 Okay, three o'clock rock. I'm Jay Fiedel here at Think Tech and we have Mark Duda with us And I want to just say a few words before I say actually hello to Mark Take a flash on mark. That's what we can see what we're talking about. That's Mark Duda. Okay So he got into the energy business pretty early In in my view of it. I mean 2008, you know, and that was that was the year if you recall of the great agreement There was the agreement to agree so to speak. Yeah The great energy agreement under Linda Lingle. It really it did change things. It did, you know, it was the nod It was the governmental nod to energy and he worked his buns off for the next several years I mean, I'm sure still and when we started getting active on the Hawaii energy policy forum and had all these events legislative briefings, you know in January and Energy day mark was very active in that and he was active in the solar energy Association for several years anyway and Those were the heady days those of the day everybody was sort of coming together on energy was so much action so much excitement Gee, I remember and I got to know early that mark Mark was really dedicated to this that he that it was his life was intertwined with energy And thus it will always be with Mark Duda I can't imagine him in any other context the other thing is really smart really articulate and I learned early that he's a Leader in this area, but we haven't seen him in a couple years And so it's really delightful to have him back. Welcome to the show mark. Thanks Jay. It's great to be back It's probably a good time to catch up. It is let's catch up, you know in those days I'm talking four or five years ago It seemed like we were all in the boat together At least I saw it that way maybe you did too and we were all working, you know toward this really exciting goal We didn't have this you know 20 20 45 thing at the time But but there was really exciting goal of putting clean energy everywhere changing our changing our state and And people took note not only in the state but outside the state and the personalities and the organizations involved the stakeholders If you will of Hawaii energy policy forum You know, I thought that we would all grow old together and that we would we'd be involved in moving this Moving the ball ahead and and creating a new world here in Hawaii But little by little and I'm sure you saw the same thing you said you view about it Little by little that that you couldn't sustain that that view because people were coming and going Organizations were changing and coming and going in the government, you know the two-year cycles in the House of Representatives My goodness, they don't know what the last guy knew you taught the last guy about it But now if somebody else comes in and just knows so much have to reteach him And so the legislative cycle political cycle, you know sort of Change things and changing personalities. It was like a great big Musical chairs kind of affair where the end of the day look around on the guys You thought we were going to get old with building energy. They weren't there anymore And then you wonder can we still do this? Who is around who remembers it's and I always said that Hawaii has a bad case of us can't remember And maybe no we can't in this area So what is your experience been like you know from the heady days when you started 2008 you're you know You were a founder of revolution now you're with DEP distributed energy partners doing solar but more than solar I know you do more than solar because you're that kind of guy What has it been like for you? What what kind of trends and evolutions have you seen could you observe in your in your you know Profundity well, I mean you've said a lot there and it's a little bit challenging to respond But I think one of the kind of key ways that I think about the last you know coming on ten years is Is you know in those early days when in some ways it did seem to be different was that? Because it was different or because we had a snapshot into what was inherently a historical process I mean I think that's been proven right like things change and evolve over time and they have and you know When I got into this we were we were trying to figure out if the grid could handle You know 1% of the customers having PV Let's say and you know now we're at somewhere north of 20% of that kind of thing and so the questions have changed and So I you know I just think that there that on one hand There's more perspective to be had in terms of integrating non utility owned Renewable energy of all different sizes into the utility grid and the implications that that has for everybody But at the same time not everybody has all of that history I think this is one of your other points is some people that have you know kind of were involved then they got out of it before They'd seen different aspects of the cycle and some of the people doing it now You know weren't around for those early days So it does make it challenging to kind of pick through and see what's really going on and that really have a sensibility For you know what certain changes that may happen now mean in the context of everything that came before and where they may be Pointing us to the future. So I you know I totally take your point. I think about a lot of the same stuff Well, I mean some some of the bumps and grinds in the road here is You know soon after the the beginning of this period. We're talking about it was contention There was contention by the solar installers of which you were and you were in that group Against the utility because the utility didn't want so much solar there was contention with the regulators who were I think Under political pressure one way another and the legislature under political prayer bars lobbying everybody about everything And and that never got settled. I'm talking about a large picture never got settled and then what not quite two years ago In walks the next era deal Which was you know talk about distraction I mean in the fullness of the historical events we're talking about that was a huge I would say that was a 4.3 billion dollar distraction Everybody stopped it was like stopped the world. I want to get off and and nothing happened I mean everybody was like waiting to see which way the wind