Hawaiis Energy Future: What Will It Look Like

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Hawaiis Energy Future What Will It Look Like?

• The Coming Paradigm Shift
• (Paradigm an established truth or theory or way
• of living that suddenly changes with discovery of
  new
• facts or factors beyond human control.)
• WILLIAM W.M. STEINER
• Dean, College of Agriculture, Forestry and
• Natural Resource Management, UHH

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The challenge of food and fuel security is driven
by economic necessity, global climate warming
impacts geopolitical turmoil
ECONOMY
COMPOUNDING FACTORS Growing population Declining
fresh H2O Declining arable land New diseases on
rise Spread of nuclear arms Declining
fertilizers Peak Oil Concerns
Growth of global markets Cost of
transportation Loss of dollar sovereignty
Islands are particularly vulnerable
FOOD FUEL SECURITY
Drought Storms Desertification
China hegemony Rise of Terrorism OPEC Ascendancy
GEOPOLITICAL TURMOIL
GCW
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Projected year of peak oil by various experts in
the energy industry, Dec 2005 (summarized from
Stichting Peakoil Nederlands, 2005)

• AVERAGED SOURCE YEAR COMMENT
• Individual Experts (12) 2011 Highest and
  lowest projections removed
• Oil Companies (4) 2022 BP removed for
  lack of projection
• Governments (2) 2030 France and
  Netherlands have projected
• Oil Analyst Firms (4) 2021 Includes
  financial and forecast firms
• Energy Advsry Grps (6) 2024 Firms providing
  services to lenders
• Auto Companies (2) 2012 Volvo and Ford have
  made projections
• PROJECTION THERE IS EVIDENCE THE WORLDS OIL
  FIELDS HAVE BEGUN DECLINING PRODUCTION PRECISELY
  WHEN CHINA AND INDIA ARE DOUBLING THEIR NEED FOR
  OIL RESOURCES
• See also internet resources under ASPO and
  International Energy Association

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Underscoring the importance of declines in
production is the history of new field discovery
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100/barrel oil weeks away

• Not Years, Say CIBC, Goldman (reported by Mark
  Shenk)A woman pumps gasoline into her vehicle
• July 23, 2007 (Bloomberg) -- The 100-a-barrel
  oil that Goldman Sachs Group Inc. said would
  prevail by 2009 may be only a few months away.
  Jeffrey Currie, a London-based commodity analyst
  at the world's biggest securities firm, says 95
  crude is likely this year unless OPEC
  unexpectedly increases production, and declining
  inventories are raising the chances for 100 oil.
  Jeff Rubin at CIBC World Markets predicts 100 a
  barrel as soon as next year.
• We're only a headline of significance away from
  100 oil,'' said John Kilduff, an analyst in the
  New York office of futures broker Man Financial
  Inc. New disruptions of Nigerian or Iraqi
  supplies, or any military strike against Iran,
  might trigger the rise, Kilduff said in a July 20
  interview.
• Oil hit 101/barrel two weeks ago before falling
  back to high 90s.

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Since 1999 Statewide Ground Transportation Fuels
Demand Has Increased
Between 1999-2005, Total Diesel Imports up by
gt31
Average Retail Price Increased 86 In 1987, 52
of Our Imports Came From Alaska, the Sea of
China, and Brunei This Past Year the 11 Came
From Alaska Over 36 of Our Imports Came from
Saudi Arabia and Africa. Utilities and
transportation systems may end up competing for
local biodiesel supplies Chinas use of petroleum
is now second to USA, and is predicted to exceed
the USA by 2012. The Latter Presents Special
Danger To Hawaii
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China Oil Hegemony GrowingA decade ago China
began a military buildup

• Iran China is largest customer provides
  missiles and arms
• Libya provides WMDs in exchange for oil
• Sudan provides WMDs, military small arms is
  blocking UN
• sanctions to stop genocide in Darfur (Africom
  Guam buildup)
• Saudi Arabia developing contracts for oil,
  offering
• intercontinental ballistic missiles
• South China Sea in dispute over Spratley and
  Paracel Islands with Malaysia, Philippines,
  Taiwan, Vietnam, Brunei
• East China Sea in dispute with Japan over
  reserves
• S. America developing contracts with Venezuela,
  Brazil, Peru and Ecuador
• Canada and Mexico pursuing exploration and
  development agreements
• MEANWHILE, HAWAII BECOMES MORE ISOLATED

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Where will Hawaii get its future oil?

• We have seen the reasons Hawaii needs to think
  security.
• What are the most promising resources?
• What are the problems associated with these?
• How large a research program do we need before
  investing millions to put plant resources in
  place?

