The Wall Street Journal covers Sopogy

Darren T. Kimura in the Wall Street Journal

Alternative State
Hawaii has become an incubator for all sorts of renewable-energy

June 30, 2008

HONOLULU — A state better known for sun and fun is quietly
morphing into one of the world’s leading incubators of alternative

Royal Dutch Shell PLC is heading up a test venture in Hawaii to
turn oil-rich algae into fuel. If the process is found commercially
viable, the Anglo-Dutch conglomerate could build algae-
processing plants elsewhere.

Ever-Green Energy LLC of St. Paul, Minn., plans to build a plant
in Honolulu that uses seawater to cool office buildings; if
successful, the project will be expanded to other states. A start-up
company, meanwhile, is deploying miniature solar-thermal
collectors on Oahu to help generate more power for the local
electricity grid. This set-up, too, if successful, will be reproduced

The reason for all the interest: location, location, location.

“Hawaii is the only place in the world where you have access to
every form of renewable energy, and you are on the dollar and
the U.S. legal system,” says Joelle Simonpietri, a former venture
capitalist who now heads an algae-to-fuel firm called Kuehnle
AgroSystems Inc.

Hawaii is trying to convert to clean energy as fast as it can.
Petroleum imports make up about 80% of the energy supply for
Hawaii’s main utility, leaving the state among those hardest hit by
the run-up in oil prices. Electricity rates have gone through the
roof. The average residential rate on Oahu, where most of
Hawaii’s 1.2 million residents live, had doubled to 25.50 cents a
kilowatt hour — the highest in the U.S. — from 12.74 cents in 1999,
according to Hawaiian Electric Co., the state’s major utility.

So, in January, Gov. Linda Lingle announced plans under a state-
federal partnership for Hawaii to derive 70% of its energy from
renewable sources by 2030 — one of the most ambitious targets
in the world.

Ormat Technologies’ geothermal plant in Puna

The state has gotten a head start toward this goal in some places.
On Maui, for example, wind farms power 11,000 homes, or about
10% of that island’s energy, while on the Big Island, which is
Hawaii itself, geothermal power from volcanic vents accounts for
about a fifth of the energy there.

And on Oahu, Hawaiian Electric is building a new power plant that
will generate 110 megawatts — enough power for about 30,000
homes — and will run completely on biodiesel fuel. The $160
million plant, expected to open next year, will initially get its fuel
from imported palm oil.

“Everything is possible as oil prices rise,” says Henry
Montgomery, chief executive of MontPac Outsourcing, a finance
and accounting consultancy in Honolulu.

Not all the technologies are problem free. Environmentalists want
to make sure, for example, that Hawaiian Electric doesn’t import
any of its palm oil from endangered rainforests in Asia. Utility
officials say that their palm oil will come from sustainable sources,
and that over time the plant will rely more on crops grown in

There’s also a question of whether the sources of energy can
overcome technical hurdles, among other challenges.

Gov. Lingle, for her part, says Hawaii is counting on a multitude of
the clean-energy technologies to succeed — not any particular
one. “If our experience with petroleum has taught us anything, it is
not to get reliant on any one source of energy,” the governor said
in a recent interview at her state capital office, where, moments
earlier, the power went down due to a temporary malfunction.

Here is a sampling of what’s going on in Hawaii:


One of Hawaii’s most abundant resources is its sunshine. But like
many places, solar power used to cost so much more than
conventional power it largely wasn’t economical — until oil prices
got so high.

Now, several solar companies in Hawaii are trying to cash in on
the boom in clean-energy demand. Hoku Scientific Inc. until last
year specialized in making fuel cells. Now the Honolulu company
makes silicon for photovoltaic solar cells at a factory in Idaho,
while in Hawaii it installs solar panels for mostly corporate
customers including the Bank of Hawaii and Hawaiian Electric.
“Obviously, with the high electric rates, Hawaii is a great place to
sell alternative energy,” says Darryl Nakamoto, Hoku’s chief
financial officer.

