Maui Electric terminates power purchase deal out of sugar cane plant

Maui Electric Co. Ltd. on Jan. 5 informed the Hawaii Public Utilities Commission that a power purchase agreement (PPA) with Hawaiian Commercial & Sugar Co. (HC&S) was mutually terminated by the parties, effective Dec. 23, 2016, in conjunction with the end of HC&S’s sugar cane harvesting operations.

On Jan. 6, 2016, under an Amended and Restated PPA between Alexander & Baldwin LLC through its division Hawaiian Commercial & Sugar, and Maui Electric, dated as of Feb. 26, 2015. HC&S notified Maui Electric that HC&S had decided to discontinue the growing and harvesting of sugar cane. Accordingly, HC&S was to terminate the agreement, effective as of twelve months from Jan. 6, 2016. However, Maui Electric and HC&S verbally agreed to an alternative termination date tied to the actual end of HC&S’s harvesting operations.

Upon completion of harvesting operations in mid- to late-December 2016, the supply of renewable fuel (bagasse) was to cease. Maui Electric understands that if HC&S power plant operations were required by Maui Electric after the completion of the harvest, the vast majority of the power production will be derived from fossil fuels, which would come at higher costs and result in adverse environmental impacts that are contrary to Maui Electric’s renewable energy commitments. Therefore, Maui Electric and HC&S agreed to terminate the PPA.

The Hawaii commission had approved the latest version of the PPA in September 2015. The covered facility consists of a sugar processing operation with an internal bagasse-fired power plant. It at one point had provided Maui Electric with 12 MW of capacity and associated electric energy and up to 4 additional MW of system protection capacity.

The amended PPA approved in September 2015: changed the pricing structure and rates for energy sold to the utility; eliminated a capacity payment to HC&S; eliminated Maui Electric’s minimum purchase obligation; provided that Maui Electric may request up to 4 MW of scheduled energy during the months of March through May, and October through December, and be automatically provided up to 16 MW of immediate emergency power; and extended the term of the PPA from 2014 to 2017.

According to MECO, providing up to 4 MW of Scheduled Energy is less disruptive to HC&S’ agricultural operations than the 8 MW it was previously providing. Additionally, it appeared that greater amounts of Scheduled Energy would require HC&S to rely on supplemental energy provided by coal. For example, in March 2014, HC&S exercised its right under the prior PPA to decrease its firm capacity from 12 MW to 8 MW. Maui said that one of the factors that contributed to HC&S’ decision was that it would reduce HC&S’ use of supplemental coal, especially during its annual maintenance period from January to February when no bagasse is being produced for boiler fuel.

Maui Electric stated that HC&S has a greater ability to export power during the months of March through May, and October through December. During these months there is typically more rainfall, which results in less irrigation pumping for HC&S and greater potential for hydropower production, both of which provide excess energy that HC&S can export to Maui Electric. Additionally, Maui Electric stated that it performs maintenance outages on combustion turbines at its Maalaea Generating Station during these times, and that it is advantageous to have HC&S available to provide energy during this time in the event of a high power demand.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.