 Yeah, welcome back to ThinkTek. ThinkTek Hawaii. I'm Jay Fidel. It's a given Monday at 12 noon. It's Energy 808, The Cutting Edge with our contributor, if you will. Marco Mangostoffer joins us from Hilo, Hawaii. Am I right about that? Are you off in Yan, Marco? I'm here in a beautiful Hilo wishing you a salamu alaykum, may the peace of the prophets and all good people past, present and future be upon you, my friend. Well, you know, you talk about Afghanistan. I know you're talking about Afghanistan, and you know, it's kind of a failed state, but there are many failed states around the world, more failed states now than there were 10 or 20 years ago. And the question is, do we, on a parallel basis, do we have failed states in this country? And the answer is in a relative sense, yes, we do. And if we had more time on the show, I would name them for you. Okay, the failed states of the United States. It's a different thing, and I'm thinking about writing a piece on it. Anyway, Marco, so let's talk about Hawaiian Electric. You wanted to talk about them because there were interesting news items about them. Am I right about that? It is never ending interesting news items from our friends, our brothers and sisters at Hawaiian Electric, Hawaiian Electric Industries, Helco, Hiko, Miko. So, yeah, I mean, you and I haven't been together now for a number of weeks, so thank you so much for having me back on. And yeah, where shall we start? Well, you know, back in the day, there was all this criticism of Hawaiian Electric. And it seemed like every activist organization, everybody, was attacking Hawaiian Electric. It wasn't that many years ago, over a myriad of things. It was like pinata time. And somewhere in that period, of course, everything is a sign curve in human history. In that period, it stopped. It relaxed. It declined. And there wasn't so much criticism. And you could say that somehow they had survived it, and they had come out smelling pretty good. And people liked Hawaiian Electric. And I think some of the things that have happened in the past year or two over COVID, for example, their termination rules, which I guess did come from the PUC, about not terminating people who were delinquent in payment during COVID, that endeared them, at least to some people. And so if you ask me right now today, this moment, what is their image in the community? What is their likes versus dislikes? I would say that a lot of people like them. But some of the news, and maybe a pretense of other events that will take place later, maybe it's a leading indicator kind of thing, are the things that you want to talk about. So why don't we talk about those things? Sure, sure, sure. Kind of where to start. I mean, I'm going to try to maybe take a top-down approach. I've been a reader of the tea leaves there at Hawaiian Electric now for more than 20 years, and I've had a chance to get to know a number of people at the column of top echelons of power there over the years. They're all very good people. And I mean that unequivocally. And it starts at the top and flows this way down. And I think the very top of Hawaiian Electric Industries is Connie Lau. And Connie came from ASB, American Savings Bank, and she was chosen to succeed a white guy, Bob Clark, Robert Clark in 2006, May 2006 of Memory Serves. So Connie is now into year 16, it's top of HCI. And I mean this most sincerely, I give Connie a tremendous amount of respect and credit for taking the company into the well into the 21st century. And she's done a fantastic job through the failed attempt to merge or to be acquired by Next Era Energy, which took about three years of their bandwidth and time from roughly 2014 into 2017 after the PUC turned down in mid-2016 to kind of unravel that. And the companies have braved rather sometimes critical audits. I'm thinking May of last year there was a management audit of HECO that was rather hard hitting at times. And they have dealt with a public utilities commission under Dr. Jay Griffin and Jenny Leo, which has been more, in my opinion, more proactive and more aggressive at times, progressive. Maybe that's the better word, progressive. And they've also, Hawaiian Electric Industries has fended off various suitors, some friendly and some not so friendly in their eyes. And I'm thinking, in particular, Jeff Ubin at Value Act Capital made a play on Hawaiian Electric several years ago. And this is all public information, not as if I'm sharing confidential insider stuff. And Ubin's company rose to become, at one point earlier this year, the number three shareholder in Hawaiian Electric Industries, holding hundreds of millions of dollars, whether they're stock, only behind BlackRock, Vanguard and BlackRock, who are two Mondo players in the world stage. And Jeff was able to get one or more of, quote, his people on the board, on the HCI board. And over the past months, there have been two departures from the HCI board. One was Eva Zlatnicka, and full disclosure, I know