Kaua'i Project
Overview
Pacific West Energy LLC is currently developing the first biomass-based, integrated green-energy plantation in the world. The biomass-to-electricity and ethanol phases of the project are modeled on similar successful operations in Brazil and Central and South America. The additional components of the energy plantation will make it a one-of-a-kind leader in the area of renewable energy.
The Company will convert existing and former sugar cane lands and woody biomass lands on the island of Kaua'i into an energy plantation by first constructing a 20 megawatt (MW) capacity biomass power plant (Phase 1). In subsequent phases, the Company will integrate biofuel production (Phase 2), and later other compatible renewable energy sources or projects, including solar, hydro, cellulose-to-energy or -to-fuel, algae-to-energy or -to-fuel, and waste-to-energy projects. Hawaiian electricity and ethanol prices are consistently among the highest in the United States.
The initial processing and power facility will be located at the former Kekaha sugar mill, a 23‑acre industrial zoned site in West Kaua'i, with agricultural operations also centered in West Kaua'i.
Unlike mainland biomass power producers, or corn- or soy-based biofuel producers, the Company will control a large percentage of its own feedstock for its power plant. Fuel for the power plant will be grown on Kaua'i on lands controlled or contracted by the Company. Supplemental feedstock will be provided from standing biomass from the Big Island (Hawai'i) on a contractual basis. Lands that are conducive for woody biomass that are not conducive to higher valued crops like energy cane (high fiber yielding sugar cane) or sweet sorghum, will be used for dedicated biomass production. More productive lands suitable for cane or sweet sorghum cultivation may be developed in these crops, with the fiber being used for fuel for the power facilities and the sugar juice being sold or used to support the production of biofuels. Two primary biomass crops are expected to be utilized, Eucalyptus, from wetter areas, and Leucaena, from drier areas. Banagrass, a high fiber yielding grass crop that has been extensively studied, with test plots grown on Kaua'i, is also a possible crop. Both Eucalyptus and Leucaena are fast growing trees that prosper in Hawai'i. Leucaena also produces a high-protein feed, and the Company intends to integrate Leucaena with grasses to support the local cattle industry. As newer conversion technologies become commercially viable, a mixture of biomass power and biofuels will be produced from these feedstocks, with the highest yielding and most profitable crops being cultivated on those lands most suitable to each particular crop.
Electricity generated will be sold under a long-term power purchase agreement with the local utility, Kaua'i Island Utility Cooperative (KIUC). The Company has been in detailed joint-development and PPA discussions with KIUC since 2008 hopes to conclude the final PPA for filing with the Hawaii Public Utilities Commission in 2010. The integration of solar, hydro, biofuels, waste-to-energy and other projects are also being considered as subsequent phases of the project, but are not included as part of the first phase of the project. The biomass power plant is ideal to stabilize these more variable renewable energy sources.
The proposed 12-million GPY ethanol plant is expected to be the first to be developed in Hawaii. The Company intends to serve the in-state market for motor fuel ethanol by constructing multiple plants, utilizing the Hawai'i Ethanol Facility Tax Credit, a strong incentive put in place by the Hawaiian Government to promote the production and use of ethanol. Unlike mainland corn-based ethanol producers, the Company intends to control a large percentage of its own feedstock for the ethanol plant as well. Sugar juice processed from the island’s biomass crops will provide feedstock for the ethanol plant while the biomass fiber remaining after water and sugar is eliminated will provide fuel for the power plant. In addition, sugar cane and other targeted biomass crops' conversion to ethanol is also significantly more carbon-efficient than corn-based ethanol, nearing carbon neutral. The Company is pursuing integration of future technologies that are intended to make the integrated energy system carbon negative.
Two State of Hawai'i mandates serve to enhance the market opportunity for the Company: (1) a mandate for a 10% blend of ethanol into gasoline that has created a local market of approximately 45 million gallons of ethanol per year and (2) the new Hawai'i Renewable Portfolio Standard that requires all utilities to generate at least 20% of their electricity sales from renewable sources by 2020.
The Company also is targeting the maintenance of sugar production capacity for local consumption, refining, and export.
The Company has been funding its development of the Kaua'i project from existing investors in the Company. The Company is currently in the process of seeking significant third-party investment to fund the next stages of the Kaua'i project, including construction.
Commercial Partners
The Company is currently negotiating to lease and/or acquire a former sugar mill site and related assets on Kaua'i. Sugar plantations and mills have been operating on Kaua'i for over 100 years. Of multiple mills that had operated in the past on Kaua'i, none remain in operation. The Company's management and directors have extensive experience in developing, owning and operating sugar plantations and ethanol production facilities. ED&F Man, the world’s largest trader of sugar and molasses and one of the largest traders of ethanol, is also a strategic partner of Pacific West Energy and the Kaua'i project. The Company has also developed a number of additional strategic partnerships, with solar, wind, algae-to-fuel, cellulose-to-energy, commodity trading, and other technology and development partners to enhance the Kaua'i project.
Competitive Advantages
Power – The island of Kaua'i is unique in its ability to provide sizeable amounts of locally-sourced renewable power to KIUC. A number of former Kaua'i sugar mills have been dismantled and their cane lands have either been developed for other uses or lie fallow. The status and location of the Kekaha mill provides a unique and favorable opportunity to integrate cultivation from West Kaua'i cane and biomass lands into the single mill, and the location also provides the opportunity to produce and integrate solar, wind, and other green energy sources, such as biodiesel and garbage. The Company believes that it is uniquely positioned to provide KIUC and others with a renewable power source that is less expensive than they can otherwise source, including internally.
Ethanol – Unlike U.S. mainland ethanol producers, who are generally subjected to rising prices of corn, their primary feedstock, the Company is uniquely positioned to keep its costs low and controlled by growing its own sugarcane and other biomass crops. The Kaua'i cane lands have historically been amongst the most productive in the world, generating up to approximately seven tons of sugar per acre per year, almost twice the average worldwide per-acre yield. West Kaua'i benefits from rich volcanic soils, access to plentiful water, and abundant sunshine. The Company believes it will have a significant price advantage in the Hawai'i market due to the added cost for competitors to transport ethanol from west coast and foreign ports, and due to high tariffs meted on ethanol produced in Brazil and certain other ethanol-exporting countries. The Company also believes that local competitors face uncertainties regarding access to water and large capital outlays necessary to enter an entirely new market for them. In addition, an existing sugar producer would have to determine that cane diverted into ethanol production is an economic trade-off against sugar production. A local ethanol plant not based on local sugar production would likely be dependent on high-cost imported feedstock.
No Food-Versus-Fuel Trade-Offs – Unlike some other biomass electricity or ethanol production projects where there is concern that the energy or fuel production comes at the expense of reduced food production, the Company's Kaua'i facility is not expected to compete with any food production. By contrast to other projects, the Company's Kaua'i project has the intended production capacity of food in the form or raw or refined sugar, as well as feed by-products from other potential biomass crops, making it a net producer of food, not a diverter of food supply. In addition, the Company also does not see future competition for food-based agricultural land on Kaua'i. The Company believes that it and its commercial partners have carefully "right-sized" the biomass segment of the Kaua'i project to eliminate any risk that there would be an infringement on future food production. As with a number of the other unique "next-generation" features of the Kaua's project, the Company believes that this forward-looking awareness of the collateral effects of the Kaua'i project, and the need to compatibly integrate with the existing economic and ecologic systems, will become a model for future green energy development around the world.