Green power is goal but at sensible cost

Hawaii energy consumers have the state Public Utilities Commission to thank for keeping an eye on electricity ratepayers’ bottom line and withholding approval of a biofuels contract.

It did so while signaling a continued support for renewable fuels, striking a balance between the state’s green-energy development agenda and the dollars-and-cents interests of the people who help pay the tab for such investments.

Last week the commission filed its decision rejecting, for the second time, a proposed biodiesel supply contract between the producer, Aina Koa Pono-Ka’u LLC, and two sibling utilities, Hawaiian Electric Co. and Hawaiian Electric Light Co. A similar deal got the thumbs-down from the PUC two years ago.

Both utilities were parties because the cost of producing the annual load of 16 million gallons of liquid biofuel would have been borne in part by ratepayers on Hawaii island, where HELCO is the power company, and Oahu.

The price to be paid by the utilities was withheld as proprietary information, but the surcharge that would be added to each customer’s monthly bill was estimated at 90 cents for Hawaii island accounts and $1.08 on a typical Oahu residential bill.

That may not sound like a huge tab, but over the course of the 20-year contract, that adds up to a substantial tab. The reason why the cost is so high is that AKP has infrastructure costs to pay off. But, as PUC commissioners rightly see it, the real benefit of that investment accrues to the private company, which would assume less of the risk of building its production plant and managing other aspects of the startup.

The price, though undisclosed, was described in the AKP application as needed to "ensure the economic returns necessary to attract project financing." In other words, the investors floating the money want the security of seeing their returns secured by the cash flow of monthly payments from utility customers. The PUC, by contrast, found that "rate-payers are not required to ensure the development of projects that do not provide them with quantifiable benefits."

The commission also determined that the proposed production method — a variation of microwave technology — was unproven on a commercial scale. That uncertainty was another good reason for withholding support.

None of this means there is something inherently unworthy about the project, which could bring employment benefits to a district of Hawaii County that really needs it. Also touted have been plans for the plant to purchase agricultural waste from other growers in the area.

AKP deserves credit for forging ahead with its plans nonetheless, pointing to its contract to sell biofuel to be used for transportation to a Georgia-based oil company. It may be that the price differential between petroleum jet fuel and the biodiesel equivalent is large enough to make such a deal pencil out more easily.

By comparison, there are more renewable options available for electricity generation that are cheaper, and they should go to the top of the list. Utility-scale solar generation, for example, has fallen in cost and offers an attractive prospect.

The commission underscored that biofuels remain a viable green-energy source for Hawaii, pointing to its decision in October to approve a biofuels supply contract between HECO and Hawaii BioEnergy LLC.

Among the key differences between the proposals: The PUC noted that Hawaii BioEnergy has a more sustainable business plan in place. HBE is further along in negotiating contracts to sell aviation and ground fuels, according to the ruling, signing an agreement with Alaska Airlines and a memorandum of understanding with Boeing Co. to develop aviation fuels in Hawaii. HBE’s proposed technology is also currently in use in commercial applications, the PUC contends.

In addition, the AKP plan was to displace cheaper fuels at the Keahole plant to a greater extent than HBE proposed to do at Kahe. This would narrow the opportunity for savings at Keahole as lower-cost fuel opportunities became available.

It’s still clear that broadening Hawaii’s green-energy portfolio is in the state’s best interest overall. But there are ways to do that without unduly compromising a competing goal: keeping energy costs to the consumer within reasonable boundaries.