Eva. I'm very respectful and admire Eva as a professional, as a person. And she left the board because of Value Acts and the successor company, Inclusive Capital Partners, they're holding one below a certain threshold in terms of percentage-wise. And as per prior agreement, Eva submitted her resignation to the board, and that resignation was accepted. This is back in May. So Eva left the board. And now more recently, Mary Powell, who I also know personally, who I also think very, very highly of, Mary Powell, has recently left the HCI board to move on to become the new CEO of Sunrun, which is the largest residential solar developer in the country. He wasn't there that long. She came from a power company, what, in New Hampshire. And it looked like a pretty good, pretty good addition to the Hawaiian Electric board. I thought so. I thought so. And point of fact, Mary was longtime CEO of Green Mountain Power, Green Mountain Power in Vermont, and Green Mountain Power in Vermont had developed a reputation under Mary and subsequent as well, being a real innovator, very progressive, little utility there on the East Coast. So like I said, Mary left the HCI board just recently. So now we're down to eighth. We're down to eight board members. And at some point, they'll find another one or two. And there's been discussion kind of behind the scene, so to speak, about Connie's continued tenure at HCI. That's the plan, whether there is a plan. The timing of the plan is unknown to me. It's not public. But I mean, at some point, after 15 plus years, it's reasonable to assume that there has been succession planning going on, you know, who comes after her. And, you know, whoever does come after her, because it's not a question of if, but when, you know, they'll have some big, big slippers to fill because Connie has truly done a fantastic job and the environment in which, you know, she started her career at top of HCI 15 years ago, 16 years ago. You know, it's very, it's very different now. So I really do sincerely take my head off to, to what she's been able to do with the company has, has been able to do through thick and thin through a very different regulatory environment, ever changing political environment, very different geopolitical environment. So with that, I'll, I'll let you respond. Okay. Well, you know, full disclosure on and off of my electric has been an underwriter for not right now, but an underwriter for Think Deck and full disclosure on your side of the, of the fence. You're the founder and CEO of the Hawaii Island energy co-op, which, you know, wants to have transactional relations with HCI or Hawaiian Electric. I don't know where that is right now, but you're in the same business, if you will. So the question is, where does it go from here? This is pretty complex at the same time. This is the, what, my right, the largest company in Hawaii. It has what, 2,500 employees. It is, it is involved in all our lives, at least on all islands, but Kauai, and we should be interested in its welfare and its future and its technology and its viability and all that. So where, you know, what is it poised to do right now? Well, quick point of clarification, Jay. Yes, I, I am one of the founders of Hawaii Island Electric, Hawaii Island Utility Cooperative, excuse me, Hawaii Island Electric Cooperative, Electricity Cooperative, HIC, but I'm not the CEO. That is, that's Richard, my friend Richard Ha. So just one point of clarification. Okay, thank you. So I'm sorry, could you repeat the question? Where is it going? Whereas, you know, here we are at a flex point, as you describe it. Where is it going? I mean, and we, and we have, you know, this is very complicated because we have COVID going on and COVID affects everything, including the utility. You know, and we have, we have the, the economic troubles that follow COVID, like rack and pinion. There will be, there are economic troubles. There are people who can't pay the electric bill. There are companies out of business and there will be more. There's no sign this is going to slow down. In fact, is every sign is it's under the blanket now and the economic troubles in Hawaii will pop up. We were in CNBC yesterday for the extraordinary number of, the extraordinary increases in the number of infections in the state. So I guess I'm asking where, where all this goes. It's very complex. It's at a flex point now and call it the management of HCI and Hawaiian Electric. But where does it go in terms of the relationship of the largest company in the state, arguably the most important company in the state as far as consumers and businesses are concerned. And who we all, you know, we all need. You styled the title, the HECO, Two Step and New. We had one question come from a, somebody who saw that and she said, new, what is new? Well, Marco will explain it to you. What do you mean? What do you mean? Yeah, I guess I'm, I'm showing, I'm being a little bit cute here by using the French word for us and OUS, which is