 Okay. We're back. The live is four o'clock here on Hawaii, the state of clean energy on ThinkTech Wednesdays and for every single Wednesday. We love this show. It's our flagship show on energy and guess what? We have Jeff O'Kohost. Hi, Jeff. Hi, Jay. Nice to have you here. And we got some VIPs between us. We got Mark Klick and he's the senior strategy policy person, specialist person that HNEI used to be the chief energy officer for the state. And he can talk about all the science and the research and all the things to follow the future of energy in Hawaii. And we have Darryl Young. He is the, wait, wait, wait, wait. Number two guy. Yep. Number two guy, Department of Transportation under Ford, Chicago. Yeah. That is something. We have him here at this table here. I'm so excited to have you here, you guys. Thank you for coming down. Thank you for having us. So this is a discussion of fueling transportation in Hawaii. And I'm going to let Jeff scope that out for it. Well, thanks, Jay. Well, during the month of April, we've been talking about the role of hydrocarbons in this clean energy future. And we've got bills in the legislature that are pending to make 100% alternate fuels for the transportation industry. So we want to talk a little bit about, you know, the harbors and are we ready to import all these type of alternate fuels? So Mark and Darryl. Well, okay, I'll start. We have about five linear miles of pure space in Honolulu. Where does that go from? Where to where? From just outside, what was it called? Right along Kakaako, from that side all the way around through Aloha Tower, past the domestic fishing village, through young brothers around Kapalama Container Terminal, through San Island and around toward Kei. Very important space. Yes. Yes, yes. And unfortunately, a lot of the space is all taken at this point. So one of the things that concerns us as we start to talk about alternate fuels, which we're very supportive of, is the need for storage and distribution and how that's going to be handled. Our primary harbor for fuels is Kalai Law out on the west side. We have just two fueling positions right now, and we are working through a master plan in EIS to build a dedicated fuel pier. My biggest fear is we're going to build the fuel pier based upon petroleum, and we're not going to have that alternate fuel capability to be put in at the onset. So there's going to be a cost thereafter, whoever may come to bring the alternate fuel. Again, we're fully supportive. On that side, we have a few areas of bulk land available if someone was looking at it. But again, we need someone to come and approach us on whatever ideas that they have. And again, we could be ahead of the technology at this point, but you know, still trying to figure out the logistical. Well, putting it in context, there's a bill pending in the legislature right now. The Food Planet Foundation is organizing a rally or something at the Capitol Road Center tomorrow. They want 700 students to come down and support this bill. And the bill is to make transportation fossil-free, 100% renewable energy, I guess, by 2045, to match the electrical generation bill that was passed two years ago. And that's not so easy, is it? No, it's not that easy. The question becomes, what type of fuel are you bringing in? Is it fungible? Is it compatible with petroleum products that we have now? Is it going to be a blend into what we have or is it going to be a completely different fuel? And if it is a completely different fuel, what is the storage capacities, capabilities, the characteristics of it? Does it harden after it reaches room temperature? Do you have to heat it as it moves? Do you have to chill it as it moves? Those are all the questions that we're needing to know as we start to plan ahead for that infrastructure that needs to be put in. Mark, you're a planner. What's the plan? Yeah, well, you know, the transportation sector uses twice as much energy as the power sector. So I think the first thing we have to do is put into context that we're talking about a big deal. We're talking about really the line share of energy, two-thirds of it in the state is dealing with transportation. We have to come up with, I think, more comprehensive plans that involve more community players. And we also need to do something that is done extremely well in Europe and even better in Asia, which is to look at 30-year, 40-year planning windows and get everyone together and look at the multitude of transportation, multi-use sort of mass transit options, and then also look at basically rebuilding our traffic lanes with bike lanes and with, you know... So it's all connected. It's all connected. All this stuff is connected. Yeah, which takes a long time. But not only the fuel, it's the funding of the roads that's tied to the fuel. As you get away from the petroleum products, as you get away from what we call the gas tax or gas fees, what is going to replace it so that the miles traveled funds the roads that need to be built? When the fuel tax was originally put in, it was based upon nine miles a gallon, you know, the types of cars that they had back then. As cars became more efficient, you're not bringing in as much revenue as you need to keep up with the demand that people have for new roads, bigger roads, bigger road systems. So how does that funding mechanism tie into the alternate fuel that you're bringing in as well? As you get