A Minnesota-based alternative-energy company wanting to air-condition Downtown Honolulu buildings using cold seawater said it's received interest to use half the planned system's total capacity.

Honolulu Seawater Air Conditioning LLC said seven buildings, including the federal court complex, have made early nonbinding commitments to use the system, which promises to significantly reduce electricity use and energy bills.

The company said the letters of intent demonstrate that demand exists for the $145 million system, which has been undergoing planning for more than three years and is another step toward delivering the ambitious project.

"We are very excited and pleased that so many Downtown businesses and organizations have welcomed this renewable energy concept," said Bill Mahlum, Honolulu Seawater's president. "We anticipate further commitments before year-end."

The company, an affiliate of St. Paul, Minn.-based Market Street Energy Co., hopes to begin construction next year and start operating June 1, 2010.

Mahlum said the company next month expects to begin soliciting building owners to sign contracts, which could take a year to finalize. The early commitments essentially reserve service for building owners.

Other than the federal court, Mahlum declined to identify property owners pledging to use the system.

Mahlum said the system could serve roughly 40 to 65 buildings Downtown though a 4-mile-long pipeline. Which buildings are connected will be a function of supply and demand with a preference for groups of large adjacent users.

"We are not going to run pipes all over town," he said.

The proposed system would draw seawater from a 63-inch-diameter pipe tunneled under the reef off the Kaka'ako peninsula, then along the ocean floor to a point about 2,200 feet offshore. At that point, water 1,600 feet deep is about 45 degrees Fahrenheit.

The cold seawater would then be run through a heat-exchanger to chill fresh water that would be piped into individual building air-conditioning systems. Warmed seawater resulting from the process would be pumped back into the ocean.

Honolulu Seawater estimates that the system can shave at least 14 percent from a typical office building electricity bill based on oil prices of $70 a barrel. Oil prices this year have ranged roughly from $50 to $80 per barrel, with an average of almost $70.

The company also said using the reusable resource from the ocean would eliminate the need for 174,000 barrels of fuel oil necessary to make electricity for air-conditioning.

The technology also could save an estimated 400 million gallons of potable water lost through evaporation in traditional air-conditioning systems.

Signing up customers is one of the few remaining hurdles for Honolulu Seawater. The company is preparing an environmental impact statement and will need to obtain permits for fairly extensive trenching to lay pipes under Downtown streets and in the ocean.

Financing for the project is to come from $100 million in state tax-exempt revenue bonds, with the projected $45 million balance from investors and conventional borrowing.

If developed, Honolulu Seawater's system will not be new. The technology is mature, with similar systems at Cornell University in New York state; Stockholm, Sweden; and Bora Bora, French Polynesia.

A similar system also cools three buildings at the Natural Energy Laboratory of Hawai'i on the Big Island, and a less-efficient cooling system at the John A. Burns School of Medicine in Kaka'ako uses saltwater from a deep well.

Honolulu Seawater said a lake-fed system in Toronto that's three times larger than Honolulu's proposed system took three years to sell out service after start-up, which was two years earlier than expected, and now has a waiting list for new customers.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.