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Pulama Lana‘i looking to buy Lanai island’s electric utility

‘Exploratory discussions’ are underway; PUC approval required

Pulama Lana’i and Hawaiian Electric have begun “exploratory discussions” about the possibility of the Lanai company “owning the grid.”

The utility said Monday that it was approached by Pulama Lana’i, the company owned by tech billionaire Larry Ellison that owns about 98 percent of the island, about acquiring the assets of the utility after the release of request for proposals last month for 9.5 megawatts of solar power paired with energy storage for the island.

“The exploratory talks are in the preliminary stages,” Hawaiian Electric said in a news release.

Pulama Lana’i said Monday that “our journey toward 100 percent sustainability now leads us to investigate the potential benefits of owning the grid.”

“We are by far its largest customer and have a vested interest in building a modernized grid that will speed Lanai’s progress toward being energy independent,” the company added in its news release. “We will have a phased plan that will lead to more renewable energy and lower electricity bills for our residents which currently ranks among the highest in the state.”

Pulama Lana’i said that its “initial transition phase” calls for creating microgrids with the Four Seasons Resort Lana’i at Manele and the Four Seasons Resort Lana’i at Ko’ele, a Sensei Retreat.

“Businesses around the world are recognizing that they have a responsibility to reduce their carbon footprint and are using microgrids to become models for sustainability,” the Lanai company said. “We believe the same can be done on Lanai.”

A microgrid is a local energy grid with the ability to disconnect from the traditional grid and operate autonomously, according to the U.S. Department of Energy website. The microgrid, which can be powered by renewable energy sources such as solar energy, can break off and operate on its own using local energy generation in times of crisis, like storms or power outages or for other reasons.

“Since its inception, Pulama Lana’i’s vision has been to create a sustainable future on Lanai,” the company news release said. “We’ve worked to reduce our impact on the environment over the past several years with improvements to our water system, recycling programs, native and endangered species protection and resource conservation.”

The utility suggested that one of the options being discussed would have Pulama Lana’i contract with Hawaiian Electric to operate and maintain the island’s generators and distribution system. The utility has 12 workers on the island.

Hawaiian Electric emphasized that any transaction would require the approval of the state Public Utilities Commission. Both the utility and Pulama Lana’i said there will be consultations with businesses, residents and other groups.

“We’re still seeking the best solution for customers and the most effective way to get Lanai and the other islands off fossil fuels,” said Sharon Suzuki, president of Hawaiian Electric’s Maui County and Hawaii island utilities. “These are decisions that have to be made in consultation with the community, and we are working with Pulama Lana’i to make sure that everyone understands the options.”

Hawaiian Electric noted that Pulama Lana’i is the island’s largest utility customer. The utility provides power to 3,000 island residents.

The ongoing negotiations have prompted discussions with the PUC and other stakeholders on possible revisions to the renewable energy request for proposals, Hawaiian Electric said.

Last month, the PUC approved the utility’s plan to issue request for proposals for wind and solar power paired with energy storage for Lanai and Molokai. The projects would come online in 2023, and 55 to 61 percent of Lanai’s power would be generated by those renewable sources.

Pulama Lana’i is offering the land for a nominal lease rent to the renewable power project but that does not mean Pulama Lana’i will win the request for proposals, utility officials said. The process is open to all energy developers, and Pulama Lana’i will not participate in the evaluations of the proposals.

Proposals are due by Jan. 31 with final awards announced March 31 for Lanai.

When the PUC approval of the request for proposals was announced in December, Maui Electric Co., which is now referred to as Hawaiian Electric, said it was mulling over what to do with an existing 11-year-old solar power/battery storage system on Lanai that has problems with its storage system.

In October, Lanai Sustainability Research, a Pulama Lana’i subsidiary, agreed to pay MECO $15,000 a month to cover $360,000 in overcharges when its battery system was down.

Another factor is the high cost the utility is paying for the power from the 1.2 MW solar power system with 1.25 MW battery storage system that went online in December 2008. The utility is paying $0.28276 per kilowatt-hour through 2033. Two recently proposed solar projects on Maui have power prices pegged at 8 and 11 cents a kWh.

Last month, officials said the utility was evaluating its options regarding the project, including selecting a larger project through the request for proposals process and terminating Lanai Sustainability.

MECO purchased the assets of Lanai City power plant in 1988.

“We want to work with Pulama Lana’i and the community to create a path that can enable the island to reach its sustainability goals faster while ensuring equity and fairness for all of its residents,” Suzuki said.

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