away from petroleum products, what you're going to end up with is you're not going to have enough money to pay for your highways. Well, in the difficulty, you know, Darryl talked about also the technology being in front of the technology a bit. It's also in front of the future of the way our urban areas are built. So you know, when he talks about newer, improved roads, they may be fundamentally different when we have autonomous vehicles, when we have more integrated gas transit, when we have, you know, more pedestrian-friendly areas. So those are long-term design issues, and we need as a community and as a state to get together and plan that and look, and ask ourselves, what do we want our communities look like 20 years from now, 30 years from now? We've never done that, I don't think. Right. It isn't going to be easy. I mean, you have a lot of people, a million people, you know, in generation, you have a couple of utilities. Right. We've talked about this before, but in electric generation, but in transportation, you have marine industry, not many players, and you have a million cars on the road. Right. You have investments in the infrastructure, in the cars and in the ships and in engines and all that stuff. Right. And so if you want them to change it, it's going to, A, it's going to cost them a lot of money. B, it's going to cost the state a lot of money. And C, how are you going to have people to actually, you know, change their investments to other infrastructure that works with renewable energy? This is going to be very hard. It's going to meet political resistance. Right. Well, you know, fortunately, two of our larger carriers, Matt and Patia, are buying new vessels that will be coming in, in the year 2019-2020. They're going to meet the air mandates. They're coming in dual fuel capable. And when I say dual fuel capable, they'll be able to run either LPG or LNG, depending on how they set it up, from the West Coast. And they're probably going to fill it up so that on a normal sea, it'll be able to come to and from Hawaii. The reason it'll be dual fuel capable is depending on whether or not they run into bad weather coming or going, they will probably need a petroleum-based fuel just in case they just off shore and can't make it to the West Coast. You know what I mean? You need to kind of make sure. And the other thing is, as you become dual fuel capable, depending on the type of fuel, you need a power plant on the, it's not just a tank. It's a power plant now. So you're converting the LNG to a gas farm to the engine. So you're taking away cargo space. So again, you could inadvertently raise the cost of goods by removing space on the vessel for the power plant. So Mark, let's make you the guy in charge of everything. And we have, what, 25 plus, what, two or three years, 27, 28 years to achieve this, assuming that bill passes, which I think is a fair chance it's going to pass because aspirational bills are easier to pass than the ones that implement the aspirations. So what are the basic, the fundamental boundaries of how we go forward? Where do we put the left foot? Where do we put the right foot going forward, assuming this passes and assuming we need to get, we need to do what Dahl's talking about within 25, 26, 27 years? Well, clearly, and I have to give the Department of Transpiration and Forward for Uchigami and of course, Darryl Young and his colleagues, they're a lot of kudos for being willing to take on energy and transportation for the first time that I'm aware of. Yeah, I join with that, I think, and Jeff does too. Kudos to you guys. I genuinely mean that, and that's an important part because when I was energy administrator and working with consumer advocate and a number of people, you know, we tried to bring in some new players into the game but, you know, the State Energy Office is not the center of transportation. So you essentially have, in terms of the public facilities, and of course, you know, the roadways and the harbors and the airports, you have the Department of Transportation but then you have all of these other players. You have the field providers, you have the kind of people that I know we're going to be talking about the refinery task force in the next part of the show, but getting different players at the table than we dealt with when we made the pledge to go to 40% renewable portfolio standard and then 100% in the electricity sector, whole different set of players. And it's really assembling those people and in determining who is responsible for what parts of the change that needs to be made. And then look over the time horizon who, you know, at the players, the integrated business systems and then figure out how these investments can be made and how they're going to make the companies that are involved in that whole as we go through this. So if you can't figure that out, this will go nowhere. No, we will figure it out. Well, let me, you know, because as we go toward renewable energy in both electricity and motor transportation, aren't we hastening the potential closures of our refineries and if that happens, are we ready at the harbors to import jet fuel? Can we take more jet fuel at Pier 51? So one of the things, so jet fuel comes in at Pier 51 right now. We are actually, when we're building the new Kapalama container terminal, one of the things that we made sure was we reached out with the Airlines Committee of Hawaii and