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Oil Can Come From Many Plant Sources
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The Hawaii biofuel development model is
straightforward

• Proof of concept research Pests present in Hawaii
• Climatic
  impacts
• Hybrid studies
• Production rates
• Economic model development
• Impact on society and culture
• ? Will it be food vs. fuel?
• Import seeds to develop nurseries
• ? Sources/lead times important
• Begin planting small trees
• Begin development of extraction mills
• Who pays for
  capitalization?

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WHAT IS OIL PALM
3-year old hybrid in Costa Rica of Elias
guineensis and E. Oleifera
Mature oil palm at UH Hilo
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Oil Palm Elaes guineensis Produces 3x More Than
Most Other Oil Crops the new hybrid palms
produce 20-30 more seed earlier
Oil Palm fruit from UH Hilo
Cooked mash ready for pressing
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Jatropha curcas fruit and seed from HARC/CTAHR
plots on Oahu
On the HEAR invasive species list. Seeds are
toxic. Mike Poteet has found insect pests
attacking it in Hawaii.
Four test plots on-island. Tissue culturing
effort underway. Currently plans to plant 7000
acres.
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Left Jatropha hedgerow in Kau.Right 5 month
old Jatropha seedlings on the Hocker-Beck Farm
above Hilo.
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Our own indigenous tree may be the key!
Kukui nut or Aluerites moluccana Genetic
selection for tree architecture oil
content productivity dwarfism oil type
early bearing
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How do other tropical countries do it?

• Costa Rica is a prime example and ASD a prime
  source of palm seed. They produce hybrid trees
  that are more profitable to plant.
• Where would we plant hybrid oil palms or physic
  nut trees?
• What would a palm or jatropha plantation look
  like?
• What would the market look like?
• What would the refining capacity look like?

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ASD Company Plane flying between San Jose and S.
Costa Rica
Which hybrid palms are best to plant in Hawaii?
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NEW INDUSTRY FOR HAWAII?
8 MONTH OLD TORNADO STRAIN OF PALMS IN NURSERY
IN COSTA RICA WITH FRANCISCO PERALTA PROVIDING
SCALE. NOTE OLDER PLANTATION IN BACKGROUND.
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Harvesting 40 yr old oil African palms

• Tornado, a hybrid of compact X Nigerian, 12 month
  old trees. Note the legume growing in windrows.

UHH Systems Engineering will be used to automate
this process.
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Seeds for overseas shipping are packed 500 to a
bag in heavy boxes
Seeds are heat-treated and washed in bleach.
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WE HAVE TO CHOOSE A PRODUCTION STRAINBack to
Hybrid Characteristics

• CROSS Bunch Oil Tolerances
• /bunch
• Deli x Ghana 15 kg, 28 lo temp solar
  radiation
• Deli x Nigeria 14 kg 28 lo temp drought
• Tornado compact 17 kg 30 dense planting, early
  fruiting
• Sunrise compact 17 kg 30 dense planting, early
  fruiting
• Evolution 18 kg 36.1 dense planting, early
  fruiting
• (Evolution now in test plots, pest resistance
  under study)

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We have to choose farm sites Dec 2002 Hawaii
County Archive Imagery
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We have to develop the facilities

• What would an oil crop project look like?

Fallow sugarcane land (oil palm) or marginal land
5,000 ACRE PLANTATION
OIL EXTRACTION
OIL REFINING (offsite)
Raw vegetable oil 4,600,000 gal/yr
PACIFIC BIODIESEL IMPERIUM RENEWABLES BLUE EARTH
MAUI US BIODIESEL GROUP
BIOMASS PYROLYSIS
OIL PLANT NURSERY
Pressed biomass
Pyrolysis oil 12,700,000 gal/yr
Animal feed 2,000 tons/yr
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The market already exists
Palm oil from
BLUE EARTH MAUI PACIFIC BIODIESEL IMPERIUM
RENEWABLES US BIODIESEL GROUP 280,000,000 gallons
of announced refining capacity being planned!
Tourism
Southeast Asia
Hawaii preferred
Military
Utilities
Off-road
Transportation
600,000,000 GALLON MARKET
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WE HAVE TO DEVELOP NURSERIES

• 2-YEAR LEAD TIME
• 100-250 ACRES OF NURSERY REQUIRED/30,000 ACRES
• HAVE INFORMAL COMMITMENT ON LAND AND FUNDING
• SEED IS IN TRANSHIPMENT TO USA AND WILL NEED TO
  CLEAR CUSTOMS

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We have to develop oil extraction mills