was blowing keeping options open waiting to see and now It's over and now we have a moment of peace maybe not so many distractions And we try to figure out which direction we were going How that may have changed in the past couple years? Which direction we should go now and we look around and we see that you know solar may not be the Cural that it was Hawaii may not be the leader that we thought it was going to be Yep, well, I think you know, maybe there's three different points in there. I like that's complex That to the distraction point, I think you know, that's unambiguous that was clear before the Commission agreed to hear that case I don't know if you remember but a number of organizations that were interveners and a lot of the Relevant dockets that are going to determine the state's energy policy going forward filed a motion with the Commission saying hey You need to figure out that there's docket to the coupling docket the power supply improvement pen docket And I forget what the other one was with four of them, you know So that we know what the state's energy policy is and and even ultimately in fairness to next terrorist They can see if they want to be a part of what the state decides is going to be the public interest around the electric power sector going forward and In you know, and you know, here's all the problems that will happen if we don't do that and instead You know, we heard the case and we're exactly right back where we were before and of course We have a new chair now and what's he done but in the last couple of weeks said hey We really now that we've got this thing out of the way It sucked all the air out of the room, but we really need to get back to these four dockets Like I say, which was clear to a lot of the people that were kind of deeply involved in this beforehand So to that point tell your your hundred percent Agreement on the distraction point and the sad part of it is that you could have known this beforehand and probably save next Error a lot of trouble as well as you know, what regulators and the interveners Right I do For that reason, which is that we don't want to make the state's energy policy in the context of what next era wants We want to make that in the term what's in the public interest and then see who wants to kind of orient to that and you know Obviously in the middle of their bid, which was based, you know in a substantial way around LNG The state decided it wanted a hundred percent renewables, you know Essentially in the same relevant time frame where you would recover the cost of that LNG investment So, you know, if you're on the next era side, you would say hey, this isn't really matching up with our plans very well You know you couldn't help but but think that but but you know, this isn't meant to be an anti next era point It's a governance point. I mean you should they shouldn't have been put in that They shouldn't have been allowed to put themself in that position when it was really clear two years ago What the state needed to do which was to figure this other stuff out and then see who wanted to support that You know that version of the public interest Couldn't you know, I mean and I dwell on this issue myself Couldn't the state have regulated next era one way or the other into following state policy? I mean why why do we why do we have so little confidence in our ability to regulate a Company to comply with state policy. Well, I think we see evidence of Governments inability to regulate, you know all over the economy and health care sector You know, so I mean it's almost like the opposite question. Why would you think you'd be successful? And not you know not not intended to be pejorative toward anyone in government It it on some level is an unequal playing field and the rewards to the company of winning that battle You know are much higher than they are to government and so people lacked accordingly It's kind of like microeconomics 101, but but things have changed now for for you for the solar industry I mean it was really gangbusters there at the beginning and it was a you know a ripe pomegranate for everybody involved And it's just a thought I want to share with you. I had this thought driving in and that is this You know at the outset this was so attractive and it was could be could be so profitable But but but but what I think what the solar industry forgot was that it needed to it needed to Understand and sympathize with the common good rather than profit per company or for the trade the industry itself And that had had the had the solar installers looked further And I think you did actually looked further to the common good It would have been a more credible force in the conversation and it would have taken us to a better place We'd be in a better place now if the industry had been looking to the common good Well, I mean I don't want to argue that everything the solar industry has done over the last decade It's great, but but I actually really disagree with the point you're making and I would say that that largely reflects the story that utilities been trying to sell through various outlets over that period you know and The the reason why in my view this is this isn't well first of all on the solar industry side, right? I mean the a lot of the arguments about where the common good is being harmed You know have no basis in any kind of empirical research or even sort of theoretical grounding There's things that get set over and over and over and haven't been examined And again, you could argue that at some point the commission should have looked at this question in a Methodologically robust and defensible way, and then we did least have a realistic answer to sort of orient around so that's a solvable problem We just haven't as a state set out to solve about the end of any M NEM was that was that a good move or not? Well, it uh, you know from the perspective I mean the most recent thing I've seen on this was by Jim Lazar who I'm sure you know Essentially that that NEM lowered costs for ratepayers in the state He didn't say that no that any amount of NEM going on forever would have that result But that was the result of his empirical analysis looking at actual data from this state So, you know, I don't think you I don't think you see that