 Aloha, welcome to Think Tech Hawaii's Movers, Shakers, and Reformers, the Biofuels in Hawaii series. I'm your host, Carl Campania. Join us each week as we explore biofuels in Hawaii and our interviews with some of the various local stakeholders to learn about policy, feedstock, and conversion processes and more. Today, our guest is Ms. Cecily Barnes of Hawaii Electric Industries, Hawaii Electric Company, or HIKO, a very important stakeholder in the energy landscape here in Hawaii, so welcome to the show. Thank you. Thank you for having me. No, thank you. I'm glad we were able to pull it together. It's not always easy to get scheduled, right, trying to find the right time, so I definitely appreciate you being here. Let's just have a good conversation. Okay. I look forward to it. It's pretty open. So, okay. For starters, let's learn a little bit about you. So you are a manager in the fuels department, fuels procurement department. What is your role and... Sure. I'll talk a little of that. Yeah. The fuels department is fuels procurement. We negotiate contracts for all fuels, including biofuel, and we also have a maintenance element. We have pipelines that our fossil fuel goes to our power plants in, so we manage that infrastructure. Okay. So procurement and... Regulatory filings. ...and infrastructure management. Regulatory. It's okay. So, okay. So, it goes pretty deep into the operations. Yes. Okay. Excellent. Okay. And how long have you been doing that? Well, I've been doing the fuels and biofuels for about six years, but my career at Hoine Electric is 24 years now. Oh, wow. Okay. Excellent. Excellent. So, did it lead up to this, or is it... Indirectly, yes. I was managing a large department of basically supply chain warehousing, purchasing inventory logistics, and completed my MBA at Scheider, my executive MBA, and I was wanting to do something different. So, I'm asking my boss for some opportunity. It wasn't specifically targeted at biofuel, but that was a special project at the time that they needed help on. Sure. That led to where I still sit here today. Now, you become the biofuels expert now. Yes. Which is excellent. Excellent. Well, however you get there, we appreciate that you're there. Thank you. So, that's good. And also, give that shout out to UH. Yes. Scheider. Wonderful program. College of Business. Excellent. Good, good, good. All right. So, you've been with HECO for 24 years, but you've been doing this particular role for about the last six years. Yes. Okay. Do you like it so far? Of course. It's more so than my former work at Hoang Electric because it does touch on strategy as we're here to talk about today, you know, the clean energy initiatives and things like that. Oh, good. Excellent. Okay. Good, good, good. All right. So, initially, you didn't have an initial desire to go chase after biofuels. It was just something that was there and it was an opportunity that was provided. But since you've grown into it, you've really... It's become something that you have more of a focus on as it become... What would you say your, I guess, personal feeling about biofuels are? Well, I mean, I'd like to see it develop and get off the ground when we've been endeavoring it now for six or seven years. We thought we were going to get farther along a few years back. Now we do purchase biodiesel, but in relatively small quantities. But I think with the clean energy initiatives and the goals, it's very viable to have sustainable, locally produced biofuel with job creation and things like that. There's a lot of opportunity there. So, yeah, it's exciting to be part of the future. Yeah, strategizing the future of sustainability for Hawaii, really. Yes. Excellent. Well, good. Okay. Let's switch a little bit more focus on HECO. Would... Okay. General numbers, whether or not you know them, I'll ask you and we'll see and we'll kind of go from there. Okay. About how much fuel in general does HECO purchase on an annual basis? Sure. I can answer that. Keeping in mind, we have Hawaiian Electric on Oahu and then there's the subsidiary companies for the Big Island and Maui. Right. So, I mean, here on Oahu, right now we buy about six million barrels of fuel oil per year for our power generation. That used to be, within the last decade, less than a decade ago, it was almost nine million barrels. So we've seen substantial reduction in consumption because of renewable energy and energy efficiency programs. About 30% reduction. Yeah, it's huge. That's great. Right. That's great on one side, but I know that impacts everybody really. And then on the other islands, I think collectively with Maui and Big Island, Molokai and Lanai, it's probably about two million barrels