Friday, August 05, 2011
Solar or Black Gold?
By Henry Curtis
Update: The Public Utilities Commission rejected the HECO-Aina Koa Pono Contract because "the contract price for the AKP-produced biofuel is excessive, not cost-effective, and thus, is unreasonable and inconsistent with the public interest."
The Public Utilities Commission opened docket (2008-0273) on Feed-in Tariffs in late 2008.
At the request of the Commission, the National Regulatory Research Institute (NRRI) filed a report in December 2008: “Reasonable profits: To establish a reasonable return on investment, the regulator needs to understand a typical project's financing. [] To make effective decisions, the Commission will need the signatories to the Agreement, and developers, to provide detailed, verifiable responses to these questions.” (pages 7-8)
The Commission issued an Order on September 25, 2009: “FIT rates will be based on the project cost and reasonable profit of a typical project.” (page 2) “In determining FIT rates, most parties appear to argue that the rates should be based on project cost plus a reasonable profit." (page 60)
On April 8, 2011, the Consumer Advocate asked HECO various questions about their application. None were focused on the biochar (charcoal) produced.
What then is the appropriate ratepayer subsidy for generating synthetic biodiesel for HELCO’s Keahole Generation Station?
Should HECO ratepayers subsidize the price of diesel so AKP can make a killing on biochar, their proposed Value Added By-Product?
On Feb. 3, 2011 the Public Utilities Commission issued an Order in the AKP Docket: “[t]he commission notes that the legislature has clearly endorsed the use of cost-effective biofuels as a renewable energy resource for the generation of electricity.” (p.11)
Hawai`i Revised Statutes (HRS) §269-91 states that "’Cost-effective’ means the ability to produce or purchase electric energy or firm capacity, or both, from renewable energy resources at or below avoided costs or as the commission otherwise determines to be just and reasonable”
The only section of state law that deals with what is reasonable for biofuels is the State Procurement Code (HRS §103D)
HRS §103D-1012(b) “When purchasing fuel for use in diesel engines, the preference shall be five cents per gallon of one hundred per cent biodiesel. For blends containing both biodiesel and petroleum-based diesel, the preference shall be applied only to the biodiesel portion of the blend.”
HRS §103D-1012(b) applies to “competitive sealed bidding.”
The AKP contract is the result of a competitive sealed bid for 100% biodiesel to be burned at a diesel engine, the Keahole Generation Station.
Therefore if the legislative mandate known as the state procurement code applies in this case, the preferential limit is 5 cents/gallon. The HECO proposal is a subsidy exceeding $1.50/gallon.
If the Commission adopts this much higher preference, then the Commission may need to show why the higher rate is just and reasonable.
Technical Note: Biochar and charcoal are the same thing but used differently.
# # #
henry Curtis
Update: The Public Utilities Commission rejected the HECO-Aina Koa Pono Contract because "the contract price for the AKP-produced biofuel is excessive, not cost-effective, and thus, is unreasonable and inconsistent with the public interest."
The Public Utilities Commission opened docket (2008-0273) on Feed-in Tariffs in late 2008.
At the request of the Commission, the National Regulatory Research Institute (NRRI) filed a report in December 2008: “Reasonable profits: To establish a reasonable return on investment, the regulator needs to understand a typical project's financing. [] To make effective decisions, the Commission will need the signatories to the Agreement, and developers, to provide detailed, verifiable responses to these questions.” (pages 7-8)
The Commission issued an Order on September 25, 2009: “FIT rates will be based on the project cost and reasonable profit of a typical project.” (page 2) “In determining FIT rates, most parties appear to argue that the rates should be based on project cost plus a reasonable profit." (page 60)
Fast Forward to the HECO-AKP Biofuel Supply Contract.
HECO’s Application (PUC Docket 2011-0005) stated: “It is our understanding that the basis of the plant design calls for: a) Production of synthetic diesel as primary output b) Production and use of biochar either for firing in boiler to produce steam and electricity or for use as fertilizer” (Exhibit H, page 6)
Christopher Eldridge, Principal, Aina Koa Pono LLC (August 2, 2011) testified that: “Assuming that we have 1000 pounds of biomass feedstock, our plant will produce 300 to 400 pounds of synthetic diesel, 100 to 150 pounds of non condensable fuel, and 400 pounds of biochar. We use about 100 pounds of material to fuel the plant.”
Ken Kaneshiro, Director of the Center for Conservation Research & Training, Pacific Biosciences Research Center at the University of Hawaii at Manoa testified as an individual on August 4, 2011: “The implications and added value of the technology being proposed by AKP goes way beyond that of production of biofuels for renewable energy. My discussions with the principals of AKP tell me that about 140,000 tons of biochar will be produced annually at full production. At this scale, the distribution of biochar throughout agricultural fields in the state as well as in watershed ecosystems will have significant impact on agricultural productivity and the quality of our water supply.”
Adam Asquith testified on August 2, 2011: “The AKP proposal could be one of the first large-scale efforts of carbon sequestration through biochar and would make Hawaii a global leader in carbon management.”
The Hawaii Natural Energy Institute (HNEI) at UH Manoa calls charcoal Hawaii's "Black Gold"
HNEI estimated in January 2007 that charcoal was worth $246/Ton. “In fact, charcoal is the only renewable fuel that is now cost competitive with fossil fuels. Remarkably, at its current price the production of charcoal is very profitable. This fact is well-known to charcoal producers, but not to the general public.”
On April 8, 2011, the Consumer Advocate asked HECO various questions about their application. None were focused on the biochar (charcoal) produced.
What then is the appropriate ratepayer subsidy for generating synthetic biodiesel for HELCO’s Keahole Generation Station?
Should HECO ratepayers subsidize the price of diesel so AKP can make a killing on biochar, their proposed Value Added By-Product?
On Feb. 3, 2011 the Public Utilities Commission issued an Order in the AKP Docket: “[t]he commission notes that the legislature has clearly endorsed the use of cost-effective biofuels as a renewable energy resource for the generation of electricity.” (p.11)
Hawai`i Revised Statutes (HRS) §269-91 states that "’Cost-effective’ means the ability to produce or purchase electric energy or firm capacity, or both, from renewable energy resources at or below avoided costs or as the commission otherwise determines to be just and reasonable”
The only section of state law that deals with what is reasonable for biofuels is the State Procurement Code (HRS §103D)
HRS §103D-1012(b) “When purchasing fuel for use in diesel engines, the preference shall be five cents per gallon of one hundred per cent biodiesel. For blends containing both biodiesel and petroleum-based diesel, the preference shall be applied only to the biodiesel portion of the blend.”
HRS §103D-1012(b) applies to “competitive sealed bidding.”
The AKP contract is the result of a competitive sealed bid for 100% biodiesel to be burned at a diesel engine, the Keahole Generation Station.
Therefore if the legislative mandate known as the state procurement code applies in this case, the preferential limit is 5 cents/gallon. The HECO proposal is a subsidy exceeding $1.50/gallon.
If the Commission adopts this much higher preference, then the Commission may need to show why the higher rate is just and reasonable.
Technical Note: Biochar and charcoal are the same thing but used differently.
pyrolysis (heating) of biomass --> fuel (charcoal)
pyrolysis (heating) of biomass --> sequestration, fertilizer (biochar)
# # #
henry Curtis
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