pronounced new. So yes, HCI, HECO and new and us. So yeah, let me kind of whittle, whittle down to that. I mean, you know, from Hawaiian Electric's perspective, things, things I think are looking pretty good right now, especially compared to, let's say, last year at this time, their stock price is trading at a very healthy mid-40s dollar share. They peaked last year a little over 50 momentarily and then went down. So their market capitalization is, I believe, makes them the most wealthy, the most, the highest market cap in the state of Hawaii. And they've also done a very good job communicating. It would seem to Wall Street analysts. And this has led, amongst other things, to an improved situation overall with their credit rating, with the three credit rating agencies of Moody's, Fitch, and Standard and Poor. So that's always very, very important, of course, to a publicly traded company. They have, shall I say, weathered the rollout so far of performance-based regulation, PBR for short, which is going live this year. And I mean, I just read a blurb in the advertiser today that we in Hawaii are back up to, you know, 30,000 people coming into the state per day, which was kind of the metric anything in 30,000 above was what we were seeing two years ago, 2019. So not to poo poo by any means, the numbers we're seeing in Hawaii now, which are astronomical in terms of COVID, both gross numbers testing positive hospitalizations and the hospital system being slammed like perhaps we've never seen it before. But you take a step back and at least Hawaiian Electric seems to have weathered these storms. And for now, at least, Jay, for now, they seem to be looking pretty good, pretty good in terms of their vital signs, at least from what I can tell. You know, in the time when David E. Gates took a position against liquid natural LNG and also the merger with next era. And that was, that was troubled times because they were both initiatives that Hawaiian Electric wanted to see happen. And, you know, then that big, phantasmagoric hearing in Blaisdell Center over the next era acquisition was really extraordinary. And it was it was not good. It was not good, not good for for Hawaiian Electric, not good as far as I'm concerned for for energy in the state or for the people in the state. That's my own view. But things seem to settle down. And Jay Griffin got to be, you know, the chair of the PUC. And that seemed to be okay. But I just wonder where that's going right now, because the relationship of the utility and the PUC is a critical element in in the credit rating of any utility in the country on Wall Street for new money. How is that doing? You know, I'm not going to speak for Jay and Jenny and Leo, but that said, I think Jay has made numerous public pronouncements or indicated at least that, you know, he sees it as a high priority not to not to for the commission to not do anything overtly damaging to Hawaiian Electric in terms of their ability to to get access to capital at a reasonable rate. So I mean, and I think, you know, they've been successful in doing that. So, you know, where do we go from here? I mean, there's still, you know, on the more granular level, there are multiple projects on all of their service territories to either Huonua here on this island or CVRE on Molokai and this lawsuit going on, as we speak right now, between half, excuse me, Molokai New Energy partners, aka Half Moon Venture for a seven megawatt solar facility with 15 or so megawatt hours of storage on Molokai, that lawsuit in federal court between Justice Michael Sebrite. And then there are, you know, there's the big push on Oahu to not only get KES, Capital Energy System online, one of the biggest batteries that will be battery with Tesla mega packs, by the way, that will be deployed when it does go live to this new program since I was away for a number of weeks now that I'm back, this new program announced with in a hurry by the Commission and by Hawaiian Electric to essentially install 50 megawatts, that's 50 million watts of behind the meter solar and storage actually storage capacity in the form of, let's say, Tesla power walls that will be able to be conceivably drawn on by HECO from these individual sites, thousands of them on Oahu, to be able to try to make sure that there's an adequate reserve margin once the co-planted AES or run by AES goes offline, absolutely positively in 2022, September 2022. So, I mean, there's so much going on, so many balls in the air, you know, energy-wise and with Hawaiian Electric and that's kind of my quick rundown on the ones that I typically have been following. What about the technology? What about community solar? What about all these various solar projects that Hawaiian Electric is involved in, which we hear about from time to time? They're big projects, they're unprecedented projects. What does that tell us about their advances in technology and in scope? Well, great question. I mean, the proof is going to be in the