Hawaii’s Natural Energy Laboratory fuels innovation

Next to Kona International Airport, at Keahole Point, sits a potential gold mine that is home to some of the state’s biggest exporters and groundbreaking research being done nowhere else in the world.

The Natural Energy Laboratory of Hawaii Authority is an 870-acre ocean and science technology park with 40 tenants – from unique aquaculture companies raising seahorses to a University of Hawaii laboratory that monitors and interprets atmospheric sounds. It is the only tech park in the world that pipes nutrient-rich deep seawater from 3,000 feet below the surface to its tenants. This chilly 43-degree Fahrenheit water is the ideal medium for aquaculture and is utilized by most of the other companies at NELHA.

Hawaii Island Mayor Billy Kenoi calls NELHA the Big Island’s sleeping giant. About 400 people work there, but, Kenoi says, someday soon it could provide hundreds more jobs to local children interested in careers in STEM (science, technology, engineering and mathematics).

“There is a lot of wonderful innovation and technology going on at NELHA, but there is potential for a lot more,” he says. “Hawaii Island is blessed with many natural resources – gifts – and I think NELHA is the perfect place to foster and incubate the most creative businesses in Hawaii.”

Here are updates on some of the innovative companies at NELHA.

Cellana

Fuel for the future

Photo: Courtesy of Cellana
Cellana’s long-term goal is to meet Hawaii’s needs for biofuel and animal feed.

Earlier this year, Cellana lost its partner and its biggest source of funding, but sees the split as a blessing in disguise.

Royal Dutch Shell teamed up with Hawaii-based HR BioPetroleum in 2007 to form Cellana and research the production of microalgae for biodiesel. Shell invested more than $80 million Photo: Courtesy of Big Island Abalone Corp in the company, including $20 million to build Cellana’s 6-acre demonstration facility at NELHA.

“Shell is a big international company with deep pockets, but, as an energy company, it changed its agenda with respect to biofuels,” says Jeff Obbard, Cellana’s VP of science and technology. “They became less interested in biodiesel, which is what our research focused on, and more interested in bioethanol technology, especially in Brazil.”

The end of the joint venture allows Cellana to explore other burgeoning markets in which Shell had no interest, such as aquaculture and animal feed, health products and cosmetics. “In order to make biomass profitable, all of these components need to exist,” Obbard says.

Cellana’s long-term goal is to meet Hawaii’s fuel and animal-feed needs.

“We’ve already proven that we can do large-scale production – more than seven tons since January 2010 – so now we’re focused on optimization,”

– CEO Martin Sabarsky

Recently, Cellana received a three-year $5.5 million grant from the U.S. departments of agriculture and energy to develop a protein supplement from algae and to demonstrate its nutritional and economic value in livestock feeds.

Photo: Courtesy of Nehla

In 2008, Cellana signed a memorandum of understanding with Alexander & Baldwin, Hawaiian Electric Co. and Maui Electric Co. to pursue the joint development of a 240-acre commercial algae facility next to Maui Electric’s Maalaea power plant. The proposed facility would be the first of its kind in the U.S. and would use the carbon dioxide produced by the power plant to feed the algae, reducing both carbon emissions and the need for fossil fuel, and creating biodiesel and other products.

Photo Courtesy of Cellana
Most of NELHA’s tenants rely on deep seawater that is piped from 3,000 feet below the surface of the ocean to operate their businesses. The uses vary; Some use the water for aquaculture, others use it for air conditioning and others bottle it for sale. Inset; Cellana says it uses “optimal turbulence” and selected nutrients in its open seawater ponds to cultivate algae that is used as high-quality biofuel.

Sabarsky estimates it would cost $70 million to $100 million to create the facility, depending on how much government funding Cellana can secure, so it will need substantial support from the private sector. The earliest the plant would be running is 2014 or 2015, Sabarsky says.

Cellana’s technology is designed to be duplicated all over the world, Sabarsky says. “We want to be known as a biorefinery of many products and now we have the freedom to make that happen.”

Koyo USA Corp.

Export success

Koyo may be Hawaii’s biggest exporter, but its product is something very basic: water.

Last year, it sold about $140 million worth of bottles of deep-ocean water and, since the devastating March earthquake and tsunami, Japanese sales have increased 20 percent, says plant manager Larry Visocky.

“That was an unfortunate disaster and our hearts go out to all those who were affected,” he says, “but the need for clean drinking water is greater than ever.”

