PEPEEKEO, Hawaii County – The company building a controversial wood-burning power plant north of Hilo may get a sizable Christmas bonus courtesy of American taxpayers – provided it starts supplying renewable energy by year’s end.

Dec. 31 is the deadline for Hu Honua Bioenergy to qualify for a federal tax credit of “upwards of $100 million,” company President Warren Lee said.

That windfall would underwrite a big portion of the $260 million cost estimate Hu Honua gave before legal disputes and flooding delayed an expected 2017 completion. The project is opposed by some community and environmental organizations.

The same federal tax credit homeowners get for installing solar panels could pay up to 30 percent of the roughly $260 million cost of turning a defunct coal-powered plant into one that burns trees to produce energy. Jason Armstrong/Civil Beat/2018

The company, which also goes by Honua Ola, still needs to wrap up the years-long conversion of the former Pepeekeo coal-powered plant and obtain two additional governmental approvals before it may begin the biomass operation and seek the tax credit.

“This is a serious situation,” Lee said of possibly forfeiting the financial benefit available to companies that produce biomass, solar or other forms of renewable energy.

“At this point, we still need to go forward,” Lee said when asked if Hu Honua can complete the project without the tax subsidy.

Credit Will Keep Electricity Costs Down

Thirty percent of allowable development costs can be applied to a company’s federal tax liability under the investment tax credit. It’s the same savings individual homeowners can claim by making their own renewable energy through use of residential solar systems.

The credit is designed to avoid creating harmful greenhouses gases, while commercial operations offer the added benefit aiding ratepayers.

“When developers are able to take advantage of federal tax credits for their renewable energy projects, it helps to lower the cost of energy that they sell to Hawaii Electric Light, Maui Electric and Hawaiian Electric.

Keeping the cost of renewable energy affordable allows our companies to pass savings on to our consumers,” Rhea Lee-Moku, director of administration for Hawaii Electric Light, wrote in an email.

Local electricity rates would be “much higher” without the federal investment tax credit for renewable energy, said Woody Rubin, president of AES Distributed Energy.

AES factored the tax savings into the price of renewable electricity it is negotiating to produce and sell to Hawaii Electric Light, Rubin said.

“So, that is kind of a pass-through” reflected in lower rates, he said.

Rubin declined to reveal his project’s estimated tax savings because the parties have not signed a power purchase contract.

Electricity would come from a cutting edge 30-megawatt solar plant to be built near Waikoloa on the Big Island’s sunny leeward side and feature batteries capable of storing 30 MW for four hours, Rubin said. AES is now building two of its solar-plus-storage facilities on Kauai and hopes to add a Maui plant that would be one of the world’s largest of its kind, he said.

As for Hu Honua, its 21.5-megawatt plant will save Big Island electricity customers more than $100 million over its 30-year life expectancy, Lee said. The company claims it will be carbon-neutral and power 14,000 homes.

Failure to open its Pepeekeo plant by year’s end could cost Hu Honua “upwards of $100 million,” said Warren Lee, company president. Jason Armstrong/Civil Beat

Another public benefit of the federal tax credit is moving the Big Island and Hawaii closer to meeting a mandate to producing only renewable energy by 2045.

Hawaii Electric Light was getting 57 percent of its power from renewable sources, but that number dropped to 37 percent when the Kilauea eruption closed Puna Geothermal Venture’s Pohoiki plant in May, utility president Jay Ignacio told Civil Beat in July.

Hu Honua is expected to make up half of that loss, Ignacio said at the time.

Renewable energy production statewide has risen at least six straight years, reaching 28 percent in 2017, according to the Hawaii State Energy Office. Tax breaks likely contributed to that trend.

“Tax credits have helped expedite the development of renewable energy projects,” said Hu Honua’s Lee.

But Hu Honua may be the one needing help since both time and  a growing number of Big Island residents are working against it.

Construction was delayed in August when massive flooding from Hurricane Lane damaged the Pepeekeo construction site. That followed previous shutdowns due to now-resolved legal battles Hu Honua had with a contractor and Hawaii Electric Light, which plans to buy all its electricity.

The Hawaii Health Department gave Big Islanders a chance to learn more about a biomass power plant nearing completion north of Hilo and got a standing-room-only crowd that sometimes became unruly. Jason Armstrong/Civil Beat

The company also needs a permit for re-injecting millions of gallons of cooling water into the ground and another for controlling surface runoff at the oceanfront site. Its applications are now under consideration by the Hawaii Department of Health, which held an unusual public question-and-answer session and hearing on the permit request Nov. 14 in Hilo.

Students from two schools, project opponents who set up informational displays and supporters wearing green Honua Ola T-shirts comprised the standing-room-only crowd of more than 200.

Among those commenting during the sometimes heated exchange was Dave Clark, who works as a laborer on the construction project. Clark said on behalf of his children and grandchildren, he had to report that while working on the site Nov. 9 he observed a “nasty” discharge of black liquid flow “10 feet from a running stream” and into the ocean.

“Yes, I’m grateful for a job,” Clark said at the permitting hearing. “Thanks for keeping me employed, but this is totally uncalled for.”

Fearing plant operations will harm the nearby marine environment, the 1,000-member Sierra Club, Moku Loa Group, on Nov. 1 requested the DOH hold a contested-case hearing before deciding on Hu Honua’s water-control applications.

“We believe issuance of these permits will allow contaminants, thermal pollution and likely inadequate salinity to negatively impact our coastal fisheries,” the group wrote in its filing.

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