It seems like just yesterday that Hawaiian Electric Company announced it had struck a 20-year deal to buy more than 300 million gallons of liquid biofuel from a local company, enough to provide about 4 percent of the utility’s current fuel needs.

That was Thursday, and it’s already old news.

On Friday afternoon, HECO made another announcement, this time revealing that it has reached an agreement with landowner Castle and Cooke on pricing terms for a 200- or 400-megawatt wind farm on Lanai. The deal is an important step forward for a project that could one day send electricity via an underwater cable and reduce Oahu’s oil consumption by some 15 percent.

The project, known as Big Wind, proposes to put 200 megawatts apiece on Lanai and Molokai. The agreement does not cover Molokai, but takes into account the possibility that the entire Big Wind venture would be built on Lanai.

The agreement sets the price of electricity at 11 or 13 cents per kilowatt-hour, depending on the size of the wind farm, plus transmission costs. Hawaii has the highest residential electricity rates in the country at around 28 cents per kilowatt-hour, making wind energy less expensive than existing technologies.

“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 possible disruptions in oil supplies,” Robbie Alm, Hawaiian Electric executive vice president, said in the joint press release [pdf].

The companies also agreed, according to the release, on a number of community benefits for the people of Lanai “in response to concerns about the impact of a wind farm on the small island.”

“The proposed benefits reflect what we have heard from many people,” Harry Saunders, president of Castle and Cooke Resorts, said in the release. “They represent a cross section of concerns about the wind farm and ideas about what is best for Lanai’s future.”

Among other concessions, HECO and Castle and Cooke will:

  • Level electric rates for Lanai residents to match those of Oahu, reducing residential electric rates by about 40 percent
  • Contribute hundreds of thousands of dollars a year to community purposes like preserving a watershed and improving the water system
  • Ensure Lanai is 100 percent renewable for electricity by 2030 and reserve 5,000 acres for biofuel crops

The deal is subject to approval by the Public Utilities Commission. The project is also subject to an environmental review.

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