in total. We buy a heavy fuel oil and diesel and... Okay. So about in total about eight million barrels a year. And that's all fuels. For the utility-owned generators, yes. The utility-owned generators. Okay. And then there's other independent generation that also uses fuel oil like Kaliwa Partners here on Oahu and the coal plants and things like that. Okay. Okay. Okay. That's important to understand those pieces as well, so okay. Of that, what is your current percentage of, I guess, petroleum-based versus biofuels? Sadly, biofuels is a very small percentage. I mean, it sounds good when you talk about it in gallons because we like to talk about biodiesel in gallons and fossil fuel in barrels, right? Yeah. But there are 42 gallons to a barrel. We buy from three to four million gallons per year of biodiesel here on Oahu for our generating plant at Campbell Industrial Park. I think I did the math just before coming here because I thought you might ask. I think it's 1%. Well, 1% roughly is biofuels at the moment. Yes. Which, I mean, you put that into context as well. 1% at the moment, and that's based on several factors. It has to be produced and available to you in order for you to produce it, and it needs to be at least of a relatively reasonable price, right? Right. So let's, I guess, let's think about that a little bit. The prices that I understand, and from last week or no, two weeks ago with my interview with Mr. Kyle Data, he was talking about how, at the moment, we can say biofuels barrel is about $80, is what the current going rate is for a barrel of biofuels. Roughly. I think he was including the Federal Alternative Fuels Tax Credit, we call it the Lenders Credit. That's $1 a gallon. So that's substantial. I mean, if you're paying $3 or $4 per gallon for biodiesel and you get a dollar credit, I mean, that's, you know, 20, 25% off. But that comes and goes. It's set to expire at the end of this year. So I think I heard him say $200 a barrel. That's probably more the range of, you know, the true costs without those types of credits. And then there's also the Federal Program for renewable fuel standards with the RINs. I mean, that's a lot of detail to get into that. But that's, again, a Federal Incident Program. So we've touched upon that a little bit. Yeah. Renewable identification numbers for that. Yeah. Right. So although Hoyn Electric doesn't take RINs credits, our producers do, our biodiesel producers do. Yeah. So that also affords somewhat of a discount. Is that something that we could institute here? Can we bring that here? The RINs? Yeah. Bring the RINs. Well, I mean, in essence, we do. It should be. Well, we do because the biodiesel that we buy today has a direct discount to the value of the RINs. Okay. So the biodiesel producer here, and then a couple of years ago we bought from a producer on the mainland, the US mainland, they basically monetized those RINs and then passed that monetary value on to us in the way of a price discount. Okay. So we are benefiting from it here. Yeah. Yeah. I would like to create more of a, personally, more of a local based version of that as well. Yeah. That'd be great. It's a production and processing. So that was something that, it's one of the future objectives and goals that I think that the industry is interested in. Right. But okay, knowing how it works and knowing that you're currently utilizing it through the means that you can opens that door, I think. So okay. Alrighty. As far as HECO's perspective on biofuels, what is HECO really looking for? Why would HECO be interested in a biofuels versus any fuel? Does HECO care? Yes. What does HECO care about with regards to biofuels? Yes, we do care. We actually, we love biofuels. So I mean, we're very sensitive to price. I mean, that's, I guess we'll get into that a little bit, but that's sort of the assembling block because we don't want to pass on any higher prices to our customers than necessary. But in addition to being renewable and sustainable and the things we've sort of alluded to, it also has environmental benefits. Biofuel is typically no sulfur. So when their air emissions are free of sulfur, and I mean, we, for the most part in any of our power generating facilities on the three companies, we can use biofuel in our existing generators. So, you know, there's no retrofit required to speak of. That's one of the most important facets of it, even for the, you know, for commercial aviation and for the development of biofuels, what everyone's always looking for is that drop-in, that advanced biofuel, that drop-in biofuel. So we don't have to change anything. We just put it in, whether it's a mixture or 100 percent. Right. And I mean, you're spot