the Hawaii Fleet Fueling Corporation to put in another line at Kapalama so that we have as a state of redundancy in systems so that we have one, the two fueling points in case one is taken out of service. The other thing that we're doing is we're hastening our ability to develop Kailai Law. In the past, we would have done the traditional bond float, build the Kapalama container terminal, wait a few years, and then eventually get to Kailai Law and the dedicated fuel field. We're trying to do both at the same time. It's that urgent for us to make sure we know what's going to happen out there. You brought up the fact that it could hasten the leaving of one of the two refineries, if not both. The sale to One Rock is one that we're watching and we're trying to make sure that we have enough space right now to take on if someone was bringing in finished product versus bringing in crude and then shipping it out. Kailai Law is a daylight-only port and it's busy because we have cement ships, we have coal ships, we have all that. We're trying to free up those spots. When we build the dedicated fuel pair, we will keep the two fueling positions as an alternate in five and six. So we actually have four fueling positions out that side. We believe it's that important for us. But again, we would like any of these alternate fuel providers or suppliers or people who have ideas to start looking at what are you going to do to supply and distribute the entire state with these fuels? It's a fantastic question, an important question. It's going to take a lot of people together, a new group, if you will, as Mark says. But right now, we're going to take a short break. I'm going to switch you out for a shout out to Rocky. Thank you so much for coming down. There'll be more. Okay, we'll do it. Thank you so much. Aloha, my name is Justine Espiritu. This is my co-host, Matthew Johnson. Every Thursday at 4 p.m. on Seantech, we host the Hawaii Food and Farmers series. We like to bring in folks from the whole realm of the local food supply and agriculture, anyone working on these issues, any organization or individual that has plans or projects. What kind of people have we had on? We've had farmers, we've had chefs, we've had people from government, larger institutions, everyone who's working to help make Hawaii's local food system that much better. So you can see us every Thursday and join the conversation on Twitter. And we hope to see you there. Aloha and happy new year. It's 2017. Please keep up with me on Power Up Hawaii, where Hawaii comes together to talk about a clean and just energy future. Please join me on Tuesdays at one o'clock. Mahalo. Okay, we're back, we're live after a very refreshing break. Here in Hawaii, the state of clean. And you talk about fueling transportation in Hawaii. So I have one of my co-hosts, Watanabe Ng, Attorney of Law. And we had Darryl Young from the Department of Transportation, and he's off and on in his place, Shashif Hesharaki, from FACTS, let's see, FACTS Global Energy. That is correct. Yeah, thank you for coming back. Thanks for having me. And Mark Glick, thank you for staying, Mark, with HNEI. So can you put this in context, Jeff? What is the discussion before I have to do with the discussion now? Good question, I'm going to have to make this up as I go along. Well, last week we had Dr. David Isaac from FACTS Global also talking to us, and he started talking about the new IMO regulation on sulfur. And then we just had Darryl Young talk about the harbors, and I thought that was a good segue into Shasha to talk a little bit more about what this is going to mean for marine transportation and how that fits in with this hydrocarbons and clean energy. Sure, no problem. Yeah, a few words about this new IMO regulation. The IMO is an international maritime organization, monetary. Basically, they're responsible for all the regulations in the shipping sector. And they have this new regulation with regard to sulfur limit that it can only be 0.5% sulfur by 2020. Now, in Hawaii, we've been complying with this and even lower levels since 2015 at 0.1%. But why this matters a lot is now the rest of the world is moving to this new spec. So the price goes up. Well, I'm going to get to that actually, yeah. Because it's a very fine line as far as the amount of fuel that is available to meet this spec. So if the refineries want to make this new spec, they have to give up valuable cracker feed space to this other fuel, basically create this. And that's going to put a lot of pressure on the lower sulfur premium fuels, such as what we use in Hawaii. So our electricity prices are highly tied to this new regulation that is going to be pulling on the same limited fuel supply source that we draw, i.e. Hawaiian Electric. And our electricity prices are going to be affected tremendously by this. How much? Because if you made a question, we're kind of modeling that right now. But I would think at least a 20% uplift from what the baseline would be. To us, 20% more. And that means 20% more electricity. That is generated from low sulfur fuel, which is still about maybe 60%. Yeah, almost 70% still. So with just L.S.F.O. then. Okay, yeah, so almost 70%. So two-thirds of your electricity bill. That's going down. That is going down with the more fixed renewables. But nonetheless, this is a really, really big deal. So people are looking at installing alternative fuels, such as LNG, as we