tapioca pudding, as I like to say, because these utility-scale solar plus storage projects have not yet gone online. They are in various stages of permitting and or construction on Oahu, this island, and Maui, and the change, the big change now and in the years to come compared to X number of years ago is the storage aspect of it. I mean, K.I., you see Dave Bissell and his crew have already been pioneering this on Kauai these past years on a smaller scale, because the Kauai grid is a lot smaller than Oahu, obviously, or Maui or the big island. So the batteries, both these mega packs, whether from Tesla or whomever else, and behind the meter storage, whether from Tesla or whomever else, I mean, that's changing the face of grids. That's changing the whole architecture of grids, or will, I should say, change it, where it's going to be truly more bi-directional, where you'll be able to, the utility operator, will be able to tap into storage that will be distributed across service territory, sometimes as granularly as from home to home to home or neighborhood to neighborhood. So when you say, well, what's the technology? How is it different? What's it going to do? I mean, we're in the grand unfolding right now of that, Jay, in terms of seeing how it all works, translating it from paper and algorithms and spreadsheets and designs into how it works in the real world. Wow. That is very interesting, because we don't have that much longer to go to reach our target dates. And although I am definitely impressed with the progress in moving in those directions and the whole notion of utility solar, whose time is certainly coming, even if it didn't come before, I'm impressed. And the question really I put to you is, all of that considered, do you think we're on track here? Do you think we're going to make the state goal of 2045 or the one electric goal of 2040 to go 100% renewable? I'm a lot less comfortable about opining about something that may or may not happen in 24 years or 19 years. I'm more kind of what's in front of me, what's in front of us right now. And let me kind of do a case in point. So, and you know, you and I have spoken many times over the years, I have a very strong connection, Afanas from Molokai goes back to my youth when I went fishing there as a kid with my father. And I'm particularly paying close attention to the rollout of what will be phase two, or the second attempt, second RFP request for proposals for community based renewable energy on Molokai. And keeping in contact with a number of the parties there, as you know, you've had Ali Andrews on and and Tadya Masheeda. So they're certainly in as well as as well, a number of other parties. And it's, it's now kind of the prelude is the foreplay to the RFP actually going live, which has been delayed and delayed and delayed and delayed. And it'll go live, I'm going to guess sometime within the next 60 to 90 days. And then that's when the clock will start ticking for proposals to come in. So practically speaking, Jay, practically speaking, there are two possible solar projects with storage that would be welcome. I'll use that kind of in a guarded sense of quotation marks that would be solicited by Maui Electric Company, Niko, for Molokai, one would be about a two and a half megawatt plant. And that would be most likely right by the one and only Niko power plant just west of kind of Gokai, a place called Palau, Palau, okay, two and a half megawatts. And then there would be conceivably a 250 kilowatts solar plus storage somewhere else on the Maui grid, or somewhere else on the Molokai grid. I've looked at the possibility of the rec center, the recreation center as a parking lot that could you could do a parking shade structure, for example, there, which is right by a Miko distribution line. So that would that's a possibility. So you have these two possible plants, right, two and a half megs at Palau, 250 at the rec center, hypothetically, right. And of course, you can't do these projects unless you interconnect to the grid, right, that goes without saying. And there's a cost to interconnecting to the grid is called an interconnect fee or interconnect cost. And what we are seeing preliminarily, according to the documentation submitted by Juan Electric Niko to the commission on these subjects, is that they are saying they're proposing they're noting all the above the cost to connect a two and a half megawatt plant at Palau could be would be over three million dollars, three million dollars. Sounds high. Will that will that kill the project? Well, and I just before I answer that wanted to add as well, that a 250 kilowatt project there at the Kuala Pua rec center, again, hypothetically, could be an interconnection cost of over $700,000. So to your question, will it kill the project? Well, I mean, that remains to be seen, it remains to be seen whether the commission, whether Jay, Jenny, Leo on the staff there will sign off on that, or whether it could conceivably be passed on to