Posted on Friday, February 23, 2007

Source: Bond Buyer

by Jackie Cohen

Hawaii could see special-purpose revenue bonds for greener energy production as early as next year, depending on the fate of a cluster of bills in the state Legislature.

Perhaps the most important of these bills, sponsored by Rep. Cynthia Thielen, R-Kailua, would enable the formation of so-called renewable energy electric generation cooperatives.

The bill loosely follows the pattern of California’s recently enacted law allowing local communities to create municipal electrical utilities that could supply clean power to the private energy monopolies, Southern California Edison and its northern neighbor, Pacific Gas & Electric.

While the California law doesn’t specifically require publicly owned utilities to generate renewable energy — defined as power generation that doesn’t contribute to global warming — Thielen’s bill does.

Thielen’s measure would allow renewable energy electric generation cooperatives to generate, transmit, and sell electricity free from the oversight of the Hawaii Public Utilities Commission, except for matters of interconnections with other energy companies.

The measure hasn’t yet made it onto House meeting agendas, and Thielen doesn’t expect that to happen until next year, giving her time to polish the details in the proposed legislation. Under Hawaii’s constitution, a bill that hasn’t been defeated could survive for both years of the biennial legislative session.

However, more imminent legislation could put Hawaii ahead of California in the race to go green. Two Hawaiian renewable energy companies are mentioned in bills in both houses of the Legislature authorizing the issuance of special-purpose revenue bonds to finance capital infrastructure.

The two companies, BlueEarth Maui Biodiesel LLC and Sopogy Inc., are each seeking $10 million of special-purpose revenue bonds, the former for biodiesel generation and the latter for solar panel farms.

If approved, Hawaii would issue the special-purpose revenue bonds on behalf of the borrowing company through a state conduit.

Since solar panels have existed longer than other forms of renewable energy generation, Hawaii’s legislators seem to better understand the technology and thus are moving more quickly on the special purpose bond authorization for Sopogy, according to the company’s president and chief executive officer, Darren T. Kimura.

The Sopogy bill already has passed its first reading in both chambers, helped by the sponsorship of senior lawmakers, including Assembly vice speaker Jon Riki Karamatsu and Sen. Carol Fukunaga, chairwoman of the Senate committee responsible for science and technology. Both are Democrats, the party controls the Legislature.

“Hawaii is one of the only places in the world where you’ve got all of the raw ingredients for renewable energy,” Kimura said. “We have so many natural resources available to us, and the cost of electricity is so high here that it’s very easy to do something that’s cheaper.”.

He said that Kona-based Sopogy is trying to become a solar energy supplier, not just to Hawaii’s existing utilities, but possibly on the U.S. mainland as well.

If approved, the $10 million of special- purpose revenue bonds would finance Sopogy’s creation of large-scale solar panel “farms” that process heat from the sun through focused mirrors and have the potential to keep generating energy after the sun goes down.

“The Legislature is looking at a variety of renewables,” Karamatsu said in a telephone interview. “We like to support our local businesses. And we’re trying to diversify our economy into technology.”

Last year, Karamatsu sponsored one of Hawaii’s first special-purpose revenue bond authorizations for a renewable energy company. Hoku Scientific could use the $10 million debt authorization to develop fuel cell technology, which generates energy through chemical reactions.

The company has yet to move forward with a special-purpose revenue bond sale, but that doesn’t rule out a future bond issue, said company spokesman Darryl Nakamoto. Hoku Scientific went public in August 2005.

Long before any of these bills came along, the 2004 legislative session enacted a law requiring that renewables make up 20% of the energy generation sources used by Hawaii’s electrical utility by 2021, a requirement called the portfolio standard.

“But there’s loopholes,” Thielen said in a telephone interview. “If the utility reaches 2020 and they find it too expensive to provide renewable energy, they can get out of the requirement by going to the state Public Utilities Commission and asking to be excused.”

The law doesn’t specify how long the excuse could exempt the utility from compliance with the portfolio standard, nor whether the excuse would have to be temporary, she said.

Thielen has concerns similar to those of California energy activists regarding whether SCE and PG&E will meet required schedules on the portfolio standard. She also is concerned about the monopoly for energy provision in Hawaii.

The investor-owned Hawaiian Electric Co. and its subsidiaries have no competition on any of the islands — with the one exception being the municipally owned utility serving the tiny island county of Kauai.

HECO’s monopoly dates back about a century, some 50 years before Hawaii even became a state.

“It hasn’t been good. The monopoly utility’s first priority is to make a profit for its shareholders so they don’t rely on renewable,” Thielen said. “We’re 25% dependent on oil from the Mideast, so we’re contributing to the conflict over there.”

HECO says it is pursuing renewable energy.

“Last month, we put out a request for proposals for biofuels. We have the ability to move into biofuel more easily than a facility that uses lots of coal, since the majority of our electric generation is oil based,” said company spokesman Peter Rosegg. “We have only one small coal plant and the rest is all oil. Right now, 92% of Hawaii’s energy needs come from petroleum.”

Thielen doesn’t expect her bill to pass until the second half of the biennium, and she plans on spending the 2007 part of the legislative session educating her colleagues about renewable energy.

“I’m pushing for wave energy, to convert the waves in the ocean into energy. Hawaii is an excellent location for that — some of the tidal waters here are very active,” Thielen said.

She said ocean waves provide a constant form of energy generation, unlike many other alternatives, such as windmills, which don’t work when the air is still.

Thielen has enticed two wave energy generation companies, Sydney, Australia-based Energetech and Edinburgh, Scotland-based Ocean Power Delivery Ltd., to come to Hawaii and pitch their wares to HECO.

She’s also looking for a company that could serve as a test model for wave energy to show her colleagues.

She suggested Maui Land & Pine as a possible company that could ask for $20 million of special-purpose revenue bonds to implement wave energy generation that could serve as a model for other companies looking to go green.

Despite her state’s preference for wave energy, Thielen has introduced another bill that would require all developers seeking to build at least six homes at a time to include solar panels.

That contrasts a 2006 California law requiring developers to include solar panels as an option within new homes, ultimately letting the homebuyers decide whether to buy the renewable energy infrastructure.

Another type of renewable energy might work its way into Hawaiian homes if a supplier contract between HECO and BlueEarth Maui Biodiesel moves forward as planned.

BlueEarth uses oil from plants to generate fuel, and is seeking $10 million of special-revenue bonds to build a biodiesel refinery that would replace petroleum-sourced energy generation for HECO. BlueEarth could replace the petroleum with oil from palm trees and jatropha succulent plants, among other natural sources.

So far, the BlueEarth bond authorization bill, sponsored by Rep. Angus L.K. McKelvey, D-Maui, only exists in the Assembly, although it passed a first reading. (c) 2007 The Bond Buyer and SourceMedia, Inc. All rights reserved. http://www.bondbuyer.com http://www.sourcemedia.com