Another company, Sopogy Inc., is augmenting local power with
solar-thermal energy, a technology that uses mirrors and lenses
to concentrate the sun’s rays on fluids, creating steam that turns
turbines to generate electricity. Spun off last year from a
technology company called Energy Industries, Sopogy has
created a miniature version of the giant solar collectors found in
places like the California desert. “Micro” collectors weigh about
100 pounds, measure 12 feet by five feet, and can be deployed
on building rooftops, Sopogy officials say. Also, unlike many
technologies that tap the sun, Sopogy has designed its system so
it can store solar energy, the company says.

Last year, Sopogy got $10 million in state revenue bonds to set
up a one-megawatt demonstration farm on Hawaii. In May, the
state Legislature approved $35 million in bonds to help Sopogy
build a solar plant on Oahu that will generate 10 megawatts, or
enough power for about 3,000 homes, for Hawaiian Electric.
Privately held Sopogy has raised more than $10 million in other
money as well, including from Kolohala Ventures, a Honolulu
venture-capital firm.

If successful, Sopogy hopes to expand its micro solar plants
around the world. “We want to see our revenues at $1 billion in
five years,” says Darren Kimura, president and chief executive of
Sopogy, and founder of Energy Industries.


One of the holy grails in alternative energy is a system that can
extrude oil from algae on a grand, and economical, scale.
Scientists say oil represents as much as half the body weight of
algae, compared with about 20% for corn, one of the most widely
used biofuel crops. Algae also grows as much as 10 times faster
than corn, and can be processed for oil without disrupting food

However, the technical challenges have proven large in the past.
For example, studies have shown algae strains that can produce
the most energy often need to be starved of nutrients, which
stunts their growth. Indeed, some previous efforts in the U.S. and
Japan over the past 30 years have been dropped, in part,
because costs were exorbitant.

But now that oil is so high, several companies are turning to algae
again. One of the more closely watched is Cellana, a Shell-led
venture with a University of Hawaii spin-off, HR Biopetroleum.
The companies announced in November 2007 that the venture
would build a pilot facility on the Big Island’s Kona coast. Since
then, researchers have been busy planting various strains of
algae in test tubes that sit in the warm sea water on the Kona
coast. One of the tasks facing them is to find algae that both
contains the highest amounts of oil and can grow in warm water.
“We’re in the process of whittling down the top super bugs from
hundreds to 10,” says Susan Brown, a University of Hawaii
researcher who collects specimens for the project on scuba dives
around local waters.


One of the simplest clean-energy concepts is to take cool water
from the ocean or a lake and use it to help air-condition buildings
in nearby cities. The technique has been used in places like
Amsterdam and Toronto, with significant power savings.

But piping water to where it needs to go requires more capital
investment than many places were willing to make when oil was
cheaper. Until recent years, there were also limitations on how
deep pipes could be put to suck up the colder water.

In 2003, David Rezachek — a former manager of Hawaii’s
alternative energy program — held a workshop in Honolulu to
revive local interest in seawater air-conditioning. Even then,
Hawaii’s electric rates were the highest in the country. “I said, ‘It’s
time to quit talking about it, let’s do this thing,’” Mr. Rezachek

He helped get Ever-Green Energy — then called Market Street
Energy — to set up a subsidiary called Honolulu Seawater Air
Conditioning. The company invested about $3.5 million in the
venture, while $10.8 million has been raised from mainland and
Hawaiian investors, including Kolohala Ventures, says Mr.
Rezachek, associate development director for Honolulu
Seawater. The state Legislature has also authorized $100 million
in tax-exempt revenue bonds for a seawater cooling project.

The venture proposed in late 2003 a seawater cooling project be
built for downtown Honolulu. Although ocean temperatures on the
beaches around Oahu hover in the mid 70s, they drop to 45
degrees at 1,600 feet deep a few miles offshore. So Honolulu
Seawater proposed to run a pipe from 1,600 feet deep to a
cooling plant onshore, four miles away. The cold seawater would
pass through a heat exchanger where it would cool fresh water
from separate pipes used to chill nearby office towers downtown.

