HILO — Aina Koa Pono, the renewable energy company that plans to build a plant in Ka‘u, has reached a biofuel supply agreement with Hawaii Electric Light Co. and is asking the Public Utilities Commission to approve the contract.
Under the terms of the contract filed Thursday, Aina Koa Pono would provide biofuel to HELCO over 20 years for a fixed price. HELCO said in a statement that the new contract would include an energy surcharge to cover the increased cost of the biofuel, but even with the surcharge it would save electricity customers $125 million over 20 years, compared to an earlier contract that the PUC rejected in 2011.
Aina Koa Pono had kept a low profile since late last year since the rejection of that contract, which included a controversial biofuel surcharge provision.
In that ruling, the PUC found that the contract price for the biofuel was “excessive, not cost-effective, and thus, is unreasonable and inconsistent with the public interest.” The new contract contains a reduced price for review by the PUC, with input from the state Consumer Advocate, Aina Koa Pono and HELCO said in a joint statement.
“We renegotiated a contract with HELCO to provide 16 million gallons a year of biofuel for them,” Aina Koa Pono partner Chris Eldridge said. The fuel will be trucked to HELCO’s Keahole Generating Station to replace the diesel that is used at the power plant.
An additional 8 million gallons per year will be sold to Mansfield Oil, which will “distribute as much as possible to Hawaii,” and then sell on the mainland, Eldridge said.
The proposed contract still contains a surcharge, and it will be a modest one if the PUC approves spreading the cost among Hawaiian Electric Co. customers on Oahu. Because fossil fuels are still less expensive than the proposed price of the renewable biofuel, the cost difference is being shared among HELCO and HECO customers. The energy utilities calculate that if the proposed surcharge were in place in 2015, the estimated incremental cost spread among customers would be 84 cents per month for a residential bill of 500 kilowatt-hours or $1 per month for a residential bill of 600 kilowatt-hours. The surcharge would not begin until Aina Koa Pono begins deliveries of biofuel and will decrease over time as petroleum prices rise.
Under the contract that was rejected in 2011, customers would have had a surcharge of $2.10 for a home using 600 kilowatt-hours, but up to $10 a month if HECO customers don’t take the lion’s share of the surcharge. HECO spokesman Peter Rosegg was confident the PUC would find the surcharge legal.
Key parts of Aina Koa Pono’s plan remain unchanged from last year. The processing plant will be built off Camp Meyer Road, 1.5 miles from Pahala. The company has leased 12,000 acres of land from the Edmund C. Olson Trust II and the Mallick Trust.
Nine hundred tons of feedstock daily from the leased lands will be dried, pelletized and treated with a catalyzer. Then, in a technology known as microwave catalytic depolymerization, the biomass will be heated to more than 600 degrees to create a synthetic biofuel and biochar. The biochar will find use as a soil additive, Eldridge said, while the biofuel would be sent to Kona.
Aina Koa Pono is not required to do an environmental assessment, Eldridge said, but the company will conduct a study of environmental and cultural impacts of the operation. The study will help the company determine whether the fuel trucks will pass south, through Naalehu and through South Kona, or whether it will go north and over the Saddle Road. The traffic impacts are not yet known.
The total development cost for Aina Koa Pono’s plant is expected to be around $450 million.
Eldridge said his company is working with the Hawaii Agriculture Research Center to determine the most appropriate source of biomass feedstock. Options for the startup of the facility include invasive plants, eucalyptus trees, macadamia nut husks, tree trimmings and coffee pulp. Long-term solutions could involve other tree crops, sorghum, napier grass and other tested sterile grasses.
The Pahala facility is expected to generate about 3,500 gallons of biofuel per acre.
Construction of the plant would take 400 workers over three years, Aina Koa Pono estimates, and after construction the farm and plant would bring about 200 agricultural and processing jobs to Ka‘u.
Some Ka‘u residents have opposed Aina Koa Pono’s earlier plans over environmental concerns and the potential loss of farmland, while labor unions and others say the region needs jobs. To address those concerns, Aina Koa Pono is contracting with consultants R.M. Towill and SMS Research to do “broad community outreach” and identify the issues and concerns of local residents.