 Aloha, I'm Kirsten Baumgart-Turner and this is Sustainable Hawaii, streaming live every Tuesday at noon at thinktechhawaii.com. My guest today is Kyle Dada, managing partner of Ulupono Initiative, a social impact investment firm whose ambitious mission is to improve the quality of life in Hawaii through investments in locally produced renewable energy, food, and waste management. Kyle received a master's degree in public and private management from the Yale School of Organization and Management, as well as a master's degree in environmental science in resource economics from the Yale School of Forestry and Environmental Studies. His previous positions include CEO of U.S. biodiesel group, managing director of research and consulting at the Rocky Mountain Institute, and a vice president at Booz Allen Hamilton, where he served as managing director of the Asia Energy Practice and the U.S. Utility Practice. He currently serves on the board of directors for Blue Planet Foundation and the Johnson Ohana Charitable Foundation. He's also national co-chair of the Sustainable Agriculture and Food Systems Funders. Welcome back to the show, Kyle. Very good to be here, Kirsten. Last time you were on was in November and I had you talking about your investments at Ulupono in food security and agriculture investments. So this time I'd like to focus on energy, particularly since I read your illustrious background and credentials in energy. So Kyle, you know that, or everyone our audience knows, of course you do, that we have the 100% renewable energy goal by 2045 in our statutes. What do you think is our potential for reaching that goal? Well, technically, we can achieve that goal today with the technologies that we have and still maintain system reliability, so that's the good news. Then it becomes a question of will that be affordable to everyday people? How much more will that cost and what benefits will we get? And as we look at it, we find that in all of our counties, especially the neighbor islands that have a lot of renewable resources relative to their population, that in fact it will be a cheaper solution when you take to consideration the risk of fossil fuels. Because many of you remember in 2008 when prices hit $145, all of us suffered a lot. Our energy bill went up by billions. And what renewables do is you essentially take away the risk of fossil fuels by putting in the money up front for the solar system or the wind farm and they don't have to worry about the risk of the fossil fuels you're displacing. And when you take those benefits into consideration, we actually find that on a risk-adjusted basis it's more affordable and it appears to what customers want. It's also more affordable because we've taken on a lot more of that power generation ourselves in Hawaii. Maybe talk to us a little bit about how that's made the energy scenario different. Yeah, so it's good for your listeners just to recap a little bit about the history of the industry and so to understand where we are now and understand where we're going. So when the industry was formed over 100 years ago, the utilities were given a monopoly but also had to undergo regulation because we wanted to allow them to have the capital to put up the wires and build the power plants. And then about 30 years ago we decided, you know, it would be good if other people could build power plants too so we changed the rules to allow other people to build power plants through competitive bids. And so you had another source of capital come into the system. Now with technology, not just for the solar panels but for your smart meters, for your smart thermostats, for your car, for all the devices in your home, you want the customer to be able to put all these devices in using their capital to also be a major contributor to the total system. And that's where we are now. That's the new frontier that we're looking at. How does that new group, the customer that's also a producer and a consumer, how does they interact with the utility? How do we change the rules so that everybody can really win? And speaking of changing the rules, we just went through this merger process where NextStare was trying to merge with the wind electric company and the PUC, the Public Utility Commission, turned it down, did not approve it. How is that going to change this scenario? Because we expected a huge infusion of capital with NextStare and that's now not coming. Well you know, it is true that the amount of capital we need for the whole system to let go of our old fossil power plants, modernize the grid and put in all these new renewable plants either at the utility scale or at your home, costs more than our local utility can afford to pay on its balance sheet. That is true. And I think if we had NextStare had come with their plan 15 years ago, we would have thrown Plumeria at their feet because we wanted the local utility to really embrace renewables and do that. And it's true they had the balance sheet to do this. The issue is that there is such a strong aspiration from the new technology suppliers and the customers, the regulators, and the government to start to embrace the business model for this century, not last century, which really involves the consumer and the utility and the independent power producers, all three of them. And that's what I think where NextStare had a challenge meeting what we would define is the public interest. And so that's why I think the merger failed ultimately because they were looking at a different model that would have gotten us there. Now I think there's an opportunity for all the stakeholders to really work together to define the model that is going to work here, that we can do on our own. We don't need a third party to come in. But that everybody will benefit. The utility will benefit, policy will benefit, the customers will benefit, of all economic classes. And the environment, of course, will benefit. Now that new model you've somewhat described, but is there a way you could encapsulate it for our audience? What would you call that new model? Well I think it falls under the general heading of 21st century utility. And what that really embodies is it embraces the technologies that we now have in this century. And these technologies really have changed our lives. We are fundamentally interconnected in a different way. And that's the essence of the business model change, is that because the customers are so interconnected and can be interconnected, they literally can form virtual power plants. Which is an extraordinary concept and something that we wrote about in 2002 and now the technology has come of age where we're doing it now, today. Can you explain that technically? Sure. In the traditional power plant you have a power generator that then you provide fuel to it or you have a windmill or a solar plant and it sends electricity down the wires to the rest of the grid. So it's one, it's one clear plant that's tied into the