Kauai’s small, member-owned electric utility is quickly becoming a leader when it comes to renewable energy.

By the end of 2014, the Kauai Island Utility Cooperative expects to be generating 35 percent of its energy from sources such as solar, biomass and hydroelectric. That’s quite a switch from 2008, when it was generating more than 90 percent of its energy from imported oil, according to a report filed with the Hawaii Public Utilities Commission.

Not only will its 33,000 customers benefit from more stable electricity rates, the utility says, but electricity costs are expected to be less than that from oil-fired generation. Currently, island residents are paying more than three times the national average and some of the highest rates in the state. A typical residential bill averages about $200 a month, according to utility data.

This week, the utility announced that a $90 million biomass plant designed to burn woodchips was set to break ground in early 2013. Green Energy Team, based in Anahola, just received a $73 million loan from the U.S. Department of Agriculture which will allow the plant near Koloa to move forward.

The plant is expected to account for about 11 percent of the island’s electricity needs. Residents can expect to save between $70 to $190 a year on their electric bill because of the project, which will offset 3.7 million gallons of imported oil, according to state regulatory filings.

“Things have suddenly, surprisingly started coming together on a number of fronts in recent weeks,” Jim Kelly, a KIUC spokesman, said in an email. “The Green Energy project was close to dead many times in the past few years because of financing issues but the developer hung in and voila, it’s a go.”

The biomass plant will be located in the same area where Green Energy Team will be harvesting trees to use as feedstock, eliminating the need to truck in the woodchips. The company is targeting invasive albizia trees that are on the 64-acre lot. In their place, the company plans to plant a range of trees. By cutting them in a special way, the trees will regrow faster, shortening the harvesting time to four and a half years, according to Eric Knutzen, co-founder of Green Energy.

In addition to the biomass plant, the utility is moving forward on large-scale solar projects. An array owned by Alexander & Baldwin Solar is expected to be online by the end of this year. Another project being developed by REC Solar in Anahola on homestead lands is expected to be completed by the end of 2014, and the electric utility is expected to announce another utility-scale project in the coming weeks.

Combined, the solar projects are anticipated to account for nearly 50 percent of energy use during the daytime.

“They are definitely leading the pack,” said Drew Bradley, a sales manager at REC Solar. “It would be nice to see other utilities following along and getting on board.”

The solar penetration would be a breakthrough for Hawaii, where engineers and Hawaiian Electric Co. have fretted over the potential of the intermittent source to disrupt the stability of the electric grids.

“Nobody is operating at that level,” said Mark Duda, an executive at Honolulu-based solar company, RevoluSun. “It’s a tremendous accomplishment and shows the way that they are willing to lean out and lead on this type of issue.”

The target price for energy from two of the solar projects — the one planned for Anahola and the one in the works – is 15 cents a kilowatt hour or less over 20 years, according to Kelly. The price comes in a lot lower than other large, utility-scale solar projects being developed around the state and it’s about 45 percent lower than the current cost of oil on Kauai. By comparison, a five-megawatt solar project on Oahu being developed by IC Sunshine has an average price of 23 cents, according to PUC documents.

Solar prices have dropped significantly in the past year with a glut of solar panels in the global market. But as a nonprofit, KIUC also has an advantage over the publicly traded HECO. KIUC can obtain low-interest loans when it owns the projects and develop them without a profit margin, noted Kelly.

The utility will own the Anahola project and the other planned solar project, which will account for about 10 percent of electricity sales.

While the utility is forging ahead now, it’s had it’s struggles. It’s smart meter initiative sparked fears among some residents about privacy and health concerns. Some residents have refused to have the meters installed. The digital technology is designed to help the utility smooth out power on the electric grid and add more renewable energy sources.

And KIUC is still working to develop six hydroelectric projects which became a source of controversy when the project developer, Free Flow Power, went through the Federal Energy Regulatory Commission to secure development rights.

Some local residents and state officials protested federal involvement in local water issues. Hawaii’s water code is considered to be stricter than that of the federal government and is tailored to Hawaii’s unique ecosystems.

By securing a FERC permit, a developer has an exclusive three-year window to work on developing a project in a specific area without competition from another company. Two of the projects sparked particular protest because another developer, Pacific Light and Power of Kauai, said it was already working to develop projects on the same sites.

The six projects could account for another 20 percent of Kauai’s electricity needs and provide substantially lower rates for residents, according to KIUC.

Kelly said that the utility, which is developing the projects in conjunction with Free Flow Power, is currently assessing which projects would produce the most power and be the most cost effective.

“I think the feeling was always that we would look at all six and then start whittling down the list,” he said.

In order to achieve greater amounts of renewable energy, sources such as hydro or biomass, which produce a firm, constant source of energy, must be tapped.

“While everyone gets excited about solar, it’s important to keep in mind that solar works when the sun is shining,” said Kelly. “It doesn’t work at night.”

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