Designed to cool 12.5 million square feet of office space — or the
equivalent of almost five Empire State Buildings — the Honolulu
system is projected to save as much as 15 megawatts of
conventional power, while at the same time cutting greenhouse
gas emissions by 84,000 tons a year. The venture expects to
secure permitting by early next year, and be in operation in 2010
at a cost of about $165 million.


Few places in the world have as much geothermal energy
potential as Hawaii’s Big Island, where the Kilauea volcano has
been erupting since 1983. As long ago as 1881, Hawaiian King
David Kalakaua met with inventor Thomas Edison to discuss
harnessing the power of Hawaii’s volcanoes.

In the 1970s, a public-private partnership dug the first geothermal
well in Puna on the windy east side of the island. Over time,
enough hot water and steam was taken out of the ground to fuel a
30-megawatt power plant. The plant, owned by Reno, Nev.-based
Ormat Technologies Inc., provides power to about 10,000 homes,
or 18% of the Big Island’s total supply, according to Hawaiian

Conceivably, the Kilauea volcano could provide enough power to
meet all of Hawaii’s needs, state utility officials say. But there are
several limitations. One is the Big Island’s isolation from the other
Hawaiian islands. For example, the ocean is so deep between it
and the next closest island, Maui, that officials in the state
abandoned a past plan to try and lay an underwater cable
between the islands to transfer the geothermal energy.

Another issue: opposition to significant expansion of geothermal
by some native Hawaiians, on grounds the volcano is sacred,
says Robert Alm, a spokesman for Hawaiian Electric.

–Mr. Carlton is a staff reporter in the San Francisco bureau of
The Wall Street Journal.

Sopogy featured by High Technology Development Corporation

HTDC assists innovative companies in various stages of their development. We refer to companies in the first stage as Seed or “start-up” companies that have innovative ideas for products or services … and a passion and belief in that idea.


SopogyWhen Darren Kimura first inquired about renting office space at MIC in 2006, he was already founder and chairman of Energy Industries*, a large national energy project developer, and a serial energy entrepreneur for over 12 years. Energy Industries had 12 offices in 3 countries and over 200 employees. Kimura had already founded Facility Solutions, a national service broker; Pacific Energy Services, an energy engineering company; Energy Conservation Hawaii, an energy retrofit company; eCONTROLS, a digital technology company; and Energy$mart, a utility consulting company. He had also already acquired the Quantum companies and other independent energy companies. His newest company, Sopogy, found the setting at MIC conducive to developing support for its Concentrated Solar Power (CSP) technology and soon decided to become a Virtual Incubation Client to tap into HTDC’s diverse technology network.

Sopogy was conceived in 2002 after Kimura’s early R&D suggested that modified concentrated solar power technology was the best option for producing energy from the sun, efficiently and at the lowest cost. Since then, the company has taken the basic design of large solar thermal power plants and shrunk it down so it can fit on a building’s roof. Sopogy’s CSP technology promises to enable widespread renewable energy production to generate electricity, create air conditioning, dry agricultural products, produce steam for industrial systems, and much more.

AvistaSopogy’s aluminum trough-shaped solar collectors are an evolution in solar energy generation—design improvements fashioned to increase the practicality of proven technology. “We try to go after markets that already exist, providing near-term, modest solutions,” says Kimura.

Sopogy’s focus is to build a system that costs about half as much as a comparable photovoltaic system, with a return on investment in three to five years. Its innovation is the nanocoating that insulates the reflectors from salt damage, and pivots that allow the reflectors to be flipped over and protected with additional casing in a hurricane.

