When new economic development director Chris Sadayasu first heard Hawaii had made it to the second round of a competition to land federal Department of Energy grants totaling $7 billion to build hydrogen fuel production facilities across the U.S., Sadayasu said he was thrilled.

“We have the opportunity to make a huge difference throughout the world,” he said. “It makes total sense for us to go full guns forward on this.”

Now comes the hard part. Hawaii is one of 32 locales to make the first cut out of an initial pool of 79. Sadayasu’s agency, the Hawaii Department of Business, Economic Development and Tourism, is leading a consortium of nearly two dozen companies and institutions that are crafting a final proposal due in April. Up to 10 proposals will make the final cut.

Chris Sadayasu, director of the Hawaii Department of Business, Economic Development and Tourism, says the state is preparing to land a piece of a major federal project. David Croxford/Civil Beat/2023

The general idea is to leverage $500 million of federal money with $500 million in private matching funds to raise $1 billion for hydrogen fuel development in Hawaii, Sadayasu said.

The whole effort is so competitive and cloaked in secrecy that the Department of Energy declined interview requests. The agency also didn’t announce what bidders had made it to the second round, although competitors were allowed to make their own announcements, which Hawaii’s consortium did, along with several others.

So, while the details of the proposed developments remain uncertain, one thing is clear: the Hawaii Pacific Hydrogen Hub, as the project is called, has made it into a rarefied field of competition that includes some of the world’s largest energy businesses and most prestigious energy research institutions.

“We have the technology to make the world better, create jobs and develop the economy.” Oceanit CEO Pat Sullivan

For example, a Texas-based consortium called HyVelocity Hub includes Chevron, ExxonMobil, Shell and the University of Texas at Austin. Another consortium spanning three states – Arkansas, Louisiana and Oklahoma – includes Baker Hughes, Halliburton, General Electric and Louisiana State University.

Although there’s no official list of contenders, the Houston-based market analytics firm RBN Energy mapped out the known contenders in a blog post, based on press releases and news reports. RBN identified 18 projects from New England to California, in addition to Hawaii.

According to the Hawaii State Energy Office, Hawaii’s collaboration includes Hawaiian Electric Co., Hawaii Gas, Oceanit, Par Hawaii and 174 Power Global.

While the competition might seem daunting for a small state in the middle of the Pacific Ocean, Jim Kelly, Hawaiian Electric’s vice president for government and community relations and corporate communications, commended Hawaii’s consortium for trying. If nothing else, Kelly said, the endeavor builds a team to bid on future deals.

“If you don’t play,” Kelly said, “you can’t win.”

Potential Win For Beleaguered Agency

Hawaii’s bid marks a fresh start for an economic development department that was plagued by challenges under former Gov. David Ige’s director, Mike McCartney. A friend of Ige who started as the former governor’s chief of staff, McCartney moved into the DBEDT position in early 2019 — a time when Hawaii’s economy was on fire, driven by surging tourism numbers.

McCartney’s plan called mainly for keeping local money in Hawaii by reducing imports of things like fuel and food by building local production and thus creating local jobs. But everything changed in 2020, when the coronavirus pandemic shut down tourism and renewed calls to diversify the state’s economy. While McCartney remained Hawaii’s titular economic development chief, Ige created a new position to plan the state’s economic recovery and tapped a former power utility executive, Alan Oshima, to fill it.

DBEDT slouched further into irrelevancy during the pandemic, overshadowed not just by Oshima but also by the public-private House Select Committee on Covid-19 Economic and Financial Preparedness.

Founded by state House Speaker Scott Saiki and Bank of Hawaii Chief Executive Peter Ho, the committee included business leaders like Peter Ingram, chief executive of Hawaiian Airlines, and Dr. Mark Mugiishi, chief executive of Hawaii Medical Service Association. The committee took a lead guiding economic policy discussions concerning the pandemic.

Meanwhile, McCartney further marginalized DBEDT. In high-profile confrontations, he repeatedly refused to update lawmakers on the department’s recovery efforts. His proposal to create 38,000 new jobs by employing Hawaii residents as remote workers went nowhere. And things got even worse as the pandemic eased and the state reopened to tourism: McCartney oversaw two botched efforts to award the state’s most important tourism marketing contract.