heard about Pasha and Motson doing that, and maybe LPG. But it's kind of like a nuclear bomb in our industry. So it has deep repercussions for the state of Hawaii as well. Yeah. And it actually is good for alternative fuels though. Because now when the baseline goes up, suddenly. It's a motivation. Exactly, exactly. What about the other part? I mentioned that I'd heard recently that somebody said, oil goes up, goes down. It's not that simple. It's not that simple. In the context of where we've been historically, we've actually seen not too much of a variation in the last couple of years. Maybe $15, $20 is still not insignificant, but maybe not the $40 or $50 movements we've had. That being said, in the next few years, we do expect limited variability in the prices, only because the marginal producer is now the United States. And it's not some governments in certain parts of the world, i.e. the Gulf, that are really dictating the price. That being said, it is a fungible, or it is a finite commodity. And eventually, you're going to have pressure on the demand and the pressure on the supply, and the prices will begin to inch up. So that volatility, while it might be flattening out a bit, is certainly not going away. So that considered, let me ask you one more question, and I'm going to turn to Mark. He will solve everything. Which area is going to be more affected by these market changes that you have just described, transportation or generation of electricity? That's a good question. I think we've already seen the massive transformation of the generating sector with renewables, not just in Hawaii but around the world. So you've seen the cost of solar drop tremendously. So that being said, there is no silver bullet right now for transportation, as you guys were alluding to earlier in the discussion. And if I look around the world, I look at somewhere like Japan, very high-tech, educated society, no natural resources, very similar to Hawaii. I mean, even they don't have ambitions yet to go to 100% renewables. Now, maybe they're not being ambitious enough, but really, I think that there is a bit more realism is the right word, because basically, they want to have a plan and then follow that accordingly. So the transportation sector is what I'm trying to say is much, much more difficult to crack. But that is the key to solving your dependence on hydrocarbons, because as Mark alluded to, in most places in the world, transport accounts for 2-thirds, if not more, of your total energy demand. And that means the money we spend to bring it in, in this case. Exactly. I want to say one more point. And that's that we model what the global car fleet's going to look like in 2040. And if we even look at what the EU has done, electric vehicles are definitely growing. But even at today's growth rates, they're not expected to be more than 10% to 20% of the global fleet. High bridge could be another 20%. But then you still have 60% on traditional gasoline and diesel vehicles. And that's because a lot of the incremental growth in the world, remember, we're looking at it from the West. It's all in Asia. And they're focusing on a completely different set of economics than we are out here. So from a global perspective. Just give us a word on what they're trying to get their middle class up to basically everyone kind of owning a car. And they're very focused on the cost aspect. So the ability to pay more for a fielded factor, whatever you want to call it, it just doesn't exist in that part of the world. So it's a different perspective they're coming at. Mark, what are we going to do? So one of the things that I found is a fascinating new statistic. Because when you really look at replacement schedules for things like when you're coming with alternatives to gasoline and diesel, you're looking at maybe a new fuel system or using electricity instead. And the truth of the matter is somewhere, and it's much earlier than we intended or we expected, somewhere between 2020 and 2024, we'll actually finally reach parity because of the dropping costs of batteries with a gasoline vehicle, diesel vehicle, and an electric vehicle. So that could lead to a more rapid replacement if the manufacturers start producing more. The production, because we model the production is not keeping up. That's right. The production isn't keeping up. So the good news is that at least now, there appears to be a cost model. Now if these vehicle models that they're building begin to have really broad acceptance and the infrastructure grows, then you may see a more rapid production to meet that. And that could help a lot. But that's still a small fraction of the overall picture. It really requires these other things, design of other ways to reduce vehicle-mouse travel. Basically get off of the road. The social end of it. That's right. So you need both of those. And what I just mentioned is the lion's share of it. Yeah, sure. But let me add one thing though. You know, we heard last year about this time was at the Verge Conference. Yeah. You were running that essentially about graphene. I didn't know anything about graphene. Graphene is one layer of carbon atoms and it holds a charge and can give up the charge very quickly. It could be the best battery we ever saw, much better than what we have now. But I heard recently there's another one which goes beyond graphene, which is solid state batteries. Okay, and without comparing