ratepayers, where Miko would part or all of the cost and pass it on to the ratepayers on Molokai, let's say writ large, as a way of not making that interconnect costs so so much of a burdensome possible poison pill. So and it's not just Molokai interconnect costs over the years have been a very big wild card that have scotched no small number of projects on on their service territory islands. And, you know, I don't want to go down the path of describing, you know, malevolent or nefarious intent here, but at the same time, you know, it kind of represents perhaps something of a tone deafness on the power of mom, you know, the utility company, because I mean, and to the to the credit of the commission, they are talking about having an independent engineer, which I think makes a lot of sense an independent engineer ride herd, essentially, on these projects, these proposed projects. So it's supposed to cover. What is the interconnectry supposed to cover? It's supposed to cover specific items or just throw it on the wall kind of number? I think that's something that our friends at Hawaiian Electric, whether it's big Jim Kelly or Peter Rostig or somebody else more, more informed to address rather than. Okay, let me let me go to the last point I wanted to raise with you and that is this. So logistically Marco and you travel you read you know about this you think about this. We're in climate change. And climate change has a real edge on it as we are seeing almost every day. We're seeing it in wildfires and floods and droughts were seeing it in storms. And we will continue to see it because it grows, whether the press decides to link a particular weather event to climate change, we all know that it's linked. And certainly we here in Hawaii, although we're small speck in the Pacific Ocean, we're in the path of extreme weather. We've had extreme weather before before climate change. And we will have extreme weather in the future in climate change and it will be more extreme. And it will happen between now, who knows when any time and the time we're supposed to meet our target goals. How will climate change and extreme weather and the other implications of climate change affect our ability to get to our targets. Oh boy, what a question to ask. I think you know I'm going to kind of do the Marco Jiu Jitsu move on that and you know ask rhetorically, practically, you know, how what's the sense of urgency that the venerable Hawaiian electric seals at this point to get these projects online. And again, I'll harken back to the CBRE program, which was passed by the legislature signed into law six more than six years ago, six years ago. And as of now, if I'm not mistaken, there are 298 total kilowatts, just two projects on Maui and Oahu under CBRE, six years later. And you know finger pointing is kind of useless, but at the same time, it doesn't not beg the question in terms of urgency. And it's all well and good to legislate and have the governor sign this and that. But when it comes to when it comes to execution, when it comes to getting stuff online, in a timely fashion, that's where there's a fair amount of grinding of teeth going on. And I mean, Jay Griffin has been very public about that, you know, in these some of these forums. So it's doesn't do any good to you know, necessarily to point fingers and to blame. But at the same time, you know, we all feel or many of us feel the frustration here in terms of getting stuff online. So now the clock is ticking, obviously. And you know, it just kind of sidebar note, Jay, I spent part of the past weeks driving from the Bay Area all the way up to the coast of the border with Canada, Bellingham, Washington, and especially south from Portland on I five, I went through hundreds of miles of dry, desiccated landscape, hazy because of the fires, I drove over what used to be Lake Shasta, this more kind of puddle Shasta now, I mean, I spent time at Shasta when I was a kid. Now it looks pretty much apocalyptic. And it's not just Shasta, I mean, it's Lake Powell in Arizona. I mean, it just goes across the board. So I mean, comparatively speaking, we in Hawaii seem to be a little bit better off. But at the same time, you know, the next hurricane rolls around and knocks off the Miko grid or the Helco grid or the Wahoo grid, then maybe it's going to get more of our attention collectively to get stuff done faster. I don't know. I mean, but there's a greater sense of urgency now to what extent the powers that be really feel that and are acting on it. That is what that's that's in the making. That's that's that's what we're witnessing. Okay, Marco, thank you very much for that. Elucidating discussion and a profound answer to my question. Thank you very much, Marco. We'll see you soon. We'll discuss other energy issues that come up in here in Hawaii 808, the cutting edge energy 808, the cutting edge. Marco Mangelsdorf, thank you so much. Hey, thanks so much, Jay. Always a pleasure. Good to be back with you, brother.