anywhere else You know prior to his analysis somebody like actually doing math to show that that kind of result And it's not like he's doing that on the behalf of the solar industry He's just an interest, you know someone who wants to get energy policy right in the state So, you know that being said, I think the question is really if you wanted to change the way Distributed generation gets interconnected. How would you do that? And in my view what the Commission did is is Is not Inherently problematic or wrong. I think there's other things that they could have done But but from a theoretical perspective, they had a logically coherent plan But the way that they implemented in the decision in that there's docket last year was just inadequate and and what I mean By that is you say, hey, here's what rightly or wrongly Here's the problems that we perceive with distributed generation and the opportunities that we perceive around it is first of all And a certain point is going to X there's gonna be too much power Exported from these systems onto the grid. So we got to do something about that We're concerned that people are being overcompensated for putting power onto the grid We're concerned about that and conversely if we could only make all these people that keep wanting to buy net metered PV systems by batteries Then we could save the utility from having to make investments in ancillary service providing Technologies that could be done from all these distributed systems And so why don't we try to solve all those problems at once and basically drive the market toward these self supply systems Which essentially two-thirds of which I think in their view We're going to be residential systems with substantial amounts of batteries That would allow people to serve their own load during the day and at night to a significant extent by providing power out of the batteries I think a good idea. It does sound like a good idea And like I say, I'm not trying to sit here and criticize that idea However, what's bad about the way they implemented what was again not an inherently bad idea Was that they didn't specify the pricing that allows you to calculate the value or the economics around that investment So how much are you going to be paid if anything for providing these ancillary services at your house? Because it does limit the amount of power that you're going to get out of these batteries that you bought So should you buy them or shouldn't you buy them? Well, I don't know because some of the variables in the math problem I'm trying to compute don't exist and so to specify something like that without those variables is a mistake Second thing is when you really want that power to be supplied or for the utility not to have to supply that power Is in the evening peak and that what the commission said is hey We want some time of use rates not the time of use periods are five to nine and the pricing is going to be like this and Not only is that what you're going to be charged if you use power at that time But you can actually be paid more for supplying power to the grid during that time So you would think that you would want to use the leverage the resource of people like you and me buying systems at Our houses to flatten the load curve and reduce the cost of supplying power to everybody they didn't do that and then they also said and The way we're kind of thinking about it is that you'll need to supply these grid supportive services Potentially as a quid pro quo just for interconnecting at all, but then they didn't say which ones and so I'm not sitting here trying To say this was an easy problem to solve but at the same time I am saying that if you wanted to sort of radically transition from a system Which is buy a PV system put it on your house export whenever you want use power whenever you want to one that said never export buy some batteries and You know supply services to the grid you need to sort of think it through and detail it out better And so that's what we got last October October 12th in essence And I would say it's still not really worked out to the point where people can make sound investment Decisions around a decision that's a lot different than than what it used to be and you can throw in the fact that over that Same period oils gone down So the cost of waiting to invest in a system like that has gone down and that kind of thing so horses Yep, I told you about Mark. He really is Akamai about this stuff very thoughtful and articulate We're gonna take a minute and think about what he said try to integrate that into our brains I'm going to come back when to ask him. What would he do now? Hi, I'm Ethan Allen host of likeable science here on think tech Hawaii calm I hope you'll join me every Friday at 2 p.m. To discover what's likeable about science Aloha a Hanukako is here every week on the think tech Hawaii broadcast network Because we need to take a dispassionate look at the issues here in Hawaii We need to understand what's going on in the economy in the public sector and the private sector What's going on in terms of schools and with the people whom we love and see every day I'm Keeley Akina president of the grassroot Institute proud to be part of think tech Hawaii and we'll see you here every Monday at 2 o'clock p.m. Aloha Aloha and welcome to think tech Hawaii. I am in a tank I am the guest host for small business Hawaii with Ratch Baker to tune in every Thursday at 2 p.m. And watch us Aloha We're back we're live and now we're gonna now we're gonna actually Figure it all this out with Mark Duda of distributed energy partners We've been around in and around the clean energy initiative really from the beginning in the current generation I'm a calling this show we calling this Plan B life after next era and we're gonna ask him what is what is his plan B to move ahead on this But let me throw some elements sort of based on what we were talking about before and during the break So it seems to me this is ultimately a question of technology. I mean we're gonna deal with the technology We'll be smart about dealing technology. It's not only the PV technology, which is pretty mature already But it's technology of the black boxes you know that you put on Smart grid and it's the technology of the batteries and it's