on with the advanced biofuel being a complete drop-in. I mean, we're buying the FAME biodiesel, which is not exactly a drop-in, but it meets the ASTM standard for biodiesel. But when we started using it 100 percent at our Campbell Industrial Park facility, that was a new facility. It's, the manufacturer wouldn't guarantee the operating of the unit on 100 percent biodiesel. So we took a big risk when we introduced 100 percent biodiesel, and a lot of the plant operators and maintenance folks were very hesitant, you know, and all this won't work. And what about this? And there was a lot of fear in what could happen with the equipment or corrosion or even storing it in the tank, you know, would you have spoilage in the tank? But our experience has been now for, yeah, the better part of six years that it's a seamless operation. So for six years. So you've been, you've been ramping up perhaps for six years now? We've been using it. At 100 percent. Yeah. I mean, that plant is a full operation. Okay. See, okay. So that plant, the Campbell plant, has been full operation 100 percent biofuels for six years. Correct. I believe so, maybe a little bit longer. Okay. And that's 110 megawatt capacity. And I think at the time, and probably still so, it's the largest utility scale facility using 100 percent biodiesel. You'll see a lot of people use the plant. In Hawaii? No, in the world. In the world. Yes. Okay. That's an important thing. Okay. Vila, 150 megawatts. 110. 110 megawatt capacity, 110 megawatt capacity, 100 percent biofuels, largest in the world. That's it. I'm pure biodiesel. I'm pure biodiesel. At least at the time we built it. Yeah. I mean, I haven't checked in the last couple of years. I mean, obviously that's taking a huge step forward. Right. So, okay. And where do you get all of that? Is that just, it's all locally produced? It is now. Initially, we started buying from renewable energy group. They're probably the largest U.S. biodiesel manufacturer. They have a number of facilities throughout the U.S. So they would manufacture it in Iowa and put it in these shipping containers, little plastic, well, big plastic tanks, and it would come on a train and on a matzen and show up and go on a truck and unload into our plant. That's when you started about six or so years ago. That's where we started. And then when you mentioned, I think, in one of your other programs, Bob and Kelly King, when they built their new Pacific biodiesel refinery in Hilo with, I think it has five million gallon per year capacity, they were then able, through that new plant, to supply us with all of our 100 percent of our needs. So yeah, we have shifted to a local, I mean, that's a good new story, right? That's definitely. The idea that, you know, build it, they'll come, you know, put it out there, you know, build the plant, create the demand. I mean, that's what we're here for, right? So you were always, you were working with them. They were kind of doing this, knowing that, okay, we'll build this and you'll buy it. Well, no, there was actually no, we didn't make any commitment to them. They built that all on their own. They took a leap of faith. There's a risk for you. There's extraordinary risk. And all of our fuel contracts we put out for competitive bid. So they competed. They competed against the mainland firm, REG, that was supplying us. And they were substantially lower cost and they won the award. They've been able to make it work and they are very important pioneers in this area. Yes, they are. And again, I mean, they will come, I mean, they've built this capacity. And then the next piece in the chain is the feedstock, right? So then you've got that ability to develop the feedstock market for oil feed crops. Exactly. Excellent. So yeah, it's exciting. I think too, I mean, what do we look for in a biodiesel? I think that was the earlier question. Quality is important and it depends on the generating unit. So our Camel Industrial Park facility is a combustion turbine. So it has a much higher demand for quality fuels. And at the time, Pacific Biodiesel wasn't able to meet our quality specifications when they were making the fuel, now again, a lot of it. Oh, okay. But with the new plant. The new plant. And they put in, it's actually a very, very clean distilled biofuel. So that's what enables you to use it 100% and have had no troubles or? Not at all. I mean, but with both suppliers, with REG and Pacific Biodiesel, we've had no issues. There have been no issues, no maintenance issues, no long-term concerns, no storage issues. No. It's just been, it's, it has been a drop in them. Yes. In that sense. That's excellent. That's excellent. And that would be our highest standard