There\u2019s been a slight change of plans at the state\u2019s natural energy lab at Keahole, just south of the Kona airport on the sunny leeward coast of the Big Island.<\/p>\n
\tFor nearly two years, Ron Baird, administrator of the Natural Energy Laboratory of Hawai`i Authority (NELHA), had been working with a Honolulu company to lay the groundwork for an operating ocean-thermal energy conversion plant at the site, where some of the most important research on OTEC took place over a 20-year period that ended in the early 1990s.<\/p>\n
\tBaird had teamed up with OCEES of Honolulu, which proposed to build a plant that would generate 640 kilowatts of electricity, after its own operational needs were met. OCEES would then sell the power to NELHA and its tenants, which include commercial aquaculture farms and bottlers of desalinated ocean water.<\/p>\n
\tBut by late May, the relationship had dissolved. \u201cThere have been some developments on the OTEC front,\u201d Baird told the NELHA board at its May 29 meeting. \u201cAt the present time, there will be no further proceeding with what we tried to do for the benefit of the people of Hawai`i in terms of OTEC \u2013 this proposal that we worked on for a year and a half.\u201d<\/p>\n
\tInstead, he said, NELHA would put out a request for proposals that qualified companies, including OCEES or the East-Coast-based Sea Solar Power, which had recently shown interest, could respond to.<\/p>\n
\tYet at the NELHA board\u2019s next meeting, in July, a consortium involving a local company, Makai Ocean Engineering of Honolulu, and a major defense contractor, Lockheed Martin, asked the board to defer installation of any OTEC power generation facility and instead reserve the use of the valuable on-site infrastructure for the sort of research that is essential if OTEC is to scale up to where the technology is capable of generating the quantity of power \u2013 25 to 100 or more megawatts \u2013 that commercial utilities typically require.<\/p>\n
\tJoe Van Ryzin, a vice president of Makai, noted that the facilities at NELHA \u2013 chiefly, a 55-inch pipe that brings up deep ocean water \u2013 \u201care a little limited. That\u2019s a relatively small pipe for OTEC.\u201d<\/p>\n
\tStill, he said, \u201cit\u2019s extremely valuable, because it\u2019s the only one around.\u201d<\/p>\n
\t\u201cBe aware of the oncoming OTEC research-and-development need,\u201d he told the board. \u201cLet researchers set the R&D goals and agenda, and be confident that OTEC benefits to the state will come.<\/p>\n
\t\u201cRealize that you possess a unique, incredibly valuable facility. You\u2019ve got the only show in town, and you should position yourself to take advantage of that,\u201d he said.<\/p>\n
\tAccording to Van Ryzin and Robert Varley of Lockheed, research could be far more lucrative than any power-generating facility to NELHA, which now has been weaned almost entirely of state support through the general fund budget.<\/p>\n
\tLater this year, Varley said, \u201cwe\u2019ll want to talk about what it\u2019ll cost us to do testing at these sites.\u201d Driving the process, he said, was the intention of HECO, the O`ahu electric utility, to issue a request-for-proposals in 2009 for a 100 megawatt renewable energy plant, which Varley said could cost on the order of $600 million.<\/p>\n
\t \u201cThe market in Hawai`i is sufficient to interest my masters at Lockheed Martin,\u201d Varley said, and \u201cwith Hawai`i leading the way, there are other markets around the country for OTEC, and clearly there are international markets.\u201d<\/p>\n
\t\u201cFor me to build a plant in 2009, I must do a lot of homework between and now and then, to write a proposal and get management sign-off. Between now and 2009, we believe we have to do large-scale testing. And if we\u2019re going to do testing \u2026 to the point we can credibly extend our designs to a full-scale plant, we\u2019re identifying NELHA facilities as the site to do that. No other sites around the country are capable of doing that.\u201d<\/p>\n
\tFor NELHA, it\u2019s an either-or choice. Van Ryzin said that while no specific research proposal is on the table at the moment, \u201cwe were trying to encourage them to be open and flexible in terms of how they have their facilities available.\u201d A producing OTEC plant, he said, would mean the end of any hope of using the facilities for research.<\/p>\n
Other Players<\/i><\/b><\/p>\n
Regardless of what occurs with respect to OTEC, other companies are looking to develop energy-generating plants on NELHA land.<\/p>\n
\tOne such firm, SOPOGY, recently was the beneficiary of legislative action allowing issuance of up to $10 million in special purpose revenue bonds to finance its proposed solar thermal concentrating system, which it hopes to build on 10 acres of land controlled by NELHA.<\/p>\n
