Hawaii – Deal for Lanai wind energy project

A planned large-scale wind farm on Lanai that would deliver electricity to Oahu via an undersea cable took a major step forward yesterday with Hawaiian Electric Co. reaching agreement with developer Castle & Cooke on a tentative price it will pay for power generated by the project.

The proposed wind farm by Interisland Wind would transmit as much as 400 megawatts of electricity to Oahu via an undersea cable from wind farms on Lanai and Molokai. Friday’s agreements were for the Lanai facilities, not those proposed for Molokai, the companies said in a joint announcement.

"Castle & Cooke and Hawaiian Electric recognize that, while the electricity will be transmitted to Oahu, the impact of construction and operation of the wind farm will be felt on Lanai, including on cultural and recreational resources, plants and wildlife, and the people of the small island community," the announcement said. "Therefore, a community benefits package for Lanai is appropriate."

State Sen. J. Kalani English, whose 6th Senate District includes Lanai, Molokai, East Maui and Upcountry, said the proposal by the companies is "a good starting point."

The two sides also agreed on a "community benefits package" for Lanai residents, including a commitment to provide electricity to Lanai at the same rate paid on Oahu.

The agreement, which will require approval by the Public Utilities Commission, sets a price target of about 13 cents per kilowatt-hour for a wind power project with 200 megawatts of production capacity, and 11 cents per kwh for a 400-megawatt wind farm. That price does not include costs to transmit the electricity to Oahu, which would add another 8 cents per kwh.

The combined price of 21 cents per kwh for electricity from a 200-megawatt wind turbines facility, including the transmission costs, would be on par with the 21.8 cents per kwh HECO has agreed to pay other developers for solar electricity under the recently enacted feed-in-tariff program.

It is slightly higher than the 19.9 cents per kwh HECO will pay First Wind for power generated by the company’s new 30-megawatt wind farm on Oahu’s North Shore.

When Castle & Cooke CEO David Murdock first proposed the wind farm in 2007, he envisioned it as a 300- to 400-megawatt wind power project.

However, after First Wind announced plans to pursue a similar project on Molokai, a consensus emerged with state officials, HECO and the two companies that each project should be around 200 megawatts.

The target price agreed to by HECO and Castle & Cooke is designed to set a reference point and could change as the project moves forward, HECO said. The two sides will eventually set a fixed price under a 20-year power purchase agreement to be negotiated later.

"These low prices will help protect Hawaii from the expected rise in the price of oil and reduce the risk to our economy and way of life from the possible disruptions in oil supplies," said Robbie Alm, HECO vice president.

The proposed wind farms on Lanai and Molokai are in the early planning stages, and no dates have been set for groundbreaking. Castle & Cooke, which owns 98 percent of Lanai, has identified roughly 13,000 acres at the far west end of the island where it would locate 56 wind turbines with a generating capacity of 3.6 megawatts each, according to a Castle & Cooke website devoted to the project.

The state of Hawaii began work last year on an environmental impact statement for the planned $1 billion cable that would carry the electricity from the neighbor islands to Oahu.

The community benefits package announced yesterday is designed to address the impact the project will have on Lanai residents, according to a joint press release from Castle & Cooke and HECO.


According to Hawaiian Electric Co. and Castle & Cooke Resorts, the community benefits offered as part of a proposed Lanai wind farm, which would need Public Utilities Commission approval, include:

* Electric rates for Lanai residents that would match those on Oahu. (This could mean Lanai residential electric rates would be about 40 percent lower than those paid now.)

* Lanai would be 100 percent renewable by 2030, using a combination of solar, wind, biomass and biofuel resources.

* Grid improvements, allowing roof-top photovoltaic arrays; and more solar water heating.

Benefits not needing PUC approval and being offered by Hawaiian Electric include:

* A $50,000 per year contribution – during the life of the purchase power agreement – to the Lanai Community Fund.

* A $30,000 contribution for at least two years from Hawaiian Electric and Maui Electric for a community-based campaign for energy efficiency and conservation on Lanai.

And, benefits offered by Castle & Cooke, subject to PUC approval, would include:

* Employment on Lanai being maintained at no less than it is today.

* The establishment of a Lanai Community Benefits Fund with proceeds of 1 percent of the wind farm’s gross revenues. (Funds would be used for economic diversification and job creation; medical and social/health services; education, training and recreation; and cultural and natural resource preservation, with at least $100,000 per year going to the Lanai Cultural and Heritage Foundation.)

* Continued access to hunting areas and to coastal fishing at Ka’a.

* The ability of residential, agricultural and commercial lessees to buy their properties or land at fair market prices.

* Priority for qualified Lanai residents in construction jobs, and a requirement that contractors ensure that all workers respect Lanai community standards.

* All contractors required to protect Lanai archaeological and cultural sites, monitored by Lanai residents when possible.

* A reserve of 5,000 acres for a biofuel crop on Lanai.

* A sum of $250,000 a year for the term of the power purchase agreement for preservation of the Lanai Hale watershed.

* At least $500,000 a year for the term of the agreement for capital improvements to the Lanai water system and 250,000 gallons a day above the current allocation to encourage diversified agriculture.

By Alan Yonan Jr., The Honolulu Star, www.staradvertiser.com