the technology factors, there are things in the pipeline that could change batteries for cars. And this kind of disruptive change is really out there. It's not that far away, I think. And the thought I would offer you is that when we find that solid state batteries are gonna be available in car number A, B and C and D are all gonna have to do it because the public will demand the best battery, no? And at HNEI, where I am now, there are test labs and really some extraordinary technicians that are working on various chemistries, thin films for PV and others, but on the storage technologies, there are really interesting processes. Right now, you decommission a battery in a vehicle when I guess it gets down to about 80%. It still is functional at 80% of its original capacity. It's lost 20%. But it still can, for the next 10 or 15 or 20%, it could have enormous applications in assisting in grid stability and other things. So basically these other sort of innovations as well, including these solid state batteries and other chemistries that will be astounding, along with just new strategies to be able to transfer and use, better use the lives of batteries that are already in existence and to recycle them better. Yeah, and who knows? I hate to say this, Sasha, but who knows batteries could be used in marine transportation too, couldn't they? Whoa. It could be used in many different applications. If they get to the kind of point that we were inferring earlier. Jeff, what do you got? Let me just see if I understand this right, Sasha. If oil prices are going to $70 a barrel, for example, by 2020, the IMO's sulfur regulation, is that gonna drive that 20% greater than that $70? Yeah, so typically the fuel we use for electricity here, the LSFO, the majority of the fuel, petroleum fuel we use for electricity is typically, historically, been at a discount occurred. Maybe 15%, 20%. Then you had events like Fukushima, which pressured it above crude. Now, with this new IMO regulation, you're going to have this Fukushima premium permanently, essentially. So it's not gonna be a two or three year issue. It's going to be until they find an alternative type of fuel, which is going to be very challenging in the near term. So basically, if we continue to burn and also for fuel, though, in the state of Hawaii, we're gonna be paying 20 to 25, maybe more percent higher than the crude oil price at that time. So it's a big deal, especially when 70% of our electricity on this island is generated by this particular fuel that's about to get squeezed. Might make the case for greater renewable energy or maybe even LNG. Yeah, I mean that you have a lot of things that people are looking at, basically. You can also invest and burn the same stuff and invest in scrubbers, but the guys don't want to do that because maybe the IMO says, okay, now we've tackled sulfur, let's tackle the carbon issue. That means you need a whole new fuel. So you put all this sunk cost investment in to tackle the carbon issue and then it doesn't matter. I mean, the sulfur issue and now the carbon issue is at play. So they're reluctant to make these added investments to build scrubbers. So many variables, so many considerations, but let me ask one last thing to Mark. LNG? LNG. So there's a chance for LNG here in Hawaii, Nate? So first to comment on that, it's really kind of fastening these trade-offs. So when the governor, when governor Ige made the decision that he thought it was inappropriate for us to import LNG for the power sector, he extended the life of the refineries, essentially. So, you know, we have this sort of quandary of how do we stabilize our conventional fuel base and make sure we don't have price and supply disruptions as we're really going downward on our declining our amount of use of low-sulfur fuel oil. And that would have accelerated the pace if you had brought in LNG. That would have accelerated the pace of the demise of the refineries. So they've been put on hiatus. So it's kind of interesting in one sense, and the refineries can prove a little easier on that matter. But overall, I do believe it does bear further investigation to look at the costs, you know, looking at the notion of a very limited sort of time period that you would explore, you know, a transitional use, essentially. Because it does have applications in the vehicular side in a significant way. And I think, as Daryl Young pointed out, you know, we have two issues, one, storage. And if we accelerate the demise of our, refineries, we're going to have to go into essentially terminals, and we have to make sure that we have all of the products that we need available, including the new renewable products in LNG as well. So it does require, I think, a careful analysis of what the full impacts of that strategy would be. And somebody needs to be enlisted to do that pretty quickly. Chef, can you summarize now that we're out of time? We've already been running here today, Jeff. But there's not enough time for these two gentlemen. Okay, Jeff Hanno, my co-host, Shashha Feshuraki, replacing Daryl Young, who's here for the first half of the show, and Mark Glick, HNEI, thank you so much, all of you for this great discussion and I hope we can continue it because obviously there are a million balls in the air and we're going to have to evaluate and come together on all of this and make it happen. Thank you so much. Thank you. I see you. Thanks, Mark.