A 2.7-megawatt industrial-scale solar project with 3-MW battery storage on Molokai, which was supposed to be online in January, is currently mired in a dispute between the developer and Hawaiian Electric over handling of an equipment change and penalties for missing deadlines.

The PV project by developer Moloka’i New Energy Partners, which is owned by Seattle-based Half Moon Ventures LLC, is located on Molokai Ranch land near Hawaiian Electric’s Pala’au Power Plant. A power purchase agreement, which calls for the utility to pay 17 cents a kilowatt hour over 22 years, was submitted to the Public Utilities Commission in January 2018 and subsequently approved.

The utility has said that the project could provide 40 percent of the island’s peak load and that the power was cheaper than the diesel oil being used to generate electricity on the island.

Utility spokeswoman Shayna Decker said Thursday that initial plans anticipated that the project would come online by Jan. 30.

The dispute, which focuses on project delays, penalties for missing deadlines and financial issues, arose in 2018 when the developers needed to find a new vendor for a critical piece of equipment, Moloka’i New Energy Partners said in a complaint filed in U.S. District Court on Oahu against the utility.

The vendor “demonstrated that it was unable to meet the requirement of the project,” the complaint says. The developer found another vendor, Tesla, to supply the equipment and informed the utility in November 2018.

The utility said in an update on the project to the PUC on April 30 that the changes “necessitated the company to perform an additional restudy of the interconnection requirements for the project.”

“On or about mid-2019, it became apparent that MNEP’s project was running behind schedule,” Hawaiian Electric told the PUC. “MNEP had missed certain guaranteed project milestones and was in jeopardy of missing additional guaranteed project milestones set forth in the PPA. The delays were primarily attributable to MNEP’s request to make changes to its facility equipment.”

After talks from mid-2019 to April proved unfruitful, Hawaiian Electric notified the developer that “liquidated damages” or penalties for missing deadlines would be assessed under terms of the power purchase agreement. The utility said the developer had missed the final three guaranteed project milestone deadlines.

On April 6, Moloka’i New Energy Partners informed the utility that it had filed a complaint in federal court for breach of contract. The developers allege that “from the end of 2018 onwards, defendant has been trying, in bad faith, to scuttle the PPA and the project.”

Moloka’i New Energy Partners claims the utility breached the terms of the power purchase agreement. The developers said that when the change in equipment was requested in November 2018 “there was no reason why the project could not have been completed timely within the PPA deadlines.”

The problem, the developer says, was the utility’s unjustified delays and lack of timely action on the request for the equipment change.

The developers cited testing requirements by the utility and delays in performing those tests and “numerous and confusing and inconsistent communications.”

The delays have jeopardized the power purchase agreement and financing for the project and possible loss of the developer’s investment, the complaint said.

Moloka’i New Energy Partners is seeking damages, including interest and attorney fees and costs.

Hawaiian Electric told the PUC that it still has the power purchase agreement in place “and hopes that the parties can resolve the issues in the best interests of the Molokai community.”

The utility said that the delays will not affect the availability of power but will “lengthen the time before customers can start to benefit from a local renewable energy resource that is anticipated to be lower in cost than imported fossil fuel,” said Decker.

When asked about when the renewable system might be ready for connection to the grid, Decker bounced the question to Moloka’i New Energy Partners. A developer spokesman was hesitant to answer questions due to the filing of legal action. The developer’s court filing did not indicate a new hookup date.

“We’re disappointed the developer didn’t follow through on its commitments and chose to go to court, but we still have an agreement with MNEP and hope we can resolve the issues in the best interests of the Molokai community,” Decker said.

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