Former Department of Business, Economic Development and Tourism Director Mike McCartney described his economic plan for the state in March 2019 before the coronavirus pandemic upended the state’s economy. Stewart Yerton/Civil Beat /2019

The hydrogen project gives Sadayasu the chance to chalk up a marquee economic development win for the department, and Ige’s successor, Gov. Josh Green. A lawyer and veteran DBEDT employee who also has worked for the tourism authority, Sadayasu credits Ige’s administration and the state’s former energy chief, Scott Glenn, now director of the Office of Planning and Sustainable Development, for initiating Hawaii’s bid by drafting an initial application in less than a month, under the DOE’s tight timeline.

“They deserve all the credit in putting this together,” Sadayasu said.

Hydrogen Technology Leaders

But now the new administration faces more of a challenge, or “the tough yards,” as Sadayasu puts it, using a football metaphor. The incoming energy chief Mark Glick, who is replacing Glenn as director of the Hawaii State Energy Office, will lead the effort day to day, Sadayasu said.

Sadayasu declined to share details of Hawaii’s application, citing the competitive nature of the process. But the general plan, he said, is to develop hydrogen production and distribution facilities that can make Hawaii a key hydrogen center in the Pacific. He stressed that the Pacific hub project would not supplant other renewables being developed, like wind and solar.

Hawaii’s advantages, Sadayasu said, include its location — it’s the only bidder in the middle of the Pacific Ocean – as well as the large presence of military that can use hydrogen as fuel.

“You look at the other 32 people that were asked (to submit full applications), none of them have that tie with the Department of Defense,” he said.

Hydrogen technology also is being developed in the islands. Oceanit’s founder and chief executive, Pat Sullivan, said the Hawaii Pacific Hydrogen Hub would give firms in the state the chance to scale up some of this technology and export it globally to solve pressing problems.

“We have the technology to make the world better, create jobs and develop the economy,” Sullivan said.

Oceanit Founder and CEO Patrick K Sullivan portrait.
Oceanit’s founder and chief executive, Pat Sullivan, envisions Hawaii as a center for hydrogen technology. Cory Lum/Civil Beat/2020

For instance, he said, Oceanit has developed new ways to produce hydrogen from water and to transport hydrogen in innovative fuel cells and tanks. Perhaps more important, the company has devised a way to treat existing natural gas pipelines so they can tolerate carrying hydrogen, which can damage untreated pipes.

“That’s the kind of thing that will transform the planet,” he said.

And it’s not just Oceanit. Sullivan said Hawaii Gas, which produces natural gas here in the islands, also has experience working with hydrogen. This all positions the state to parlay a hub into lasting jobs for Hawaii.

“We have to be leaders in creating the technology, not just acquirers,” he said.

Hawaii is also positioning itself to fulfill another goal of the federal program: to “advance diversity, equity, inclusion, and accessibility” by creating economic opportunities for disadvantaged communities.

The DOE has said the $7 billion program is expected to contribute to President Joe Biden’s Justice40 Initiative goal, which requires that “40% of the overall benefits of certain federal investments flow to disadvantaged communities.”

Keoni Ford is founder and president of DIBS Hawaii, a Native Hawaiian-owned firm based in Waianae that is also part of the Hawaii Pacific Hydrogen Hub Consortium. DIBS stands for “Dry Ice Blasting Service,” which describes what the company does. It cleans industrial facilities and equipment by sandblasting, except it uses dry ice, which quickly evaporates, instead of sand.

Ford also recently landed legislative support to build a facility designed to recover vented carbon dioxide emissions and scrub and liquify the emissions into food grade liquid carbon dioxide.

Ford is helping lead community engagement to make sure the project translates into meaningful opportunities for Native Hawaiians.

“The fact that Hawaiians are touching this project, we’re making that Justice40 requirement a reality,” he said.

The good news for Hawaii, Sadayasu said, is that even if Hawaii doesn’t land the federal money, there’s a chance it can use its plan to attract private investment.

“The thing that's exciting is it sets us up with that plan to see if we make it happen, even with the private funds,” he said.

Regardless, Sadayasu said, the state is not going to squander the opportunity.

“People are skeptical, let's be honest, because Hawaii might not be ready,” he said. “But we're saying we're going to be ready. We'll get ready. We're going to be ready because we need to be ready.”

Hawaii’s Changing Economy” is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

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