Hawaiian Islands eye ethanol

State ethanol production incentives in place, technology providers interested, economic impact assessment looks promising
By Tom Bryan | November 01, 2002
If Hawaiians speak of energy independence with more urgency than mainlanders, it is because they have been, for too long, economically crippled by a near-total reliance on foreign sources of energy.

The beautiful, yet isolated, geographical characteristics of the Hawaiian Islands are as punishing to the state's energy supply and security as they are rewarding to tourism. Over 95 percent of the energy consumed in the state comes from imported fossil fuels - mostly petroleum - and the percentage of energy derived from petroleum resources in Hawaii is higher than any other state in the nation.

Fortunately, this energy quandary is not beyond repair. The state has passed legislation to provide ethanol production tax credits (see production incentives on pg. 38), intended to encourage sugar producers on the islands to produce ethanol. The program offers producers incentives to use molasses and other wastes as feedstocks for production. The credit is available to companies producing the first 40 mmgy of capacity in the state by 2012.

Hawaii legislature capped the production incentive at 40 mmgy because the state's present annual consumption of gasoline is on the order of 400 mmgy (at 10 percent ethanol blend by volume = 40 mmgy).

Design-build firms interested
At least two U.S. ethanol plant design-build firms (and/or process-technology providers) are making efforts to gain a foothold in Hawaii by forming partnerships with sugar producers on the islands.

Williamsburg, Va.-based Delta-T Corp., and Cincinnati-based Katzen International have both entered into talks with major cane sugar producers, such as Hawaiian Commerce & Sugar Company (HC&S), a Maui-based subsidiary of Alexander & Baldwin, as well as Kauai-based Gay & Robinson. EPM was unable to reach either sugar producer for comment.

Delta-T has a dual marketing agreement with Praj Industries of India. Praj would likely be working with Delta-T on any future projects in Hawaii, should one come to fruition, according to Larry Johnson, Delta-T business development manager.

"Praj holds expertise in the fermentation of molasses (and other feedstocks)," Johnson said. "Whereas Delta-T holds expertise in distillation, purification technologies and so forth."

Katzen International President & CEO Phil Madson declined to be interviewed by EPM but did release a statement for this article that spelled out the company's interests and ambitions in Hawaii.

"Hawaii is a very straightforward situation that is completely different from any other part of the USA." Madson told EPM. "It cannot be understood by applying midwestern ag thinking nor Brazil/Asia sugar-industry thinking. Further, it cannot be understood by applying "49-state" political and socio-economic thought. A small team of us understand that unique set of circumstances very well."

Due to confidentiality agreements, Madson could not talk about specific ethanol projects in Hawaii, but said Katzen International has been consulting with "the real key entities" in Hawaii for several years. Whether or not those entities are the state's two largest sugar producers was not stated.

The straight-talking Johnson made a point of telling EPM that any ethanol produced from sugar processing plant streams in Hawaii would be utilizing waste molasses - not refined sugar - as the primary production feedstock. Molasses is the residue left from sugarcane processing.

"They would not be making ethanol from refined sugar," he said. "They are talking about using low-quality molasses that sells for $48 a ton on the West Coast."

Johnson said there has been an increased level of interest in ethanol production on the islands, in part, because of the state's incentive program and high gasoline prices. However, he explained, the stars may not be perfectly aligned for ethanol production in Hawaii just yet.
"There are still several factors that could be interpreted as somewhat risky. The state does not have a defined air quality program - because its not needed - and the gasoline requirement is still (lenient)."

Johnson and other ethanol experts are saying the ethanol market in Hawaii presents a "catch-22."

"Future producers are waiting for an ethanol mandate and legislators are waiting for a guaranteed supply," Johnson said. "The state doesn't want to mandate ethanol use until production begins, and no one wants to begin producing on a large-scale basis until they have a guaranteed local market."

Johnson, who said he toured at least two sugarcane plantations while on the islands last month, also hosted ethanol seminars for mechanics on the islands of Maui, Kauai and Oahu. Jim Collet, a certified auto mechanic from the West Coast, hosted a similar seminar on the Big Island.

Both Johnson and Collett were in Honolulu Nov. 14 for the "Hawaii Ethanol Workshop," part of the U.S. Department of Energy's (DOE) Ethanol Workshop Series facilitated by BBI International. The event was sponsored by DOE, Pacific Regional Biomass Energy Program, City and County of Honolulu, Hawaii Department of Agriculture, Hawaii Department of Business, Economic Development & Tourism, Hawaii Department of Health, Hawaii Natural Energy Institute, JN Automotive Group, and Honolulu Clean Cities.

Over 120 people attended the Hawaii Ethanol Workshop on November 14, 2002. "Thanks to the hard work of the workshop planners, sponsors, and presenters, interest in ethanol in and for Hawaii is at an all time high," said Maria Tome from Hawaii's department of business, economic development and tourism.

The workshop was a morale-boosting highpoint for supporters of the undeveloped Hawaiian ethanol industry, which has struggled to take flight for more than 20 years (see timeline of ethanol developments in Hawaii sidebar).

Sugar production down

Warren Hall, of Baltimore-based EA Engineering Science & Technology, holds an office in Honolulu and presented a chronological timeline of ethanol developments in Hawaii at the DOE workshop. Hall told EPM that one of the most challenging aspects of ethanol production in Hawaii would be feedstock availability.

"The sugar industry has downsized its production capacity enormously over the last 10 to 15 years," Hall said. "Compared to the mid 1980s, sugar production in the state is 15 percent of what it once was."

Hall said there have been several plans to build ethanol production plants in Hawaii, but none have been successful on a large scale. Feasibility studies too, have been produced in each of the last three decades.

Economic impact study
BBI International's Denver-based biofuels consulting division is conducting an economic impact assessment for the state of Hawaii. Mark Yancey, director of the BBI's consulting division, presented the preliminary findings of the assessment at the DOE workshop in Nov. 14.

"These results are preliminary," Yancey explained to the workshop participants, adding that refinery side impacts had not been incorporated into the company's findings at the time of the meeting.

Nevertheless, Yancey said that BBI has concluded that ethanol production in Hawaii would have a "significant positive economic impact" on the state. According to Yancey, BBI determined that the total construction cost of building three facilities on the islands (in Oahu, Maui and Kauai) would run as high as $104 million, resulting in a total economic impact of $253 million and creating over 2,500 jobs. Once production reached 45 mmgy, Yancey said, the facilities would have a combined annual operating costs of $57 million and create $112 million in total annual economic activity, as well as 686 new jobs.

Yancey noted, sugar and starch feedstocks are in short supply on the islands due to declining sugarcane acreage, as noted by Hall. Hypothetically, the study found, that the islands could support up to 148 mmgy if all sugar-based crops, food wastes, organics in MSW and lignocellulosics were utilized.

"Realistically, there are only two crops grown in Hawaii at the scale required for ethanol production - sugar cane (molasses) and pineapples, and pineapples are too expensive," Yancey said.

In addition, sugar producers on the islands are reportedly uninterested in utilizing anything but low-grade molasses for ethanol production.

"Lignocellulosic feedstocks are plentiful, but the corresponding ethanol technology is not yet commercial," Yancey said. "All the primary Hawaiian Islands have sufficient acreage to support ethanol production from dedicated crops like sugar cane or energy cane, but this would require rejuvenating historical acreage that has been retired from production."