\tJohn Rei, SOPOGY\u2019s chief operating officer, gave the NELHA board an update on the company\u2019s plans. Unlike the OTEC proposal that had been under consideration, SOPOGY would sell its power to the Big Island utility, HELCO, under an independent power-purchase agreement, Rei said.<\/p>\n
\tBut until it has a firm commitment to use the land, he added, HELCO has said it cannot move forward with the power-purchase agreement. Without the power-purchase agreement, it can\u2019t obtain financing.<\/p>\n
\tCompany founder and president Darren Kimura told the board that he was taking a technology that had been proven elsewhere, and adapting it to Hawai`i conditions. The technology had been in use in California for more than 30 years, he said. When a small-scale facility using the same technology was tested at a Kohala resort five years ago, it failed because of problems with exposure to salt air and other issues.<\/p>\n
\t\u201cSince then,\u201d he said, \u201cwe\u2019ve been trying to make the technology work in Hawai`i.\u201d With measures now in place to protect against salt spray and other improvements, he said, he\u2019s confident the technology will now be effective in generating steam that, in turn, will produce electricity.<\/p>\n
\t\u201cOur goal,\u201d he said, \u201cis to use the technology we demonstrate in Hawai`i to take our company to the national market.\u201d<\/p>\n
\tDeputy attorney general Bryan Yee asked if the company was seeking a variation from the standard lease terms.<\/p>\n
\t\u201cI don\u2019t think so,\u201d Rei replied.<\/p>\n
\tBaird quickly corrected him. \u201cWe have been in negotiations and looking at a different lease for energy projects. Ten acres, at $1,200 a month.\u201d The customary lease rent is $3,000 per acre per month for most other NELHA projects.<\/p>\n
\tBut there was more, Baird said. \u201cWe have an equity kicker in place.\u201d<\/p>\n
\tIn other words, Baird was once more seeking an equity, or ownership, share in the developing technology, even though a similar effort to get a stake in the proposed OTEC plant fell through. (For details, see the OTEC article in this issue. \u2013 Editor\u2019s note<\/i>)<\/p>\n
\t\u201cIt\u2019s kind of unusual,\u201d Kimura told Environment Hawai`i<\/i>. \u201cThere\u2019s a problem with energy projects. They\u2019re not like bottled water, which you can sell for a premium. Utilities will only buy power in a certain range.\u201d For that reason, the $3,000 per acre per month standard rental rate for other NELHA tenants won\u2019t work for energy producers, he said.<\/p>\n
\tIn return for the discounted rent, he continued, \u201cNELHA had proposed a warrant in the company \u2013 an exercisable option to purchase stock at a future point in time at a given price,\u201d known as a strike price, which generally is about 10 percent of the appraised value of the stock.<\/p>\n
\tFor Kimura, the warrant solves one problem. \u201cWe\u2019re not public yet,\u201d he said. \u201cIf we tried to give them stock now, that wouldn\u2019t work.\u201d And because warrants typically are sold as soon as they are exercised, this approach would not give NELHA any long-term equity in the company. \u201cIt\u2019s basically a financial transaction,\u201d Kimura said.<\/p>\n
\tWith the NELHA board having authorized a lease to SOPOGY at the July meeting, he said, \u201cwe can take it to HELCO and finish our power purchase agreement, then begin construction.\u201d<\/p>\n
\tYet another energy proposal was floated last December by Hannon Armstrong, a company with a long history of financing power generating projects. It proposed to install a 5 megawatt, $40 million photovoltaic solar field on 93 acres of partly cleared land near the Keahole airport.<\/p>\n
\tNELHA board member Maurice Kaya, chief technology officer for the Department of Business, Economic Development, and Tourism, was enthusiastic, describing Hannon Armstrong\u2019s proposal as \u201ca very exciting prospect.\u201d<\/p>\n
\t\u201cBoth SOPOGY and OCEES, they\u2019re dabbling in technologies that are not fully developed. This project, it\u2019s commercial, you know what the cost is. You can get going from Day One.\u201d<\/p>\n
\tMaybe it\u2019s just too good to be true \u2013 for NELHA, at least. Since making its appearance last year, the Hannon Armstrong proposal has not surfaced at any subsequent board meeting.<\/p>\n
\tEfforts to reach a company spokesman by press time were unsuccessful.<\/p>\n
— Patricia Tummons<\/p>\n
Volume 18, Number 2 August 2007<\/p>\n","protected":false},"excerpt":{"rendered":"
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