for power generation. I mean, when you get into a reciprocating diesel engine, we can use less refined oils, perhaps, in our steam boilers. I mean, you could probably burn just about anything, but with some caution for moisture in the fuel or acidity and emissions. I mean, you still want to make sure that you've got your emissions within your air permit. Just like that, our first segment is over. Wow. So, see, I told you, it goes really quickly, much quicker than you think it is. Thank you for joining us. Thank you for joining us here. Thank Tech Hawaii, Movershakers and Reformers. This will be bio, fuel, and Hawaii series. We do appreciate you joining us, and we once again thank you for joining us in this conversation. We'll see you on Monday. Okay. This is Hawaii, the state of clean energy. A wonderful show. We do four to four-thirty every single Wednesday. And the progenitors of this show, Sharon Moriwaki, race starling to my left. So, how's it going? How's it going, Sharon? Do you like the show? I love the show. Yeah. I hope everybody watches the show and joins in and gives us their comments on clean energy. Yeah. Every week. Every week. With incredible guests and topics in discussion, and mostly candor. We like candor. This month is all renewable energy. And next month, we're going to look at procurement. Each month, we have a different series. Yeah. And so, it's going very well. We learn so much. We keep the public so well advised. The best we can. Right. What do you think? Well, I think this is the place where it's happening. It's where we discuss the latest of what is going on in the energy world. And it's a great place to be, a great place to meet some new people that are into the energy world that we haven't talked to before. So, I'm happy to be here. Okay. This is a... You know, energy is the biggest thing happening in Hawaii where they realize it's not going to affect all of our lives. It's affecting all of our lives. And it's like a million things are happening in energy. How could you possibly understand what's happening? Unless you are informed, this is your way. This is the deal. Hawaii, the state of clean energy every Wednesday at four o'clock. Right? Join us. I knew you'd say that. Welcome back to Think Tech Hawaii's Woovers, Shakers and Reformers, the biofuels in Hawaii series. I'm your host, Carl Campania. And today, once again, please welcome Ms. Leslie Barnes from HECO. Thank you. We are talking specifically about biofuels and how HECO has been purchasing biofuels and how the Campbell plant is 100% biofuel generated. So, that's a huge, huge thing and important to know. And the largest 110 megawatt capacity plant, largest that we are currently aware of globally. So, that's a huge and important thing. So, okay, let's... As an off-taker, which means purchaser, it's important to know... Okay, we were just talking about what does HECO look for in its fuels? And you were saying, okay, it needs to be a quality. It needs to be clean enough. It needs to fit the standard, the ASTM standard as well, okay? So, okay, that's fine. But what's important to know is the pricing. So, let's jump a little bit into the pricing side of that. We started off with, okay, well, is it actually 200? Is it 80? We've got the subsidies that come into play. Well, a lot of people talk about the subsidy thing as far as... And something that isn't clear is petroleum has subsidies that have been there for a while. So, the pricing that we pay for our petroleum fuels still has its own subsidies. So, when we put a subsidy there for biofuels, it's not inconsistent to say. And what I would like to see and what no one has produced, and I don't know if you can see this and if the answer is no, then fine. But what that comparison is, and if you're able to give us any insight into that difference, into the subsidies that are there for petroleum fuels versus biofuels. Do you have any thoughts or insight into that? Yes, I've heard it say that there are subsidies for petroleum fuels, but it's not something that we deal with directly. I mean, we, again, competitively bid, we contract with the local refineries. I'm sure that's at the federal level, maybe with oil exploration. Yeah, I'm sorry, I don't know the answer to that. Yeah, it's the oil rigs and all the people who actually find oil and search for oil and the incentives and why they continue to do that as well. Yeah, that's one of the things that I would like to know better or understand better from an economic side of that, is what are the subsidies and what does that mean for the cost of the petroleum fuels and so that we can have a nice... And how could that be shifted to some degree at the federal