Hawaiian Electric to Terminate Contract With Biomass Facility

– by Duane Shimogawa, February 17, 2016, Pacific Business News

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Photo: Hu Honua Bioenergy

Hawaiian Electric Co. plans to terminate its power purchase agreement with Hu Honua Bioenergy on March 1 after the developer of the large Big Island biomass plant missed several deadlines that were part of the contract between the two companies, according to public documents.

In an update of the Hu Honua Bioenergy project to the Hawaii Public Utilities Commission, Hawaiian Electric said that the project has been significantly delayed, and has missed deadlines, such as beginning commercial operations by Jan. 22.

“[Hu Honua has] failed to provide adequate assurances that [it] can perform or has the financial means to perform in the future or otherwise be relied upon as a provider of renewable firm generation on [the Big Island],” HECO said in its update to the PUC. “Absent compelling changes in circumstances, [we] intend to terminate the [power purchase agreement] effective March 1.”

Hu Honua was in the process of refurbishing the power plant originally built in 1972 for the Hilo Coast Processing Co. sugar mill in Pepeekeo, which would have generated 100 construction jobs and 30 permanent positions.

Additionally, more than 130 indirect jobs in forestry, harvesting, hauling, and local service shops were expected to be generated in the local economy.

After a series of extensions to a termination date, Hawaiian Electric said that canceling the power purchase agreement is in the best interests of its customers.

In 2013, the PUC approved Hu Honua’s contract with HECO subsidiary Hawaii Electric Light Co. to provide renewable energy from its 21.5-megawatt biomass plant, which is expected to generate 10 percent of the island’s energy needs.

Hu Honua chose a California firm to replace Honolulu-based Hawaiian Dredging Construction Co., the original general contractor, after the Honolulu firm pulled the last of its workers from the job site because it hadn’t been paid by the renewable energy developer.

Hawaiian Dredging previously told PBN that it was owed at least $24.5 million from Hu Honua for work it has done at the Big Island plant.

Last year, Hu Honua’s plant was named as the top clean energy project in Hawaii.

Hu Honua has invested roughly $100 million towards completing the facility, which is approximately 50 percent complete.

John Sylvia, CEO of Hu Honua, told PBN Wednesday that it is currently engaged in a process with the PUC and Hawaiian Electric subsidiary, Hawaii Electric Light Co., to clarify changes in circumstance.

“Pursuant to the PUC’s order, Hu Honua plans to submit its response by Feb. 23,” he wrote in an email to PBN.

Darren Pai, spokesman for Hawaiian Electric, said that, as part of its efforts to further diversify the renewable energy mix on the Big Island, it supported the Hu Honua project, negotiating a 20-year contract approved by the PUC in Dec. 2013.

The project was originally expected to start serving customers last month. “However, the project has had many delays and has no ability to begin operations in the near future,” he told PBN in an email. “Last July, it failed to meet a critical
construction milestone — to pass a ‘boiler hydro test’ — that was ‘guaranteed’ in their contract.”

Pai noted that it has tried to work with the developer and although it had the right to terminate the contract in November, the utility provided them time to offer revised contract terms, such as lower pricing that would benefit its customers, although the developer has not done so.

“It’s important to note that the contracted price per kilowatt-hour at a levelized payment of 25.3 cents, which was reasonable back in 2012 when the contract was negotiated, is high compared to the range of other more recent generation contracts, which have pricing as low as 11 cents per kilowatt-hour,” he said. “They’ve also not provided adequate assurances that they have the ability to complete the project. We gave them until March 1 to respond to the concerns expressed in the updated we provided to the PUC.”

Hawaiian Electric last week terminated its power purchase agreements for three of SunEdison Inc,’s major Oahu solar farms after the Missouri company failed to meet several financing deadlines.

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