Photo: Courtesy of Makai Ocean Engineering
Makai Ocean Engineering’s Heat exchange Test Facility opened in July and was designed for R&D and expansion. By adding a turbine and generator the facility, electrical power can be provided to the grid, and operation and control procedures can be perfected before creating a full-scale OTEC plant.

Koyo’s water comes from an undersea current that travels the globe’s ocean floor. Koyo says the water, piped from 3,000 feet below the surface of the Pacific Ocean, is safe from surface pollutants and packed with minerals. Visocky says Koyo isn’t trying to compete with big companies, such as Nestle, that sell their water for $3 a case at Walmart. Instead, it targets affluent consumers who are willing to pay more for high-quality items.

“We are one of the biggest exporters in Hawaii, if not the biggest,” Visocky says, “and we think we can keep that momentum going.”

The company continues to invest in its impressive NELHA facilities. Visocky estimates Koyo’s parent company, Koyosha Group – which he calls the Japanese version of Amway – has poured about $80 million into the company’s infrastructure since it started in 2002.

The investment is very visible: Around every turn, there are shiny, industrial-size machines that desalinate, bottle, transport or package Koyo’s Mahalo Hawaii Deep Sea Water. The company’s automated operations mean it only requires 18 employees at its 30-acre facility.

Currently, it is sold only through individual distributors in Japan at retail prices, Visocky says. However, Koyo is preparing to launch a smaller, 0.5-liter bottle, which will be sold on a home-shopping TV network in Japan.

“We thought we hit our peak, but then sales started to increase this year and we expect they will continue at this level,” he says, adding that the company is planning to focus more of its future sales efforts in the U.S. market and other parts of Asia. “We feel like we can take this business to the next level and that’ll be both good for us and great for Hawaii’s economy.”

Numbers on Mahalo Hawaii Deep Sea Water

2 million
Number of bottles of Mahalo water shipped every month.

1
Seconds it takes for a Koyo machine to pack a 12-bottle case.

99.5
Percentage of total production exported to Japan.

10,000
Number of independent distributors in Japan.

$7
Price of a 1.5-liter bottle in Japan, Koyo’s No. 1 seller.

Makai Ocean Engineering

Ocean Thermal Energy Conversion

Ocean Thermal Energy Conversion is not a new concept at NELHA. In fact, the park was built three decades ago specifically to conduct OTEC research: generating electricity using the temperature difference between deep-ocean water and surface water. While the concept is well established, the creation of a commercially viable system has been an engineering and financial challenge, says Michael Eldred, project manager at Makai Ocean Engineering.

The high price of imported oil and the public’s desire for clean-energy solutions have renewed interest in OTEC. Many, including Mayor Kenoi, hope the latest round of R&D could lead soon to an OTEC plant in Hawaii.

In July, Makai commissioned the first heat exchanger test facility in Hawaii, a five-story structure at NELHA. Heat exchangers are the most expensive component of an OTEC plant, so their cost, longevity and performance will make or break the project’s economic feasibility.

“What we have here is about one-tenth the size of an actual heat exchanger needed for a real OTEC plant,” says mechanical engineer Robert Loudon. “We’re in the R&D stage right now, but if we had an investor willing to take this project to the next level, we could bring it to a commercial scale pretty quickly.”

Loudon says in order for an OTEC plant to make economic sense, it would need to generate at least 100 megawatts of energy. With current technology, that kind of plant would cost about $1.5 billion, but Makai is testing aluminum as a substitute for titanium in the heat exchangers, which would lower costs dramatically.

Makai has teamed with Lockheed Martin’s Alternative Energy Development team to create a pilot OTEC plant for Hawaii, which would be the first of its kind in the world. It has also received support from the Japanese government and the U.S. military is also interested in OTEC technology, but Eldred says construction of a plant would still require significant private investment.

“Our plan is to have a two- to four-megawatt pilot plant offshore by 2014,” Eldred says, “and then we could test the reliability of an OTEC system. Nobody’s ever plugged in something like this to the grid, so we would need to know if it’s reliable and cost effective.”

Eldred says a successful OTEC operation would not only reduce Hawaii’s dependency on foreign oil and create clean energy, but a refined system could also decrease the price of electricity by up to 10 cents per kilowatt hour, or about $90 a month for the average Hawaii household, which consumes 900 kilowatt hours of energy per month

Cyanotech Corp.

Think big, go big

Photo: Courtesy of Cyanotech
Cyanotech’s 90-acre facility with long relatively narrow algae ponds, is the largest at NELHA.

When microalgae producer Cyanotech opened a 5-acre facility at NELHA in 1984, it was one of the park’s first tenants. Today, it is the largest tenant, with 90 acres. “I guess our growth says we must be doing something right,” says Gerald Cysewski, Cyanotech’s chief science officer and executive VP.