level? Exactly, exactly. Or at least make sure there were a fair and equal playing field with regard to this. And I totally get all the sides of it, but I think going forward from a sustainability perspective, as we're thinking about Hawaii, that's the perspective. That's that piece of that energy security thing. And it comes in a constant supply. We're not subject to price shocks up and down. We're not subject to availabilities because we've been able to create throughout the islands enough production to be able to get what we want and so forth at a regular pace, which means that operationally the costs can be a constant. Because just to get your thoughts on this side of it, it's important to understand that the pricing that you pay has a direct impact on what the pricing of our electricity is. Yes. And so as the prices are currently at about $50 a barrel, give or take, a couple of years ago, it was $120 a barrel, $140 a barrel. $140, yes. Exactly. So that obviously has a direct impact. So if you can add into that idea, because not a lot of people quite see it. They get it, they hear it. But I hear everybody talking about, well, the reason we want to go to biofuels is because of carbon reduction. It's because of our global warming concerns. And that's all great stuff, but that's not a business case. Right. So from a business case perspective, the reason to go to biofuels needs to be put out there and the way to connect that to costs. Well, yes. I mean, the cost of oil is a heavy influencer on whether we use biofuel or how much biofuel. I mean, biodiesel, often for transportation, sort of tracks the price of diesel because it's a diesel substitute. So I don't know how you get out from under the influence of high oil prices because when they're high, things look more attractive. Right now they're low. I mean, that's a worldwide thing that's going on right now where low oil prices slow down renewable efforts, whether it's renewable energy, renewable fuel. So I think, I mean, we have forecasts. We have oil forecasts that show oil going back up. If any of us knew. When? Yeah, we would be rich. Yeah, you know exactly what I'm having. Yeah, right. So I mean, I guess it really is a way to look at how do you think long-term to demonstrate that we're not going to pay a whole lot more for biofuel in the future. I guess you kind of have to, at some degree, believe that oil prices will be higher, which most people do. And they will, because historically it has shown. It's always doing this for one reason or another. Right. Some, you know, policy-made reasons versus other reasons. But it's always been doing that. So we know it's sort of down now. It's come up a little bit, but very little. So at some point it will go back up again for one reason or another, right? Yeah, so I mean, subsidies certainly help biofuel subsidies. And then I think you mentioned advanced biofuels. I mean, there's a lot of progress that's been made with some of the advanced biofuel technologies. I mean, I'm not an expert in that by any means, but presumably as those get further into commercialization, you also get a production cost that comes down. So that would certainly help. And more yield per acre for cellulosic type biofuels, biomass, biomass. Now you're speaking biofuels language and all that. Yeah, so it sort of depends. But then, you know, putting price aside, clearly, you know, any policy mandates or subsidies, you know, help push the market along. Right. You know, I mean, the reason we're burning 100% biodiesel at Campbell Industrial Park is because the Public Utilities Commission told us to, right? So we're mandated to do that. Similarly, we're constructing a new 50-megawatt facility at Schofield Generating Station, sort of in partnership with the Army. And the Army, you know, said they want to be renewable. So they're the ones that are driving this requirement that all of the diesel fuel that will be used there is to be a 50% biodiesel. So we'll have biodiesel at that facility. That's a 50-megawatt? Yes, 50-megawatt capacity. And that's been approved by the Public Utilities Commission. Probably, I mean, the groundbreaking for the, you know, where they go and bless everything that's occurred. I think it will be in operation 2018 so soon. I mean, you know, it's well underway. But again, it's a policy, right? I mean, the Army, it was important to them that it have a renewable aspect. So we're doing it anyway, right? Yeah, absolutely. I mean, when you look at the 100% renewable by 2045, I mean, those types of things drive behavior. And then I think it really caused into question the value. I mean, what value is it to have a renewable future at a sustainable island? And maybe people are