A renewable energy company that plans to burn locally grown eucalyptus trees to generate 10 percent of the Big Island’s electricity needs signed an agreement Monday to sell the power to Hawaii Electric Light Co.

The project’s developer, Hu Honua Bioenergy LLC, is converting the former Pepeekeo sugar mill on the Hamakua coast to a 21.5-megawatt power plant that will feed electricity into the HELCO grid. The sugar mill, which closed in 1996, has a steam boiler, turbine and generator that previously generated electricity by burning sugar cane waste called bagasse. The boiler, turbine and generator will be used by Hu Honua while the structure, built in 1974, will be renovated.

The power plant will be able to burn eucalyptus or other locally grown woody plants to generate electricity, company officials said. Hu Honua’s 20-year power purchase agreement with HELCO is subject to approval by the state Public Utilities Commission. Neither Hu Honua nor HELCO would disclose the price of the electricity in the contract.

"Hu Honua’s facility will supply us firm, renewable energy at prices that are stable and not tied to the unpredictable world oil market and that is good for our customers," said Jay Ignacio, president of HELCO.

Once Hu Honua’s facility is connected to the grid, more than half of the electricity consumed on Hawaii island will be from renewable sources, Ignacio said.

Other alternative energy projects include a 38-megawatt geothermal plant in the Puna district, two wind projects totaling 31 megawatts of generating capacity, and several small hydroelectric projects with a combined capacity of nearly 15 megawatts.

Unlike solar and wind, which are intermittent sources of energy, the Hu Honua project will provide consistent power.

The energy it generates will displace an estimated 250,000 barrels of oil a year and keep more money in the local economy, said John Sylvia, the company’s chief executive officer. Hu Honua negotiating with several suppliers of eucalyptus and other "biomass" crops to fuel the power plant.

The company also is finalizing agreements with contractors to renovate the old sugar mill structure. Once the work starts, the new plant should be operational within 18 months, Sylvia said. The renovation project will generate an estimated 80 to 100 jobs, he said. About 30 people will be hired to run the plant.

Hu Honua in September received a permit from the state Department of Health’s Clean Air Branch to burn biomass at the plant.

Eucalyptus trees harvested from the slopes of Mauna Kea already are being used to generate electricity on Oahu.

AES Hawaii Inc., which operates the state’s only coal-fired power plant, last May began adding eucalyptus chips to its fuel mix to boost its generating capacity by 5 megawatts. Those trees come from the 13,000-acre Sunbear Plantation, one of several Big Island timber plantations that has sprung up in the past few decades to generate economic activity as sugar production in the area was phased out.

Once the trees are harvested, the eucalyptus stumps resprout and produce a new tree that reaches maturity in 10 to 12 years.