Hawaii Electric Light Company asks PUC to approve new contract for Aina Koa Pono to supply locally grown and processed biofuel on Hawaii Island
(Honolulu – August 2, 2012) – 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 for review 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 determined that the Micro Dee process, now a second-generation technology, is now poised for optimal renewable liquid fuel production.