all that software that Canon should be devised in order to control all that and make it work together So really it's a technological question and and so why haven't we done more? Up till now we could have black boxes. We could have smart grid we've been talking about smart grid for the longest time and Batteries are out there. Yes, they're expensive and yes Marco Mangelsdorf and his article said they cost about as much as the system itself as the PV system itself So effectively it doubles the cost of your system, but it's critical. That's good for the community So why can't we find a way to incentivize and cause the structures? You know in the community in the energy community to put all this in place and move forward I think the context for that question and for what you said that it you know, it's the most fundamental thing is technology I would say that there's one thing even more fundamental which is the business model of the utility and so I think that's sort of the point from which everything else is ultimately going to emanate and And so I think if you had a utility with a different business model, then you know You'd get different sets of policy issues You'd get probably different sources of agreement and disagreement among the different players Then you have now and you'd get a different sort of pace of technological adoption and that kind of stuff too So talk about what change in business model I mean the thing that you hear a lot is that the coupling has sort of severed the link between the utility wanting to sort of buy and own things like generating assets and Their remuneration for doing that But it doesn't really like that because you still periodically have these rate cases where you sort of reset that Compensation level and so the thing that I think that like the fundamental question in utility regulation in the state is is when we are going to Sort of acknowledge and confront and really get into addressing the fact that we can't have a utility that makes money by buying things and Expect them to not want to do as much generation transmission Distribution and everything else they can as possible And so you know if we think that that's in the public interest then we should leave the regulatory model the way it is If we're trying to get somewhere else then we need to change it and by change it I mean we need to put them in a position where they can do as well as they as they can And as they need to do and as they can go to their shareholders to them to have a fiduciary Responsibility, you know with a clean conscience and say this is a great plan for us But they have to make money by doing something different I mean and it's literally at the level of IBM not making computers anymore and going into consulting services that kind of thing So they need to do things like manage the grid and you know at the end of the day And I'm not talking tomorrow if you want to sell some kilowatt hours to someone else They you know you need to be able to do it and they need to be able to make money for enabling that type of transaction And so you know eventually we're gonna get there just because the sheer weight of technology will ensure that that you know stuff developed Elsewhere eventually lands here, but that could be 30 years But we should be talking about it like tomorrow and trying to get there otherwise I think we're gonna be stuck in this cycle excuse me. We're gonna be stuck in this cycle where You know they are Motivated based on their regulatory incentives to want things that are different than most of the other stakeholders and that in my view Aren't in the public interest and so you're gonna get them wanting to own Power plants that make power in an evening peak and they're gonna at the end of the day want a relatively high peak because it justifies more Power plants where what's in the public interest is a really really flat load curve Yeah, you're not talking about a co-op side notice you haven't said a word about co-op I don't think that a co-op is inconsistent with that or that it means you'd automatically land in that world It's just an it's an ownership model that that is you know Need probably in some ways neither more or less consistent with that regulatory model than other ones I think you know, I'm certainly not an expert on this But there's you know co-ops come with a different set of advantages and disadvantages than an investor on utility for sure You're just talking about the entity whatever it is. Yeah, how they have to be differently incentivized Exactly, so they're not looking to make money on things. We don't need and well on more of things that we do need then we could get away with Yeah, okay, so so I give you a lot of people who'd like still to put PV on their roofs I'd like to you know, and I give you a utility that like likes to make I should like to make Utility scale PV farms and turbine wind turbine farms We we have the opportunities to develop an awful lot of renewable energy, but what's missing is the technology I Mean and I go back to the batteries Some I mean people have all kinds of different views about this. I'm interested in yours Where should the batteries be? Should they be at the homeowner? Should there be the utility should be at both places and how do you talk? How do you have them talk to each other and this I don't mean to sidestep your point about, you know, the The monetary model, but just in terms of the efficiency of the entire system And assuming that there still will be a utility That it's relevant to connecting us all and making our our electric community work Where do you put the where do you put the renewables and where do you put the batteries? I think you put both in both places I mean not to try to dodge the question but about the optimal system probably has utility scale storage where that's needed and it also has storage, you know at the individual house level and You know how much of each you get is going to be a response to the price signals based by those consumers on the smaller Scale and developers on the utility scale and the utility itself in terms of the regulatory model But it just seems to me that that you have the public willing to to you know sort of step up and buy things that historically have been bought by the utility and