Hawaiian Electric Co. has signed a contract with a subsidiary of Iowa-based Renewable Energy Group to supply biodiesel to its new 110-megawatt plant at Campbell Industrial Park.

Under terms of the contract, REG will supply 3 million to 7 million gallons of renewable biodiesel per year for two years.

REG, which won an earlier bid to supply biodiesel for emissions testing in the unit, emerged as the winning bidder from among eight companies seeking to fill the two-year contract.

As in the earlier contract, the new agreement calls for REG to supply high-quality biodiesel processed from used cooking oil (known as yellow grease) and waste animal fat.

The contract is still subject to approval by the state Public Utilities Commission, with input from the Consumer Advocate, before it can be included in Hawaiian Electric fuel costs.

Delivery of the biodiesel could begin within about four months of PUC approval.

Robbie Alm, HECO executive vice president, called the contract “;an important step forward”; in efforts to create a clean-energy economy for Hawaii.

“;We must pursue every renewable resource available — the sun, wind, our land and oceans — and take advantage of our unique ability to substitute 'green' fuels in place of 'black' oil-based fuels in our generating units,”; said Alm.

REG operates a national network of biodiesel production with the capacity to produce more than 300 million gallons of biodiesel per year.