Ethanol plant anchors Hawaiian energy farm

By Susanne Retka Schill | August 27, 2007
Two companies that have been collaborating on a Hawaiian ethanol project the past year have created Gay & Robinson Ag-Energy LLC to build a 12 MMgy ethanol plant on the Gay & Robinson Inc. sugarcane plantation on the western side of Kauai, Hawaii. "We had separate identities before," said William Maloney, president of project partner Pacific West Energy LLC. "Now we're going to be completely integrated."

Concurrent with the partnership transaction, Pacific West completed an equity funding round led by Officers Row Capital LLC, a venture capital firm based in Vancouver, Wash., specializing in energy and telecommunication. Pacific West will be moving its headquarters to Vancouver, Maloney said.

The first stage of the $80 million project is the ethanol plant designed by Praj Industries Ltd., which is expected to break ground at the end of the year. The air permit is in place, and work has begun on the county planning process. While the plant will begin operations using the existing sugar plant boiler and generating capacity, the project financing includes funds to build a new biomass boiler and 25-megawatt generator using bagasse and glycerin as feedstocks. Ag-Energy will purchase glycerin from the state's biodiesel producers and, in the future, utilize glycerin from a biodiesel plant proposed for the Ag-Energy campus.

"We are converting our sugar farm into an energy farm," said Gay & Robinson President Alan Kennett. Gay & Robinson is one of two sugar plantations left in the state, he explained, down from 17 in 1977 when he moved to Hawaii. He sees the transformation to an energy farm as vital to the company's survival. "The price we're getting for sugar today is the same as it was in 1985," Kennett said. The 7,500-acre plantation produces about 50,000 tons of raw sugar annually.

Other alternative energy systems that Ag-Energy developers are exploring include biomass gasification, biomass-to-liquid, methane recovery, processing of municipal solid waste, hydropower and solar energy. "We're hoping what we do here in the layering of different energy systems can be replicated in other areas of the world or elsewhere in Hawaii," Maloney said.

Hawaii has attractive incentives, Kennett added. Ethanol producers in the state will receive a state tax credit worth 30 cents per gallon with a maximum credit on 15 million gallons. An E10 mandate became effective in April 2006, although with no ethanol production in Hawaii, the mandate has been filled with imported ethanol. In June, Hawaii Gov. Linda Lingle signed legislation to restore a general excise tax exemption. The governor's office estimated Hawaiians paid an additional 11 cents per gallon between Dec. 31, when it expired, and June 30, when it was restored. The restored exemption, which took effect in July and sunsets June 30, 2009, also requires gasoline wholesalers and retailers to pass any savings realized from the exemption on to the consumer. The Department of Transportation estimates the savings to consumers will total $32 million over the two years.