Cyanotech produces health and nutrition products from microalgae, which the company says contain many nutrients and grow much faster than land-based plants. The company has developed proprietary production and harvesting technologies that eliminate many of the stability and contamination problems frequently encountered in microalgae production using deep seawater. It has 69 large culture ponds filled with microalgae at different stages of development that are used to manufacture two products: Hawaiian Spirulina Pacifica, a blue-green algae, which, Cysewski says, contains more than 100 nutrients and is known for its superior health benefits, and BioAstin, which is packed with antioxidants and is said to have anti-inflammatory applications.

From April through June, Cysewski says Cyanotech generated $5.95 million in revenue and its BioAstin sales increased 97 percent over the same period a year earlier. He says the value of Cyanotech’s combined sales make up about 50 percent of the state’s total aquaculture exports. This year, the company received the prestigious President’s E Award from the U.S. Department of Commerce for its export success. Cysewski estimates half of the company’s products are sold in the U.S. and the other half are exported to about 50 other countries.

“We probably sell an excess of 20 million tablets a year of Spirulina and bulk powder through Nutrex Hawaii, a wholly owned subsidiary of Cyanotech,” Cysewski says, “and we’re currently making investments to expand our business.

“Fortunately, we didn’t see a drop in sales during the economic downturn. In fact, we’ve seen steady growth. In tough times, people start turning to supplements to maintain their health instead of going to the doctor.”

Big Island Abalone Corp.

Focus on quality

Big Island Abalone recently completed a multimillion-dollar expansion that more than tripled its production capacity, from 1.5 million abalone a year to 5 million. Now, the company has 450 tanks filled with abalone – everything from babies to adults ready for harvest – and is growing its only algae for feed.

Photo: Courtesy of Big Island Abalone Corp.
Workers at Big Island Abalone conduct a final quality inspection before the shellfish are exported to Japan.

“We are the only ones in Hawaii raising live abalone, so we have an advantage in the local market,” says CEO Hiroshi Arai. “But most of our product – between 60 and 70 percent – goes to Japan, the biggest consumer of live abalone, but there is a lot of competition.”

He says his Kona-raised abalone does well in a crowded market because, “We are growing the best quality species from Northern Japan and our facility at NELHA offers prime growing conditions that are among the best in the world.”

Big Island Abalone wholesales to more than 30 high-end restaurants in Hawaii, including Alan Wong’s, Morimoto and Restaurant Suntory. Unexpected revenue has come from sales at the weekly Kapiolani Community College Farmers Market.

“It’s very popular among locals and tourists,” Arai says. “We sell out every week.” Prices there range from $2 to $11 per abalone, depending on the size. Arai says he is grateful for the local business, especially since Japanese sales have slumped this year.

Photo: Courtesy of Big Island Abalone Corp.

“When the Japanese economy begins to improve, we are confident that our sales will, too. We’ve already seen some positive signs, so the timing with the completion of our expansion couldn’t be any better.

“Our hope was that, by increasing our production capacity, we would increase the (size of the) pie, be able to sell more and be more profitable. Now all we have to do is keep our fingers crossed. Whenever something good or bad happens in another part of the world, it just shows us how we are all interconnected, because it affects us, too. ”

NELHA’s operators

Big investment in economic development

Even with so much activity at NELHA, the park is only operating at 50 percent capacity, so one of NELHA’s top priorities is marketing to draw more tenants, says Gregory Barbour, NELHA’s new executive director.

“We need to improve our presence in the community, especially at trade fairs, and make this place more attractive, so that others will want to come here to start a business or conduct their R&D,” he says. “Leasing more land and broadening our base would help our existing tenants by lowering costs.”

NELHA doesn’t provide incubator-type services, such as business counseling, Barbour says, adding, “We’re not a place for basic research. But, we are designed for R&D and demonstration and we see potential in many areas, especially in office rental and as a demonstration site for national labs. This really is a one-of-a-kind place.”

NELHA is a state agency attached to the Department of Business, Economic Development and Tourism. It was created in 1974 as a site for OTEC R&D. Today, it generates all of its income from lease rents and does not receive any money from the state, but a lot of state money was spent to get it going. Next to the construction of the Hawaii Convention Center, NELHA is the largest single investment – about $120 million – in economic development by the state of Hawaii in the past three decades, says Barbour.

That’s money well spent, he adds, since “there are so many innovative companies here selling one-of-a-kind products in Hawaii or doing cutting-edge research that’s sparking global interest.”