Kaua`i’s Gay & Robinson Takes Lead in Race to Produce Ethanol in Hawai`i

posted in: December 2006 | 0

Like a modern-day Rumpelstiltskin, E. Alan Kennett thinks he has found a way to turn straw into gold – or, what amounts to the same thing these days, convert cane trash into cash.

Alone among potential ethanol producers in Hawai`i, Kennett, president of Gay & Robinson, Inc., the Kaua`i sugar planter, is pursuing a two-pronged ethanol production strategy. Initially, plans call for construction of a traditional distillery that will convert molasses into ethanol at a rate of 12 million gallons a year. The planning process for this step is well under way; last month, the Hawai`i Department of Health Clean Air Branch issued a draft permit for public comment and review by the Environmental Protection Agency. A final permit could be issued before the end of the year, if no show-stoppers are identified.

Beyond that, Gay & Robinson has embraced a new approach to manufacturing ethanol that does not use sugar or molasses as the basic feed stock at all, but instead takes the fibrous byproducts – bagasse (what remains after the sugar is squeezed from the cane stalks) and trash (what remains in the field after harvest) and, employing a new technology, turns them into ethanol.

At the Hawai`i Agriculture Bioenergy Workshop held in October, Kennett outlined Gay & Robinson’s business plan to an audience of two hundred or so growers, landowners, utility representatives, agency officials, and others who were keen to learn what had caused Kennett to embrace an approach that, to many in the field, seems to rely on a relatively untried technology.

Kennett acknowledged the skeptics, admitting freely that he had been one of them, too, until he saw what the so-called Pearson technology could achieve.

“At first I was very skeptical of ClearFuels’ technology,” he told the packed ballroom at the Hilton Hawaiian Village in late October. ClearFuels is the company with which Gay & Robinson is partnering in its plan to develop an ethanol production facility on Kaua`i that employs the Pearson technology and will be designed to produce 7.2 million gallons a year.

“But then I was really impressed at what they’re doing and how they’re capturing all the energy” available in an acre of cane. “That’s something we’ve got to focus on and hopefully bring to fruition, because it’s got major implications if it is successful.”

In the past, Kennett said, “we have tried to gasify bagasse, with dismal outcomes.” Such approaches focused on using bagasse to create a synthetic gas, which could then be used to power generating plants. “Bagasse is difficult to handle,” he added. It does not have a uniform size, the pith (or center) of the cane is a “powdery product,” while the rind surrounding it is tough and fibrous. “It is a bear to handle, but Pearson has found a way to do just that,” he said.

ClearFuels, Kennett said, is “going to guarantee the process,” which will be installed as part of an overhaul in Gay & Robinson’s business strategy requiring from $90 million to $100 million in new investment. Of that, says Kennett, $30 million to $40 million will go into ethanol facilities. (State tax credits allow Gay & Robinson and its partners in ethanol production to deduct 30 percent per year of the “nameplate” capacity of ethanol plants, so plants whose combined output is 19.2 million gallons a year generate $19.2 million in tax credits over eight years. If the value of the credits exceeds taxes owed, “the excess of credit over liability shall be refunded to the taxpayer.”)

Other components of Gay & Robinson’s business strategy plan include installation of new equipment to develop value-added sugar products (mostly refined white sugar), and modification of existing boilers so they can burn coal as well as bagasse.

For the moment, with sugar prices hovering at around 18 cents a pound, Kennett said, his company does not want to abandon production of sugar. But Kennett anticipates drastic changes in the sugar market, possibly as early as 2008, when cheaper Mexican sugar will be allowed to enter domestic markets. “Sugar prices we see as going only one way – declining,” he said. With a different economic landscape, Gay & Robinson may direct its production to different cultivars of cane that favor fiber over sugar.

“We’re not thinking of changing our varieties now, because sugar currently has a lot more value than the fiber,” Kennett said. “If the Pearson technology works, we will start to consider growing high-fiber cane. You can’t have both. If you grow high-fiber cane, it will be at the expense of sucrose.”