willing to pay a little bit more for that. And it's always about the short term. Right. A little bit more in the short term so that it levels itself off. Because one of the points that Kyle Dada was saying is as you see those prices go up and down, the relative cost of what that is compared to a constant cost. And that's the objective. If the constant cost is higher than our current cost, but the relative, but where is that in a relative cost? So your average, if you're currently paying 50, but you've also paid 140, your average is somewhere above and below that. So where does that fit within that $80? And how do we begin to make that decision, bring that down a little bit more so that, you know what? You grow it, I'll buy it. Right. Kind of a thing. It gets larger and larger. So that goes back to the incentives that are there to help. So, okay. Let's, what would you say, as far as from the purchasing side, from a purchaser of fuels perspective, looking at biofuels, what do you think some of the barriers are at the moment? Pricing is one of them. Yes, one to make sure that it's a competitive price. Are there other barriers that go along with that? Sure. And I guess, you know, it depends too. Again, if we talk about traditional biodiesel, that Pacific biodiesel is refining, I mean, like I said, they took a leap of faith. They built it. They got the feedstock. We're buying it. Those are typically short-term procurement. But I think to do some of the other things, you know, to invest in agriculture, say, you know, to dedicate acres to grow an energy crop, whether that be biomass, biogas, biofuel, you need long-term commitments of the off-taker, right? So, I mean, I think that's a barrier for people. Presumably, that's where the utility could possibly come in and offer a longer-term guarantee to take it. Especially if it's at a slightly lower price, if you negotiate this, say, okay, well, if you do five years, if you do 10 years, you can guarantee this production at this pricing that helps support. With that, though, one of the questions, and I'll jump on this one, one of the questions and concerns that people have is like, well, if you're going to grow feedstock for fuels, that means you're not growing food. And I think, and I'd like to hear your general thought on this, I think that it can and should be done in tandem. Right. And I mean, that's everything I hear locally is, you know, when you talk about crops, as I just mentioned, I mean, they sort of coexist, you know? So, I mean, like, you have the pangamia trees that you could have livestock grazing through the trees, or there are, you know, crops that have multiple products, exactly. So, you know, I don't think it's an either or debate. Right. But that's one of the challenges. So, when people immediately say, well, one of those barriers is if you're going to grow that, you're not growing food. It's not actually a barrier. When you look at the amount of potential land that we have in the OHA and the state and a lot of other just landowners, it's the opportunity to use the land is there if we can create that relationship and that partnership so that we can then grow more food and it's suckling at each other. And of course, water. I mean, I heard you talk on your other show about water. I mean, but that's the nice thing too about some of the energy crops, you know, that they maybe don't require as much premium land or as much water as other crops, you know? So, you can grow them on more marginal lands. Okay. So basically pricing, resource availability, the ability to have enough of a quantity what the Department of Logistics Agency calls operational volumes. Make sure that you've got that ability to buy it because it's available to you. Knowing that it's a drop in and that it's not something you need to change your equipment for. Right. All of these things, and so all of these barriers that used to be are all kind of fading away a little bit. So, the final barrier that exists is still that cost. Right. That current policies and future policies can impact as we progress in subjects and so forth. So, all right, well, I think that, so again, we're at the end of our show. Okay. Just like that. So, thank you very much for joining us. Thank you for having me. We can go another hour worth of conversation that they should, but I truly appreciate that. Thank you so much for joining us. This is Stingtec Hawaii's Movered Stakers and Performers. Once again, thank you to our guests, to the barns from Pico. Thank you to the staff and the crew of Stingtec Hawaii. They all are wonderful people. We will see you, I believe we'll see you in the next one week. To be determined, I might be out of time. I love you.