Maui Electric Co. has inked an agreement to purchase power from Maui County’s first grid-scale solar and battery energy storage system on Molokai that could lower electric bills, the utility announced Tuesday.

The 2.7 megawatts of contracted power from Moloka’i New Energy Partners can potentially provide up to 40 percent of the island’s peak load of 5.7 MW, said MECO spokeswoman Shayna Decker. The agreement still requires the approval of the Public Utilities Commission, and the request has not yet been filed, she said.

The facility to be built by Moloka’i New Energy Partners will include a 3-megawatt battery storage system, which has the potential to store the energy produced from the project’s solar array and discharge it during peak demand periods, such as the early-evening hours, or when needed, MECO said.

To be located on Moloka’i Ranch land adjacent to Maui Electric’s Pala’au Power Plant, the solar/battery project is expected to be online by the end of 2019, the MECO news release said.

The 22-year agreement calls for the company to provide energy from its solar array and battery for 17 cents per kilowatt hour, less than the present cost of diesel generation on Molokai, MECO said.

By contrast, two utility-scale solar projects in Kihei and Lahaina to come online in the first quarter of this year have a total 5.7 MW capability with MECO paying 11.06 cents per kWh. The Maui projects do not have battery storage capability.

In a report filed Jan. 31 with the PUC on wind power usage on Maui, MECO reported the cost of fossil-fuel generation in December was 13 cents kWh.

Each island in the county has its own energy generation and cost structure. On Molokai, the Pala’au Power Plant, with its 10 generators, can produce about 15 MW of power. The units have come online from 1985 to 1996, Decker said.

The current residential rate on Molokai is 37 cents per kWh. A residential customer consuming an average 400 kWh of electricity pays $147.78 a month, she said.

Assuming application of a federal New Markets Tax Credit provided by Punawai ‘O Pu’uhonua, a Hawaii-based Community Development Entity, the project would provide savings to the island’s 3,200 customers every year of the life of the contract, MECO said.

As a Community Development Entity, Punawai ‘O Pu’uhonua is responsible for the management of New Markets Tax Credits that support the creation of jobs, goods and services in lower income communities in Hawaii.

“We’re grateful to support the community of Molokai, Maui Electric and Moloka’i New Energy Partners with an allocation of New Markets Tax Credits for this project,” said Pono Shim, manager of Punawai ‘O Pu’uhonua. “We’re also excited to be a partnership that recognizes the privilege of being in the Molokai community.

Moloka’i New Energy Partners is a Half Moon Ventures company, according to its website. HMV is a renewable energy company based in Chicago and Montreal, according to its website. Michael Hastings, who is listed as a Moloka’i New Energy Partners principal in a Hawaii business filing, is the CEO of HMV. HMV Executive Director Mike Luo also is listed as a principal of Moloka’i New Energy Partners.

“Our Moloka’i New Energy Partners team is very pleased to be able to provide a cost-effective solar energy solution,” said Charles Magolske, the team leader from Moloka’i New Energy Partners. “We are grateful for the amazing support we have received from the community, the strong technical relationship we have enjoyed with Maui Electric, as well as Punawai ‘O Pu’uhonua for the New Markets Tax Credit that helps make the low costs possible.”

MECO President Sharon Suzuki said that the agreement is “an important step as we continue to work with the Molokai community in reaching 100 percent renewable energy for the island” with a 2020 goal. She said as MECO looks to renewable energy the goal is “to always look for lower prices for clean energy that will benefit all of our customers over the life of our contracts.”

MECO is taking a multifaceted approach, which includes making agreements to buy electricity from independent power producers like Moloka’i New Energy Partners, said Decker. This approach also involves continuous outreach and discussions with residents and businesses and seeking alternative financing possibilities through tax credits and third-party grants.

To prepare the grid for more renewables, MECO is starting to implement innovative utility-sited solutions, such as installing new protection devices on the system and testing a new battery energy storage systems at the Pala’au baseyard that address system reliability and security issues.

MECO also is piloting new customer options, through partnerships with E-Gear and ConnectDER, to enable Molokai customers who were waiting to install private rooftop solar systems to move forward, she said.

* Lee Imada can be reached at leeimada@mauinews.com.