Gay & Robinson has no intention of abandoning the market for sugar, however, as its plan to invest in refining capacity attests. According to Kennett, it makes no sense to send raw sugar to California for refining and then have it be shipped back to Hawai`i supermarkets and wholesalers. “We’re going to make a white sugar,” he told Environment Hawai`i. “Plus we may make a natural sugar as well,” one that still has a bit of brown color, similar to the turbinado and raw sugar products that HC&S produces under its Maui Brand label. “We intend to sell it locally and capture the white sugar market in the islands.”

If the plan to produce and market white sugar is successful, sugar will continue to be the high-value crop for Gay & Robinson. “Ethanol would have to go to $3 to $4 a gallon to replace value-added sugar,” Kennett said. However, if your only output is “commodity sugar,” ethanol is competitive at current prices.

But Gay & Robinson’s formula for ethanol production on Kaua`i won’t necessarily be a good model for other areas in the state. “The sugar crop is a huge user of water, and this should not be lost on those who are going back into cane production,” he warned. Should former cane lands on O`ahu be put back into production for ethanol, “water is going to be a critical component.”

Even in areas with adequate water, such as the Hamakua coast of the Big Island, which Kennett noted is “blessed with the rain the Good Lord gave,” other factors come into play. The Hamakua coast is very rocky, so the crop cannot be harvested by combines and instead must be mowed down by bulldozers. This makes the cane dirty, and while it can still be processed, any processing facility would need to have a permit under the National Pollutant Discharge Elimination System, or NPDES. While the defunct Hamakua Sugar Company had such a permit (with lax conditions, thanks to an act of Congress), Kennett noted that any new NPDES permit would not be easy to obtain.

Meanwhile, on Maui

HC&S is the largest sugar producer in Hawai`i, but it takes a back seat to Gay & Robinson when it comes to ethanol production plans. Lee Jakeway, director of energy for HC&S, told the crowd at the Hawai`i Bioenergy Workshop that his company was still investigating possible approaches.

“We’re looking to fermentation for our due diligence work,” he said, adding that molasses would be the likely feedstock for any HC&S plant. If the current molasses production of 70,000 tons per year were converted to ethanol through fermentation, the yield would be 5 million gallons a year. Yet construction of a plant with that “nameplate” capacity would be no less expensive than a larger one, he said: “You’re going to pay the same amount for a large-capacity plant as a small-capacity plant.”

“We could supplant molasses with some cane juice,” he said, “but then the economics become much different.” If that were done, then “we’d be working against the amount of sugar we produce for the specialty market. If you divert juice [to ethanol production], you reduce sugar.”

But the Maui Brand sugar HC&S produces is a high-end commodity. “We enjoy higher margins with this as compared with raw sugar production,” Jakeway said, adding that the company is “currently ramping up production of this product.”

Another drawback to a fermentation plant, Jakeway noted, was the generation of wastewater, or vinasse, at a ratio of 12 gallons of vinasse to one gallon of ethanol. Vinasse is often described as highly polluting and difficult to treat with standard methods. (The high content of phenols in the vinasse defeats the bacterial action needed for anaerobic digestion.) Vinasse has the potential of replacing “all our potassium fertilizer needs,” Jakeway said, but it “poses significant operational issues for treatment and utilization, and we have to incorporate this into the cost of production.” (Gay & Robinson intends to evaporate its vinasse to the point where it is 60 percent solids, and then dispose of it as solid waste, according to information it provided to the state Department of Health.)

Although HC&S might be slower out of the gate than Gay & Robinson in the race to produce ethanol, Jakeway insisted that his company was committed to biofuels. One of the reasons HC&S is still in business, he said, “is because of our involvement in bioenergy activities.” In 2005, the company generated more than 200,000 megawatt hours from bagasse-fired steam production and sold more than half of that to Maui Electric as firm power.

To enhance that, the company could burn cane trash, now left in the field, Jakeway said. Now the company generates 85 kilowatt hours per ton of cane; with trash, that amount could double, he said.


HC&S may not be building its own ethanol plant right away, but, if all goes according to the plans of Gay & Robinson, much of the molasses from Maui cane fields will be converted to ethanol at the Kaua`i distillery.

To produce 12 million gallons a year of ethanol, the distillery will consume every one of the 15,000 tons of molasses that Gay & Robinson generates annually, but that accounts for just 12 percent of the total amount of molasses required, according to the application of Kaua`i Ethanol for a permit to operate from the Department of Health. The remaining 110,000 tons of molasses will come from Maui, says William Maloney, general manager of Kaua`i Ethanol.