control room. In the virtual power plant case you're taking all the devices in the home, the solar panels, all the flexible loads, your dishwasher, your air conditioner, your refrigerator, your car, your electrical vehicle, everything. And you're allowing that to be controlled by a system that then allows the loads to up or down or power to be provided to the system and needs it or drawn from the system. And essentially it creates through lots and lots of customers, thousands and thousands a virtual power plant. This is not science fiction, it's not a visionary thing. It exists at a very large scale in Germany today. In the northern German area of Hamburg and Hanover there's a company called Lichtblit and it's the largest utility in Germany and it's created something called Schwarmpower which has reached a thousand megawatts or a gigawatt scale of virtual power and to give everyone a sense of how big that is, all of Oahu is 1800 megawatts, that's 1.8 gigawatts. So this is a power plant that is bigger than all the neighborhoods combined and as big as half of Oahu made up entirely of customers and it's cheaper than the central power plant that is displaced and that's an extraordinary thing. That's how far technology has progressed and I think that's one of the solutions, not the only side. The utility still has to modernize the grid and we still are going to need some centralized power plants. There will probably be some degree of decarbonization of fuels of modernization. So decarbonization of fuels meaning emphasis on renewable? Well it's probably a combination of things because the energy system does not exist in isolation. The energy system and electricity which is where our targets are uses the bottom of the refinery. But one of the questions we have to ask is when we take out the bottom of the refinery the refiner is going to close. So what do we want to do to replace them? We could just bring in tankers and have tank farms but I think what we're going to see and where the rest of the world is going is the rest of the world is decarbonizing it because of climate change and probably applying natural gas to the transportation sector and the marine sector and then a small amount of the power sector just for the modern turbines to play well with the variability of wind and solar. So there'd be an easing in, in other words we'd use some of the fossil fuels. Right. It's a transitional thing. It's like a 20. What you're seeing in most the world is a 20 or 30 year transition playing out where we're taking out the highest carbon things, coal, we're trying to figure out what to do with the old nuclear plant that are low carbon but dangerous. And you're seeing this, this shifting to renewables back by natural gas as opposed to the other side which was natural gas back, back by renewables. Now it's the other way. It's really renewables back by natural gas in the power sector but also and then in the transportation sector you're seeing the electrification of vehicles. Because here's the question. We have, we bring in 45 million barrels of oil equivalent every year to the state and mostly oil but other fossil fuels. So we have to think about how are we going to take that all the way down, not just in power which is one-third but when we do that how does it affect the rest of the system? What do we replace it with? What do we transition and how do we integrate the system for to think about the whole energy system? Right. And I know that Ulupona was looking at that. I think you had a study that may have been completed now on the status of the electric utility. Yeah. We've done a number of analyses of working with UH, Dr. Fritt and of course the teaming of Blue Planet and many other stakeholders. And then the utility sometimes itself, the essence of the situation is we have choices. I think during the merger the utility expressed one choice which is let's really have a wholesale switch to LNG and we'll back it up with renewables and eventually swap it out 30 years from now. There was another set of choices saying well maybe we go all renewable but how will that work? And this course is an intermediate hybrid choice where you do mostly renewables but you transition through a process. So we've looked at those choices and looked at the cost of those choices but also the relative risk they impose. And what we found is for a very, very small amount of additional cost you can take away lots of the cost of, lots of the risk of fossil fuels and as a society that's probably a better choice. So we wanted to... Was the study published? I know it was also from... We provided it as inputs to the power supply planning process to be transparent and... Which is still a docket that remains even after the PUC didn't accept the merger, right? Yes. So it's still an open plan, it hasn't been completed. There is a number of parties, ourselves included in virtually all the other parties, mostly environmental groups, community groups, all the renewable companies, the gas company, the state that want to reach out to the utility to say hey we need to really pull our numbers on the table, make sure we use the objective planning model and just see what our choices are and what are the trade-offs around the choices. Terrific. When we come back we'll talk with Kyle a little further on where Ulupono is investing in energy. We'll be right back. You're watching Think Tech Hawaii which streams live on thinktechhawaii.com, uploads to youtube.com and broadcasts on cable OC16 and Olelo 54. State content for Hawaii from Think Tech. Hi, I'm Ray Starling and I am co-host for Hawaii's Wednesday afternoon state of clean energy. And with me today is Leslie Cole Brooks and she's going to tell you what's happening this month with our shows. Hi everybody, I'm Leslie Cole Brooks, the executive director of the Distributed Energy Resources Council and this month is the focus is on distributed energy resources. We just had a great show on smart grid technologies and the rest of the month we're going to discuss storage, different strategies, micro grids and then we're going to have live man and woman on the street from Verge. So it's really exciting, very informative, lively and just worth doing. So see you next Wednesday. Hi. Hi, we're back with Kyle Dada Ulupono Initiative and we're talking about what they're going to invest in energy. What is the scenario you see for Ulupono's investments and you mentioned natural gas so I'm wondering is that an area you see is right for social impact investing? Well it's probably not going to be directly one of our investments but we will be investing in renewable natural gas in partnership with the gas company because we believe that there's a portion of the gas stream that can be created here from both our waste products and some biomass and of course landfill gas and whatnot that has an important role to play and we're very, very big believers in what's called combined heat and power. That's known