Pacific Biodiesel to supply HECO for another 3 years

Hawaiian Electric Co. has struck a deal to buy renewable fuel at a lower price from a local company to produce power on Oahu.

The utility announced Tuesday that it has negotiated terms for a three-year contract to buy biodiesel made by Pacific Biodiesel Technologies on Hawaii island that would be delivered by barge to run at least two Oahu electrical generation plants.

The new contract, which HECO hopes to implement next November, is subject to approval by the state Public Utilities Commission and would succeed a now 2-year-old supply agreement with Pacific Biodiesel that replaced an earlier agreement with an Iowa supplier.

Under the new deal, Pacific Biodiesel would annually provide HECO with 2 million to 4 million gallons of biodiesel made from recycled cooking oil and other sources, including sunflower seeds grown on Maui. That represents a potential increase of 1 million gallons over the existing contract for 2 million to 3 million gallons a year, though Pacific Biodiesel has already produced over 4 million gallons for HECO in a year.

“This new contract accomplishes our goal of using locally produced biofuel to the greatest extent possible,” Ron Cox, HECO’s senior vice president for operations, said in a statement.

The amount of fuel in both contracts represents a small portion of what HECO uses to run its Oahu power plants. Last year biodiesel represented 2 percent of HECO’s oil and diesel consumption. The alternative fuel also helps the company meet renewable-energy standards, and the new contracts are reducing costs for ratepayers.

HECO wouldn’t disclose its contract price for biodiesel because it said that keeps pricing competitive with other potential biodiesel suppliers.

The existing contract produced a 13 percent savings on what HECO previously paid for biodiesel from Iowa-based Renewable Energy Group Inc.

When HECO proposed its first deal with Pacific Biodiesel, the utility said the lower price for one year amounted to roughly $3 million saved. Spread among HECO customers, those savings would be 30 cents a month, or 0.2 percent less, for a typical residential customer using 600 kilowatt-hours of electricity.

Under the current biodiesel contract, the renewable fuel is used by an 8-megawatt emergency power plant at Daniel K. Inouye International Airport, a 110-megawatt generation station at Campbell Industrial Park and other power plants if needed.

Last year Pacific Biodiesel provided HECO with 4.8 million gallons of biodiesel, well over the contract’s upper range, by mutual agreement.

HECO said it will use biodiesel under the proposed new contract to help run a 50-megawatt generation station being built at the Schofield Barracks Army base, which is designed to feed Oahu’s electricity grid under normal operations but can be isolated to exclusively supply Army facilities in an emergency. The Schofield plant is expected to be finished in 2018 and would run on a mix of petroleum diesel and biodiesel.

The Campbell plant would switch to burning regular diesel fuel after the Schofield plant starts operating, the company said.

Pacific Biodiesel’s annual production capacity is 5.5 million gallons of biofuel, which can be used in diesel engines without modifications. The facility started operating in 2012.

Besides HECO, Pacific Biodiesel customers include vehicle fleets for the City and County of Honolulu, Maui Disposal Co. and DHX.