A Houston-based energy company estimates Hawaiian Electric Co. could save 30 percent or more on its fuel costs by burning the firm’s compressed wood pellets instead of fuel oil to generate electricity.
Zilkha Biomass Energy conducted a series of studies in 2012 and 2013 that demonstrated the feasibility of burning its "Black Pellets" in steam boilers at the Waiau and Kahe power plants, Zilkha CEO John Holmes said in a recent filing with the state Public Utilities Commission.
Zilkha officials signed a "letter of intent" with HECO, but a utility spokesman described the discussions as preliminary. As with other new fuel sources, extensive testing would be needed before HECO could sign a contract to buy the fuel pellets.
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BLACK PELLETS
» Made by pressing wood chips, wastepaper or other agricultural products into pellets, which burn better than raw wood because they are far drier
» Pellets shipped to Hawaii would initially come from a planned facility in British Columbia that will have access to more than 40 million acres of western Canadian forest damaged by the pine bark beetle.
» Already a staple in Europe’s energy sector, wood pellets are gaining popularity in the United States. About 1 million U.S. households use wood pellets for heating.
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Zilkha’s Black Pellets are a form of biomass, which is an attractive energy source for HECO because it counts toward the utility’s renewable-energy mandate. HECO has committed to using renewable sources to generate 40 percent of the electricity it sells by 2030. And unlike intermittent solar and wind power, biomass can be burned in conventional boilers to provide consistent power.
Hawaii is the most petroleum-dependent state in the nation. Oil accounts for about 90 percent of all energy needs and 75 percent of electricity production in the state.
Zilkha, which is owned by Selim and Michael Zilkha and Microsoft co-founder Paul Allen’s Vulcan Capital, manufactures the pellets from harvested trees at a plant in Texas with a production capacity of 40,000 metric tons a year, Homes said in the PUC filing. The company is building a plant in Alabama with a capacity of 275,000 metric tons a year, and it has plans for additional facilities in the southeastern U.S. and western Canada.
"The delivery of Black Pellets to the Kalaeloa Barbers Point Harbor could begin as quickly as 18 months after a HECO commitment to purchase," Holmes wrote in a six-page letter to the PUC. Once an agreement is secured, Zilkha would commit to a long-term supply contract with a predictable price, he said.
HECO officials said they were limited in what they could say about their work with Zilkha due to a nondisclosure agreement.
"We have met with representatives of Zilkha Biomass. No commitments have been made at this time. It is a promising technology but further study and evaluation are needed to determine whether this option provides a cost benefit to our customers," HECO spokesman Peter Rosegg said in an email.
Zilkha markets its Black Pellets on the mainland as a replacement for coal in power plants. The pellets burn cleaner than coal or oil, with lower emissions of carbon dioxide, nitrogen dioxide and sulfur dioxide, according to the company’s filing.
Holmes estimated Black Pellets would be 30 percent less expensive than the low-sulfur fuel oil burned at the Waiau Generating Station. The savings would increase to 36 percent at the Kahe Power Plant because of storage and logistics.
HECO could save roughly $40 million a year in fuel costs for each generating unit it converts to Black Pellets, Holmes said. There are eight generating units at HECO’s Waiau power plant and six at Kahe.
Holmes said the pellets could eventually be produced in Hawaii from locally grown plant material.
The cost of generating electricity with Zilkha’s Black Pellets would even be less than burning liquefied natural gas, another option being considered by HECO, Holmes said. Black Pellets would be an estimated 16 percent cheaper than LNG at Waiau and 20 percent at Kahe, Holmes said.
The Blue Planet Foundation, which opposes efforts to bring LNG to Hawaii for power generation, welcomed Zilkha’s plan.
"This is exciting to us because much of the conversation to date has been about how renewables are great, but we need LNG to lower prices long term. To some it is almost fait accompli that LNG is our logical future fuel," Blue Planet Foundation Executive Director Jeff Mikulina said in an email.
"But Zilkha’s — and similar companys’ — offerings can change the conversation. Here’s something (Black Pellets) that not only is renewable and helps HECO comply with RPS (renewable portfolio standards), the EPA regs, and the state (greenhouse emissions) law, but it could be cheaper and available sooner than LNG," Mikulina said.
