Kapolei-based Hoku Scientific Inc. said yesterday it will base its new solar-energy business in Idaho.

The fuel-cell technology company announced plans in May to raise $250 million to fund an expansion into solar energy. At the time, Hoku said it was considering expanding in Singapore, which the company said offers better incentives than Hawai'i. In the end, Idaho offered the better deal.

Hoku said state and municipal governments in Idaho offered Hoku a variety of incentives including tax breaks, financial support for infrastructure improvements and grants to fund the training of new employees.

"Idaho is a very attractive place for us to expand our business," said Dustin Shindo, Hoku's chairman, president and chief executive.

One of the new businesses, Hoku Solar, plans to manufacture photovoltaic modules, the basic element of a photovoltaic system, which converts sunlight into electricity. The company's other new business, Hoku Materials, plans to manufacture polysilicon, one of the key materials used in the production of photovoltaic, or solar, modules.

The production of polysilicon is an energy-intensive process, and Idaho has very competitively priced electricity, Hoku said. Hoku Scientific is evaluating three sites near the Snake River in southern Idaho, and plans to make a final decision within the next several weeks.

The plan calls for Hoku Solar to begin making photovoltaic modules in the second half of 2007, with initial manufacturing capacity of 30 megawatts per year. Hoku Materials is expected to begin production of polysilicon in the second half of 2008, initially producing up to 1,500 metric tons of polysilicon per year, the company said.

Hoku's remaining business — Hoku Fuel Cells — will remain in Kapolei.

Hoku's decision to build its new businesses in Idaho is not surprising, said John Strom, a vice president at economic development agency Enterprise Honolulu.

"I would imagine Idaho gave them a better deal" than Singapore and other locations that were considered, Strom said. "Idaho has been actively building a tech sector out of the companies that have been leaving California" because of high costs. "So they have got the manufacturing infrastructure there."

Hawai'i could never compete for such manufacturing jobs for several reasons, including high land and construction costs, Strom added.

"We were never going to be a manufacturing place because we don't have the land or the buildings," he said.

Shares of Hoku yesterday fell 6 cents to close at $4.34 on the Nasdaq Stock Market.

Reach Sean Hao at shao@honoluluadvertiser.com.