Hawaii Electric biofuel contract denied by utility commission

By Erin Voegele | October 05, 2011

The Public Utilities Commission in the state of Hawaii has denied a request set forth by the Hawaii Electric Co. Inc. to approve a biomass-based diesel supply contract it established with Aina Koa Pono LLC. According to information published by the Public Utilities Commission, the agreement, made Jan. 6, 2011, would have covered the purchase of 16 MMgy of fuel over 20 years.

In its denial, the Public Utilities Commission said it found the contact price to be excessive, not cost-effective and therefore unreasonable and inconsistent with the public interest. “By the HECO Companies’ own projections…the cost difference between the AKP-produced biofuel and the cost of the petroleum fuel it intends to replace will be an estimated eight-figure amount in 2015, the first year in which the 16 million gallons of biodiesel is utilized; and…over the course of the 20-year contract period, the total estimated cost impact of using AKP-produced biodiesel instead of petroleum fuel will be a nine-figure amount,” said the Public Utilities Commission in its denial.

The published documentation also noted that while the denial is largely based on the high cost of the biofuel, it does have other concerns with the contract. According to the commission, it intends to explore an appropriate form to consider these and other biofuel-related issues.

The documentation further explains that AKP’s biomass-based diesel project includes several components, including the construction of a plant that would feature microwave catalytic depolymerization technology. It would also include the planting, cultivation and harvesting of feedstock. Biodiesel Magazine was unable to reach a representative of AKP for further comment on the denied contract and what it could mean for the company’s proposed project.

Hawaiian Electric, however, is moving forward with alternative plans to procure biofuel to power its operations. On Sept. 29 the company announced it has reached an agreement with Phycal Inc. for a supply of biofuel derived from algae for testing at Kahe Generating Station. The agreement calls for delivery of 100,000 to 150,000 gallons of algae biofuel by April 2014. The fuel must meet Hawaiian Electric specifications.

According to Hawaiian Electric, the biofuel will be provided at a fixed price. The Hawaii Public Utilities Commission must also review and approve the new contract in order for Hawaiian Electric to proceed.

 "This is another contract resulting from our call for local biofuels," said Robbie Alm, Hawaiian Electric executive vice president. "After decades of near-total dependence on foreign oil, we must take advantage of diverse local energy sources, including solar, wind, geothermal, waste-to-energy, hydro, ocean and biofuel.”


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