• OI Feedmill at UHH
• Community based mills
• Oil
• Biomass
• Distribution
• Truck
• Barge
• Mill byproducts can be used for soaps, plastics,
  pesticides, animal feed, pharmaceuticals, and
  fertilizers

Thus extensive business and industry spin-offs
abound
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There is a potential for insect and fungal
diseases that must be guarded against
Pollination is by the weevil Elaeidobius
kamerunicus American Palm Weevil Rhynchophorus
palmarum known to carry fungal diseases Five
known fungal agents attack fruit, leaves,
phloem Red Ring Disease is caused by the
nematode Bursaphelenchus vectored by R.
palmarum IPM is considered the best approach
Male oil palm floral parts with pollination
beetles scattered on the spikes.
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Proof of Concept research will confirm economic
models for revenue projection from 5,000 acres

• Jatropha Oil Palm
• No. Trees/acre 1,250 100
• Carbon sequestered T/ac 10 8
• Year of first profit 7 6
• Agricultural expenses/yr 2.41 mil 5.34 mil
• Extraction expenses/yr 1.56 mil 3.92 mil
• Profit by year 6/7 1.51 M/yr 7 3.22 M/yr 6
• Assumptions are made for fertilization costs,
  herbicides and pesticides costs, labor and carbon
  credit which is taken at 6/T.

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What Has Been Done in the past 8 months?

• Currently permits to import oil palm are in
  place about 50 young trees are growing at
  CAFNRM.
• Order has gone out to ASD to purchase the first
  10,000 seeds for oil palm.
• Cooperating landholders are lined up and
  waiting about 120 acres of Paauilo Land is under
  lease development from the County. Another 14
  acres is available on Oahu.
• Eight test plot sites for Jatropha curcas are
  either planted or under development these will
  be used to develop more seed for planting as well
  as collect production data.
• A Big Island lab is developing tissue culture
  techniques for jatropha (3 million plants under
  cell culture no mill in place).
• Within 2-3 years we will have a strong data
  bank to support proof-of-concept models.

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SCHEDULE

• Nursery operation late-2007, test plots underway
• Field planting Mid-2009
• Mill Funded in 2008 legislature, built by 2010
• Build refinery plant by-2010
• First harvest Jatropha by 2009, Oil palm by 2010
• Full production-2013
• First Pyrolysis plant may be built by 2020.

600 MILLION GAL DIESEL 400,000 ACRES OF
BIODIESEL PLANTINGS
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What do we need to do policy-wise?

• Act 221 is already on the books.
• May have to redefine the Act to accept new
  sustainable industries.
• The Federal Farm Bill is up for renewal this
  year.
• Education policy may need revitalization.

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Act 221 QHTB Tax Incentives as revised Act 215
(2004)
100 Investment Credit 2
Stock/Equity Option income - excluded from income
tax for employees, officers, directors
QHTB1
20 RD Credit Refundable No base limitation
Revenues
Royalty license fees excluded from income tax
1QHTB gt 50 devoted to Qualified Research (QR)
gt 75 QR in Hawaii - R D - Software
development - Biotechnology - Performing
arts products - Sensors and optics -
Ocean sciences - Astronomy - Non-fossil
fuel energy-related technology

• 2100 Investment Credit
• QHTB must be Hawaii-based (property,
• capital or property in Hawaii) and
• more than 75 of QR in Hawaii or
• more than 75 of gross income derived
• from QR on sales from and mfr. in
• Hawaii

QHTB Qualified High Technology Business
84601.4 Rev. 1/20/2005
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Only thirty percent of Congressional Districts
receive 70 of farm bill funding
276 Billion
10.6 growth between 2005 and 2006, estimates for
2008 run much higher
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Policy Problems in Hawaii

• Education
• DOE funding of charter schools with agriculture
  emphasis should be increased.
• 2. Public school agriculture programs should
  get earmarked funding to grow and sustain them.
• State should provide block grants to any graduate
  with an accredited College or University degree
  who wants to farm to help lease land, pay for
  supplies, energy, etc.
• Must stay in farming for at least 5 years
• Will be eligible for Grown in Hawaii branding
• Hawaii Graduates with agriculture degrees and
  teaching certificates should have their tuition
  fees refunded over the first three years they
  teach in Hawaii schools.
• 5. New Graduates and H.S. dropouts should be
  required to spend 1 year of in-service on
  developing farms.
• 6. We can take examples from Federal programs
  like old CCC, the Job Corps, the Peace Corps, and
  others.

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There is no oil industry education in Hawaii!