The numbers still don’t quite add up. If HC&S produces only 70,000 tons of molasses, as Jakeway says, Gay & Robinson still comes up 40,000 tons a year short. Even assuming the full 125,000 tons of molasses is found and fed into the distillery, the output would be 8.875 million gallons of ethanol a year, more than 3 million gallons short of the nameplate capacity. Adding about 20,000 tons of sugar (sugar has about twice the energy value of molasses) brings the total fuel stock up to the 12 million-gallon-a-year nameplate capacity.

Maloney was asked about the discrepancies. “I understand the confusion,” he replied in an email. “The plan is to start with G&R’s molasses, about 12,000 tons, add the Maui molasses to this, approximately 60,000 to 70,000 tons, and the equivalent of about half of G&R’s sugar in the form of syrup. There is a limited market for value-added sugar, between 10,000 and 25,000 tons per annum, we believe. The sugar mill will make a first strike of sugar and direct the rest of the stream to the ethanol plant. Depending upon yields, that should give us about 10 million gallons per year of production, with the 5 percent denaturant [gasoline].” (To qualify for the tax credits, the plant must operate at a minimum of 75 percent of its nameplate capacity; a 12 million gallon a year plant would thus have to produce at least 9 million gallons a year.)

The plant will eventually work its way up to full capacity as additional feedstocks from sugar cane are developed, Maloney said. That will occur, he wrote, as G&R increases its cane plantings to 12,000 acres on Kaua`i (including lands planted by farmers). “Our intention is … to be as self-sufficient as possible, thereby eliminating the requirement for supplemental imported feedstock.”

Much of the increased acreage will be on land at Kekaha, Kaua`i, that used to be in cane but was abandoned when Kekaha Sugar went out of business six years ago. Large areas of that land, now under the administration of the state Agribusiness Development Corporation, is encumbered by 30-day revocable permits to two seed-corn companies. According to ADC executive director Alfredo Lee, the agency is planning to convert the RPs into 20-year land licenses just as soon as an operation-and-maintenance contract can be worked out with a tenants’ co-op.

The licenses will require that any sub-license agreement be approved by the ADC, Lee said. “We also will specify that there should not be any sandwich profit,” he added. In some cases, the ADC would want to see a business plan of the sub-licensee before approving the sub-license agreement, but in the case of Gay & Robinson, which remains an ADC tenant on about 500 acres of Kekaha land, that would probably not be necessary if their intention is to keep growing cane. “If they were going to grow some other cellulose type of crop,” Lee said, “that might be different.”

Kennett said the seed-corn companies, Syngenta and BASF, have no objections to Gay & Robinson’s plans to use part of their acreage. Because of the nature of their crops, he said, they are required to have a buffer area, so the actual acreage they cultivate is far smaller than the area they have under the revocable permit from ADC, and sugar, he added, is an ideal crop to plant in the buffer area.

Other Contenders

To be eligible for the generous tax credits the state is extending to companies building ethanol facilities, the developers must file their notice of intention to build with the state Department of Business, Economic Development, and Tourism. As of July, five companies had filed such notices.

Gay & Robinson initiatives account for two of the five (the ethanol distillery and the Pearson technology plant) and add up to roughly half of the 40 million-gallons-a-year capacity that are available for tax incentives.

The three other companies are Maui Ethanol (12 MG capacity), O`ahu Ethanol (15 MG capacity), and Aloha Ethanol (15 MG capacity). Maui Ethanol and Kaua`i Ethanol are closely linked, with Maui Ethanol having submitted applications to the Department of Health last March for both a plant on Maui and the one on Kaua`i. According to Maloney, general manager for both companies, “our Maui project has been put on hold because HC&S has taken the position that they wanted to step back and re-evaluate their options.” Both Maui Ethanol and Kaua`i Ethanol are wholly owned subsidiaries of Pacific West Energy LLC, he said.

Environment Hawai`i attempted to reach representatives of O`ahu Ethanol and Aloha Ethanol, but was not successful.

— Patricia Tummons

Volume 17, Number 6 December 2006