UPDATED 7/18/11 3:26 p.m.

The Hawaii Public Utilities Commission has thrown a wrench into plans for the state’s most ambitious wind energy project.

A decision by regulators Thursday blocks an agreement between Molokai Ranch and San-Francisco-based Pattern Energy to develop 200 megawatts of wind energy on Molokai from proceeding.

The ruling throws into question how the 400 megawatt “Big Wind” project that aims to bring energy from Molokai and Lanai to Oahu through undersea cables will proceed.

The project could supply about 20 percent of Oahu’s electricity needs, according to the state energy office, and is considered a major part of Hawaiian Electric’s plan to transition to renewable energy.

The ruling, rejecting how the major parties to Big Wind had agreed to proceed with the project, requires Hawaiian Electric to issue an RFP for 200 megawatts of renewable energy, which could be sited on any island that can be reached by the inter-island cable or on Oahu itself.

The original agreement, dating back to 2007, involved a 200 mw wind farm to be developed on Lanai by Castle and Cooke and a 200 mw wind farm to be developed by Boston-based First Wind on Molokai. PUC commissioners ruled earlier that the agreement was not competitively bid by Hawaiian Electric Co., but allowed it on the basis that they believed the project was in the public’s best interest.

However, First Wind missed a critical March deadline to secure land for the project on Molokai after repeated offers to Molokai Ranch. Subsequently Peter Nicholas, CEO of Molokai Ranch, where the wind farm is expected to be located, announced that he had chosen Pattern Energy as its preferred developer.

If one wind farm fell through, according to the original agreement, then the entire wind farm could be developed on a single island. However, Castle & Cooke ceded 200 mw of its now 400 mw allocation to Pattern Energy. The PUC’s latest ruling said that Castle & Cooke had no authority to do this.

Executives of Pattern Energy have been holding community meetings on Molokai to discuss their plans for the wind farm since March. They were most recently on the island last month for a series of contentious meetings, in which local residents voiced their opposition to the project.

Pattern Energy CEO David Parquet said he was still trying to digest the PUC ruling.

“We all need a little bit of time to think about what this means,” said Parquet. He declined to say whether Pattern Energy would submit a bid for the new RFP for a Molokai wind farm.

The ruling opens the door for First Wind to possibly re-enter as a developer in the “Big Wind” project. The wind developer’s CEO, Paul Gaynor, had been highly critical of the agreement, and Hawaiian Electric in particular, which had supported the new arrangement between Pattern Energy, Molokai Ranch and Castle & Cooke.

Gaynor had pushed for the 200 mw allocated for Molokai to be put out to competitive bid after First Wind missed its March deadline to secure land for the project. He also asked that the PUC consider Maui as the second site, according to PUC documents.

John Lamontagne a spokesman for First Wind, would only say that “we are just reviewing the order and determining what our next steps will be.”

Hawaiian Electric spokesman Peter Rosegg said that he didn’t expect that a new RFP, which the utility has 90 days to submit to the PUC for approval, would necessarily delay the project.

“This should not be a long drawn-out process,” said Rosegg. “I think the key players are pretty well known.” He added that determining whether the project would be a “go or no go” was about two years away.

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