You know recourse the cost of that recovered from everybody and you know You kind of sit there knowing that the public is willing to make this type of investment And it has spillover benefits that we really haven't tried to sort of monetize not monetize But try to try to haven't tried to bring onto the grid and that like, you know The regulatory system going forward ought to try to focus on doing that, you know And so in my sort of guesstimate here once you've done a fair amount of that you will you will still be aware that there are places where you need to cite storage on the grid and You know, that's the most cost-effective way of making sure that you don't have some congestion on the transmission system Or what have you you know that kind of thing. I mean maybe I'm being simplistic about this but if I had a lot of Utility scale solar and wind and whatever else I mean I see those as the real possibilities not anything else Both politically and technologically And you have batteries that will cover the peak Why do we need generating systems at all? Can't we put the money into the batteries and move forward, you know Even faster than 2045. I don't think there's a Technological reason why you couldn't do that, you know, I think you want to optimize that investment you know like so from a PV perspective the cost of solar panels was continuing to trickle down, but You know if you wait 30 years and it comes down another 20 cents a watt You know you've lost more in that time period than you've saved by having the investment be cheaper That isn't the case on the batteries So there's some time in the next 20 years and maybe it's five years Maybe it's 10 years when you'd want to sort of say, okay If I you know starting whenever we're gonna build up and then eventually we're gonna you know Like the real central phase that investment is gonna hit, you know in year You know x y and z when we think that the price will have come down so that you optimize that Investment decision the way that you do with any kind of investment like that. So I think that needs to be factored in You know the some costs are going up labor is going up land costs are going up in the state Obviously, everyone's aware of that and probably there's more awareness of the O&M on the solar and wind systems So that that's going up as well one thing that we haven't talked about that's relevant here Is that you hear a lot about why the cost of utility scale generation in both solar and wind is higher here than on the mainland? And one thing I know I don't know much about the wind side if I can speak to the solar side And the thing that I never here talked about is the risk premium that gets injected into the development process here Just based on the fact that most of those deals end up dying And so why would you knowing what you know put your money into a utility scale solar investment in the state right now when? I don't know was it 14 out of 15 of the recent ones have died You know some at the Commission some for different you know for other reasons You know and some obviously from the utility having cancelled them when in the case of the Sun Edison stuff So it's just and that's built into the price when they made bid It has to be because you know investors aren't dumb and they look at what happens in here And most of these things don't get built right so you don't put your money into something that has a Whatever nine five nine out of ten chance to fail right and yeah millions and then you lose it So you have to build that in it's only good business Yeah, so my view is that like you know half of those costs are just the Hawaii risk premium There are things that are much more expensive here. Well, maybe we can we should I don't know if we can but we should yeah So my ultimate question the show question for you and we only have a minute or two left Sorry Is what is your plan B? What do we do? What do we do first? What do we do intermediate? What do you do long term? I think step one is the state needs to articulate, you know how it wants to get to hundred percent renewable I'm assuming we're not going to change that in 2045 is going to be you know more or less is going to be the year So so we need to figure out how we want to get there and that needs to be considered broadly I need to figure out what the sort of spill overs outside the energy sector are of going this way or this way or this way That's a good thing then we need once we know that we need to look at what regulatory model is consistent with that outcome And then we need to get the pricing right and being willing to tweak it And and I think that the problem will take care of itself not that those three things are easy But those are all doable and it's you know instead we tend to focus on you know What you would do if those things were already in place like that You know let's do this or let's do that But if you just get this fundamental stuff right it basically is going to drive itself in the direction you want and you know We've seen that with the solar industry where the panels got a lot cheaper and the cost of the utility power went up And we had a supportive tax incentive and you know the thing took off like gangbusters, so You know you nobody nobody was micromanaging it it just worked because everything was pointing in one direction I think we can do the same thing with the whole electric power sector But it's gonna you know take a lot of political will and it's gonna take a lot of leadership to kind of browbeat Everybody into doing that, but that's where I think we are and I'm going to clever suggestions and clever incentives And you know not controversy just clever Clever and controversy, you know, yeah It works better if you do clever, so I only have one more question. Would you ever consider government service? I haven't you know I think my sort of position is or the place where I feel most comfortable is in policy analysis And so you know historically I've done that from outside of government, but You know you never know right you never know But it you'll come back right and we'll explore these things further as the ball moves forward. Yes, absolutely Thank you. Mark sure day Mark Duda Distributed energy partners and a long time principle in the initiative for clean energy