HECO plans biofuel plant to open in '09

The $142M project is the first major energy project in 17 years

» Hawaiian Electric Industries Inc., HECO's parent company, missed second-quarter earnings estimates by 10 cents a share as net income dropped 36 percent

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The state's predominant utility has won approval to build Hawaii's first commercial biofuel plant.

It is the first substantial new power generator that Hawaiian Electric Co. has added in 17 years.

HECO will build the $142.3 million facility at Campbell Industrial Park on Oahu beginning early next year, and expects to begin commercial operation in mid-2009. It will run exclusively on fuels made from ethanol or biodiesel.

The plant is the culmination of a five-year environmental, permitting and engineering process that has seen HECO transition from using a mix of more traditional fuels to a plan that includes only biodiesel or ethanol.

HECO's parent company announced the state Public Utilities Commission's May approval of the unit yesterday in its quarterly financial filing with the Securities and Exchange Commission.

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Hawaiian Electric Co. has won approval to build the state's first commercial biofuel plant.

The Oahu plant is the culmination of a five-year environmental, permitting and engineering process that has seen HECO change from using a mix of more traditional fuels to a plan that includes only biodiesel or ethanol. It will be the first substantial new power generator HECO has added in 17 years.

Construction on the Campbell Industrial Park plant -- part of HECO's goal of moving toward renewable energy -- will begin in early 2008. The $142.3 million facility will run exclusively on renewable fuels made from ethanol or biodiesel. Hawaiian Electric Industries Inc., the parent of HECO, announced the state Public Utilities Commission's May approval of the unit in its quarterly financial filing with the Securities and Exchange Commission yesterday.

The plant will begin commercial operation in mid-2009, HECO spokesman Peter Rosegg said in an interview. It will use between 5 million and 12 million gallons of fuel each year, with a capacity of up to 20 million gallons.

"We cannot continue to burn fossil fuels indefinitely, so that's the general motivation," Rosegg said. "We have a renewable portfolio standard that by 2020 we need to be getting 20 percent of our electric sales from renewables."

Costs for the project would not be passed to customers until the unit is completed and in service. HECO will then decide if it will propose a rate increase, Rosegg said.

Catherine Awakuni, executive director of the state Division of Consumer Advocacy, said the projected consumer impacts, including rates and reliability, are reasonable.

"The increased reserve capacity margin will ensure that Hawaiian Electric will have sufficient generating capability to serve all customers during the hours of Hawaiian Electric's system peak," she said.

The 110-megawatt plant, which will have two buildings, two fuel tanks, three water tanks and one 210-foot-high exhaust stack, will be part of HECO's 1,700-megawatt power generation system. It is designed to run several hours each day to help deal with peak usage, which occurs between 5 and 9 p.m. as people return from work. Since Hawaii cannot import its power, Rosegg said HECO tries to keep a reserve margin of 30 percent above peak capacity. Sometimes it operates with less than 20 percent.

"We don't have enough comfortable margin to deal with that peak," Rosegg said. "If something goes wrong, then we would be forced to turn people off."

HECO put out a request for proposals from biofuel suppliers at the end of last year, and the company will announce one supplier in a month, Rosegg said. The PUC must then approve the decision. HECO ordered a fuel-flexible generator from Siemens in December 2005.

"Our hope is there will be biofuels here in Hawaii that we can use at this plant and at other plants in Hawaii," Rosegg said. "At the beginning we will have to import biofuel for this new plant, but we hope that in the near future we will be able to use biofuels that have been grown and processed here in Hawaii."

Another biofuel project, the BlueEarth Maui Biodiesel LLC refinery on Maui, is set to open in 2009. In a partnership with HECO, it would generate 40 million gallons of biodiesel from imported vegetable oils in its first year for Maui Electric Co. Rosegg said he hopes Maui will be powered completely on renewable energy within six to eight years.