Castle & Cooke and HECO agree on a price for power to be sent to Oahu from a planned wind farm
POSTED: 1:30 a.m. HST, Jan 8, 2011
A planned large-scale wind farm on Lanai that would deliver electricity to Oahu via an undersea cable took a major step forward yesterday with Hawaiian Electric Co. reaching agreement with developer Castle & Cooke on a tentative price it will pay for power generated by the project.
The two sides also agreed on a "community benefits package" for Lanai residents, including a commitment to provide electricity to Lanai at the same rate paid on Oahu.
The agreement, which will require approval by the Public Utilities Commission, sets a price target of about 13 cents per kilowatt-hour for a project with 200 megawatts of production capacity, and 11 cents per kwh for a 400-megawatt wind farm. That price does not include costs to transmit the electricity to Oahu, which would add another 8 cents per kwh.
The combined price of 21 cents per kwh for electricity from a 200-megawatt facility, including the transmission costs, would be on par with the 21.8 cents per kwh HECO has agreed to pay other developers for solar electricity under the recently enacted feed-in-tariff program.
It is slightly higher than the 19.9 cents per kwh HECO will pay First Wind for power generated by the company's new 30-megawatt wind farm on Oahu's North Shore.
When Castle & Cooke CEO David Murdock first proposed the wind farm in 2007, he envisioned it as a 300- to 400-megawatt project.
However, after First Wind announced plans to pursue a similar project on Molokai, a consensus emerged with state officials, HECO and the two companies that each project should be around 200 megawatts.
The target price agreed to by HECO and Castle & Cooke is designed to set a reference point and could change as the project moves forward, HECO said. The two sides will eventually set a fixed price under a 20-year power purchase agreement to be negotiated later.
"These low prices will help protect Hawaii from the expected rise in the price of oil and reduce the risk to our economy and way of life from the possible disruptions in oil supplies," said Robbie Alm, HECO vice president.
The proposed wind farms on Lanai and Molokai are in the early planning stages, and no dates have been set for groundbreaking. Castle & Cooke, which owns 98 percent of Lanai, has identified roughly 13,000 acres at the far west end of the island where it would locate 56 wind turbines with a generating capacity of 3.6 megawatts each, according to a Castle & Cooke website devoted to the project.
The state of Hawaii began work last year on an environmental impact statement for the planned $1 billion cable that would carry the electricity from the neighbor islands to Oahu.
The community benefits package announced yesterday is designed to address the impact the project will have on Lanai residents, according to a joint press release from Castle & Cooke and HECO.
In addition to providing electricity to Lanai residents at a discount, the community benefits package includes:
» A commitment from Castle & Cooke to maintain employment at today's level.
» Establishing a Lanai Community Benefits fund with proceeds equaling 1 percent of the wind farm's gross revenues.
» Giving priority to qualified Lanai residents for construction jobs associated with the wind project.
» A donation of $50,000 a year from HECO's shareholders to the Lanai Community fund for the life of the power purchase agreement.
» Improvements to the island's electrical grid.