP). Its decision is expected within the next several weeks.
Why should rate payers on Oahu care about this proposed contract?
Because if approved, Oahu residents would pay about 90 percent of the cost — even though the very expensive biofuel would be used only on the Big Island.
The contract between HELCO and AKP calls for HELCO — and you — to purchase fuel from AKP at about $200 per barrel. Today, a barrel of oil costs about half that: $107. If this contract is approved, there will be a surcharge, to cover the difference, on your monthly electricity bill.
Furthermore, note that whenever oil has reached about $120 per barrel, world economies have slowed precipitously. Many have gone into recession. This tells us that there is a natural economic "stop" in place that keeps oil from getting anywhere near $200 per barrel.
And yet, HELCO/HECO is trying to guarantee AKP a fixed price of $200 per barrel.
While a discussion of using renewable energy, rather than primarily buying foreign oil, is warranted, when the cost of those renewables is so unrealistically high that any buyer would look for other alternatives, then that discussion has reached the point of absurdity.
What lower-cost alternatives exist for the island of Hawaii?
» The island has significant geothermal resources at the equivalent price of $57 per barrel. Right now, HELCO purchases only about 70 percent of the geothermal power available, meaning there is more geothermal available at well below the equivalent of $200 per barrel.
» HELCO currently purchases power from biofuel and hydroelectric sources that make a reasonable profit at today's prices, and don't ask for $200 per barrel. Additional power plants are asking to come on line at today's prices.
» HECO and HELCO currently buy solar power at prices well below the equivalent of $200 per barrel (in fact, from what we can tell, at less than half that price).
» HECO and HELCO buy wind-generated power for far less than $200 per barrel, with more potential sellers lining up to sell to them.
AKP's plan has technical issues as well. The process AKP plans to use has never been proven at the scale it is proposing; the proposed yield of source material is many times more than ever grown anywhere. There are also cultural and environmental issues.
Finally, you might ask why Oahu rate payers should pay for power consumed by rate payers on another island. Good question.
The simple answer is that if rate payers on Hawaii island had to bear the burden, there is no way this could be approved. That kind of tells the whole story right there, doesn't it?
We suggest writing to the Public Utilities Commission if you oppose this contract — email@example.com — or contacting your state or county lawmakers.
Richard Ha submitted this on behalf of the Big Island Community Coalition, of which he is a founding member (www.bigislandcommunitycoalition.com). Other founding members include Dave DeLuz Jr., John E.K. Dill, Rockne Freitas, Wallace Ishibashi, Ku‘ulei Kealoha Cooper, Noelani Kalipi, Ka‘iu Kimura, Robert Lindsey, H.M. "Monty" Richards, Marcia Sakai, Lehua Veincent and Bill Walter.
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