• A bill introduced into the State Legislature in
  2007 to establish a Biofuels Institute at UHH
  CAFNRM disappeared in Ways and Means, perhaps in
  the form of an Agriculture Education
  Revitalization Act to establish several Centers
  at UHH (Heritage Foods, Pacific Equine Center,
  Biofuels)-will need public support.
• 2. We believe there is a 3-5 year window for
  implementation this means policy and regulations
  must be in place to allow a rapid growth.
• Integration of biofuel development and food
  security is a must development zones should be
  outlined for each and the joint dependence of
  initiatives here must be recognized.
• Internship grants for students in both areas must
  be forthcoming.
• 5. 2012 will be a pivotal year this is when
  China will surpass USA in use of petroleum
  products, Russian ascendancy based on its own
  huge petroleum reserves will be assured in part
  because of the new China threat

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Pacific Aquaculture and Coastal Resources Center
at UHH-CAFNRM is ideally suited to conduct
research into biodiesel from algae
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The next generation fuel producers will be those
working with syngas from biomass

• Choren Industries, Germany announced on Oct 14
  2007 that Daimler AG and Volkswagen AG had joined
  Shell Oil in acquiring minority shares in the
  company. This is the most advanced synthetic
  biofuel company with a patented process biomass
  to liquid (BTL) process.
• 1. Converts biomass to molecular form, then to
  either biodiesel or gasoline or propane no
  competition with foodstocks, 90 reduction in
  CO2, 3X higher yield/unit area.
• 2 alpha proof of concept 2002-2005
• beta proof of economic model 18 million
  L/yr 2008
• sigma fullscale production 250 million
  L/yr 2013
• 3. Owner Mike Saalfeldt has recently
• purchased 2000 acres of land in Waimea.

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Mahalo for your attention!
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(No Transcript)
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What do we need to do to begin developing the
physical plant?

• There is a need to develop nurseries and mills
  for every 30,000 acres of plantation whether coop
  or single owner.
• We have to choose production strains.
• We have to verify pollinator and pest status.
• We have to validate the economic model.
• What is happening right now?

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What does the future hold beyond biodiesel?

• What will be the role of algae?
• What will be the role of syngas?
• Does developing our own fuel beget a danger for
  our future (do we have a choice)?

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BIOMASS PYROLYSIS

• Triples the oil production
• Proven off-the-shelf technology

Sources of biomass may be any organic material
including grasses
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RUDOLF DIESEL INVENTED DIESEL ENGINE IN 1895 TO
RUN ON 100 PEANUT OIL
The use of vegetable oils for engine fuels may
seem insignificant today. But such oils may
become, in the course of time, as important as
petroleum and the coal tar products of the
present time. (Rudolf Diesel Quote in 1912)
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How is Hawaii Vulnerable?

• Hawaii is isolated in the middle of the Pacific.
• Hawaii is a target as a U.S. military Bastion for
  the Pacific.
• Hawaii imports 85 of its food and all of its oil
  (less 2 million gallons recovered by Pacific
  Biodiesel).
• Hawaii is still a one company town but tourism
  is beginning to show signs of weakening.
• The mainland when threatened may pull resources
  away from Hawaii to protect people there (e.g.
  oil and food will be shipped to Hawaii for
  military use)
• Hawaii uses gt600 million gallons of
  petroleum/year.

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PLANNED KALAELOA BARBERS POINT HARBOR100 MGY
IMPERIUM BIODIESEL PRODUCTION FACILITYExpected
to be On-Line Late 2008
NEW BIOREFINERY FACILITIES WILL NEED TO IMPORT
VEGETABLE OIL FOR THE FIRST FEW YEARS OF THEIR
OPERATION
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10 Point plan by State of Hawaii (2006)

• Expand renewable energy opportunities
• Increase energy efficiency in public buildings
• Increase solar water/energy efficiency and
  renewables
• Maintain policiesregulations to encourage energy
  efficiency and renewable resources
• Preserve regulatory protections
• Invest in planning for sustainable communities
• Improve energy efficiency options in
  transportation
• Support research and development of alternative
  fuels
• Encourage development, production use of
  biofuels
• Ensure security of fuel and electrical grids

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Current high oil prices are blamed on

• Attempts by terrorists to disrupt supplies
• Not enough refinery capacity
• Political shenanigans aimed at increasing oil
  profits
• Miscalculation and manipulation of supply and
  demand
• Giant storms that disrupt supplies
• Manipulation of USA stores (US has 150 days of
  oil in storage in salt caves, weeks of private
  reserves in storage tanks in OK depot)
• Aging of facilities
• Geopolitical disturbances (small regional wars
  in oil producing states)
• OPEC cutting off supplies
• Industrial growth of emerging powers like China
  and India.