 The company has the units manufactured from glass, aluminum and concrete in a low-cost process that is attractive to investors, and will eventually make them affordable for consumers. Sopogy is working with two different commercial models—a 2.5-foot-wide SopoFlare and a 5-foot-wide SopoNova. “We’re the only company out there that is trying to shrink these systems,” says Kimura.

Over the next year Sopogy, with 11 current employees, plans to grow to over 100 employees. In the next 3 years, the company hopes to go public. “Our market is California, Asia,” says Kimura, “Hawaii is really only our lab” Yet the entrepreneur from Hilo has no plans to see his company leave the state. “I want to leave a legacy in Hawaii.”

Sopogy Q & A

Heidi Kuehnle

Q: Can you tell us a bit about how you got into your industry?
A: My family owned a successful contracting company so I was exposed to business and the energy business at around the age of 11 years old. I got my early professional start trying to help my dad’s clients save energy in 1992 and started my first business in 1994. My newest company is a culmination of experiences and knowledge gained since that time combined with the urgency to address global warming and break the fossil fuel addiction.

Q: Please tell us briefly about your company and what it does?
A: Sopogy is a manufacturer of a solar thermal concentrator. In our system we use mirrors to focus the energy from the sun to create steam. We use that steam to create electricity. This highly efficient use of the sun energy gives us renewable energy which helps reverse the effects of global warming and saves our customers money.

Energy Industries is a national energy project developer with a turn-key energy saving solution called “Energy Solutions as a Service.” We help businesses save energy which saves them money by taking over management of their energy systems. Our business will provide an efficiency retrofit with the most efficient technologies and we use the customer energy savings to pay for our services. Our customers also share in the energy savings.

Q: Please tell us about your initial contact with HTDC, what value you saw that caused you to become a tenant/participant?
A: I contacted HTDC when I decided to launch Sopogy because I saw how they helped companies like Hoku Scientific and Blue Lava Technologies. I was living in Seattle and was deciding on opening Sopogy’s offices in Hawaii or in California. I initially emailed Sandi Kanemori who was helpful and explained the services offered by HTDC. I learned about the virtual program, the leases and other services. We were very intrigued by the month to month leases, the entrepreneurship programs and the service provider package.

Q: How has HTDC helped your business? What were some of the most significant, memorable ways?
A: Excellent educational and diverse presentations, good vendor database, networking (CEO breakfast/lunch), expositions, positive word of mouth, and use of conference room facilities.

Q: How did the Hawaii SBIR matching grant program help your company, and why should the State continue funding it?
A:SBIRs are possibly the only form of income for small, start-up R&D companies with no commercial sale products. Without SBIR funding, these companies will not exist, we’d lose valuable jobs and talented people.

Q: What more could HTDC/the State do to assist innovative businesses like yours?
A: I would like to see more awareness for Hawaii companies. One low cost approach could be internet focused blogging on Hawaii High Tech companies. Possible newspaper or magazine articles about these companies (awareness helps companies fund raise, helps investor relations, helps sales and marketing, helps build brand). Seed funding or even small grants. Legislative positioning.

Q: What are the 3 biggest mistakes people make when starting their own business and what do you suggest for them to overcome these mistakes?
A: Lack of appropriate funding and understanding of work required to get businesses going. Suggestion: Work for someone else, grow the database of clients and potential investors, then take the plunge.

Weak legal foundation which leads to trouble with financing and exit. Suggestion: Get someone with experience to assist with your set-up, preferably a professional.
Developing bad company culture. Suggestion: Set the rules for your company right up front and over communicate with staff. Bad culture = bad companies.

Q: What was your biggest business challenge and how did you overcome it?
A: Lack of credibility – Keep your word. Work hard at getting better. Openly communicate with customers.

Q: Any advice for today’s young business person?
A: My advice comes from a life lesson. I started at 19 and spent a lot of time early in my career trying to model my approach around other business people. It wasn’t until I realized that there is no such thing as a prototypical entrepreneur and there are trillions of different ways to run a successful business that I really began to grow and learn.