Plans for seawater air conditioning in Honolulu dropped

Costs have killed an ambitious plan to air-condition many commercial and government buildings in Honolulu using cold deep-sea water.

The company that had been pursuing the endeavor for 16 years announced recently that the project is dead because of increased construction cost estimates after spending $25 million, obtaining all major regulatory approvals and signing up numerous customers.

A Honolulu Seawater Air Conditioning LLC representative said a prior $275 million construction cost estimate had risen to $400 million.

“We had come so far,” Gregory Wong, the company’s director of customer service, said in a statement. “It’s disappointing that we have to stop now. Still, we appreciate the great collaboration and the relationships we’ve had the opportunity to develop over the years.”

Honolulu Seawater said its administrative functions will wind down by the end of January.

The project’s end comes despite Honolulu Seawater obtaining what it said was its last regulatory approval and enough customer commitments to move ahead with construction pending financing that included the ability to issue $145 million in tax-exempt revenue bonds authorized by the state.

The system was touted as something that would benefit the environment and reduce customer expenses with an economic payoff for the developer and investors.

Turning seawater into air conditioning works by pumping cold seawater to a land-based heat-exchange plant to chill a closed system of fresh water sent to individual building air conditioning systems via distribution lines laid beneath streets. Leftover warmed seawater in the heat exchanger is returned to the ocean where the water is about the same temperature.

Honolulu Seawater planned to build a 4.7-mile pipeline tapping 44-degree seawater from 1,755 feet below the ocean surface off Kewalo Harbor to serve around 40 buildings from Kakaako to downtown.

The company said its system could cut air conditioning costs for building owners by up to 75% and eliminate 77 million kilowatt-hours of electricity use annually — enough to power about 13,000 homes.

Other touted benefits included reducing potable water consumption by more than 260 million gallons and cutting carbon dioxide emissions by 84,000 tons a year, or the equivalent of removing 15,000 cars from Honolulu streets.

An affiliate of Minnesota- based Ever-Green Energy announced the project in 2004 and anticipated it could have the system running by mid-2007. But efforts to obtain regulatory approvals, customers and financing produced challenges that led to delays and a takeover of the company.

In 2008, Honolulu Sea­water said it had raised $10.75 million in private financing to advance work over the next several years that included producing an environmental impact statement, obtaining permits, receiving state approval to issue $145 million in tax-exempt revenue bonds and a 55-year lease with Kamehameha Schools for the heat-exchange plant site makai of the former Gold Bond Building.

The company also signed up customers that included the state Capitol, seven other state buildings, the federal courthouse, several city buildings, The Queen’s Medical Center, Hawaiian Electric Co., First Hawaiian Bank, Finance Factors, One Waterfront Towers and others.

The state Department of Land and Natural Resources expressed optimism for the project in a 2011 report that noted similar systems exist in Sweden, Hong Kong, Canada, the mainland and at the Natural Energy Laboratory of Hawaii Authority on Hawaii island.

“The engineering design and deep water pipeline installation has been proven to be feasible, reliable and economical,” the report said.

Financial challenges, however, persisted and construction never began.

In 2013, local investment firm Ulupono Initiative, founded by billionaire eBay founder and Hawaii resident Pierre Omidyar, agreed to invest $1 million that led Ulu­pono to become Honolulu Seawater’s majority owner in 2014 following an additional investment. Ever-Green and Stockholm-based Capital Cooling Group remained minority stakeholders.

Last year Honolulu Seawater said it expected construction could begin this year and be completed in 2022.

Murray Clay, Ulupono’s president and a Honolulu Seawater board member, said the decision to call off the project was not easy.

“Letting go of our dream is not easy,” he said in a statement. “Despite all of the environmental benefits and the project’s ability to help move our state toward greater energy self-sufficiency, it became clear it would not have been prudent to pursue this further.”