as cogeneration technically where you are essentially displacing not just the electrical load and say a hotel but also the heat load for heating and cooling and laundry and whatnot and it's so efficient that we think that's a very, very good use of the fossil molecule when we're going to use it and it also plays well with renewables. Have you, folks, also invested in the cold water air-conditioning in RKP? Yes. One of the most important things to always invest in is efficiency and the number one efficiency project in our state is Honolulu Seawater Air Conditioning which is really district cooling. It's using seawater to replace all the cooling towers and all the air conditions and all the buildings downtown. And I understand that's actually how it was done many years ago that coming into this very street of Bishop Street that there were a couple of the buildings that were cooled that way. Yes. I think you're right. And it's very, very common in the Nordic countries and Sweden it's nothing to be scared of. It's really actually plumbing. It's literally plumbing. It's cold seawater. And so it's very environmentally safe for the oceans because you're recycling it back. So efficiency is an important project. We very much believe in investing on the customer side. So there's many really innovative technologies around demand response. One of the most innovative is shifted energy which essentially takes all the water heaters and allows them to, as I was saying earlier, charge and discharge depending on what the grid needs. So they become part of that virtual power plant I was talking about but it's very inexpensive because many people still have electric water heaters. And of course we have... And that's... Sorry, that's... I just want to clarify. So that's very much dependent though on the smart metering technology in order for that to be able to happen. Yes. Yes. We are in favor of the application of smart meeting technology because that's essentially a grid modernization tool that allows the utility to play nicely with its customers and vice versa. That is the... You need that gateway into the customer's devices and vice versa so the customers can sell to the grid. But the essence of why this all works is the ability of our control systems to understand what's out there and send signals to it and they get signals back and you need a meter to both do that but also to fairly charge or pay for the services used. So is that an area also that Lupono is investing in? Well we don't have to invest in smart meters because actually it's the utility function they already have a proposal out. We're very supportive of that proposal. We'll certainly invest in the things on the other side of the meter. We're clearly very interested in investing in the largest scale renewables whether it's biomass, geothermal, wind or solar. All of these technologies at this point are very proven. And what we see is that the neighbor islands can truly for a decade be at essentially 100%. Also the new battery... In a decade. In a decade. I want to note that. That's really ambitious. That's exciting. It truly is possible and affordable. The other thing which I think is an important element of course is storage where you have both pump storage which is really moving water up and down elevation so you're using that kinetic storage like a giant battery. And those places and most of the counties where so mountainous where that makes a lot of sense is environmentally appropriate. Often in former hydro or former ponds that used to be part of the plantation of the agricultural infrastructure or the ranches. As well as of course better technologies including one by our very own entrepreneur Hank Rogers which is using a more advanced version of lithium with cobalt so it runs cooler than the normal sort of Tesla type batteries which is of course more beneficial to the home because you're not adding any more energy load. Now we had Hank on the show talking about the blue lion. And I haven't followed its success though commercially. Is that... I think what we're seeing is it's all starting to move. We're in an interesting situation now which is really the challenge and the opportunity for the customers in many cases especially in the neighbor islands where rates are much higher than Oahu it actually makes sense in many cases to defect to leave the grid which is not necessarily the best social outcome but it makes sense for them as individuals. It also makes sense across all the counties never to connect. That's how affordable microgrids are but they're only affordable because the utility has not taken the steps to turn off their old fossil plants that are very inefficient modernized with just the minimum amount of fossil needed and really embrace the renewables because it is true it is cheaper for the utility to provide that but when they don't the customers vote with their wallets in their feet. Exactly. And so that's what we're seeing. So if we have that possibility and we're seeing that happen already and indeed we know that the probably the best example of microgrid at least in Hawaii is at Camp Smith. So we have the Department of Defense taking that route also. What's it going to take now without this infusion of capital to get our monopoly utility to do that? I think it's all about choice and ultimately about trust. I think part of what you know we had a big scrap over next era between the utility and all the stakeholders. I think it's time for us to say okay we had that let's now move forward together and how can we find solutions where the utility, the ratepayers, the customers, public policy, the environment all win and that's important that that dialogue needs to happen and that requires trust, requires extending trust to the other parties especially to most importantly kind of the emerging executive team that are inside HECO because they are the next generation of leadership and they are far more open-minded than the prior generation because of just their youth and their energy. So it's an important time to kind of pick up a new chapter in this relationship. So that's part of it. I think the other part is recognizing that we're all going to accommodate a new business model. And so that's a lot of change. It's a lot of regulatory change. It's a lot of business model change and we're going to have to strengthen our regulatory institutions and ensure that they are truly have the capacity they need, have the independence they need because at the end of the day we have our society does best when decisions are made openly, transparently and whatever we decide we can buy into because we understand how the decision was made. Basically with regard to the regulatory changes, what are some of the major dockets or changes that we might see also in the legislature coming up this fall that are required to make that happen? Well, there's a number of changes that will happen. Most of them will be with the public utility commission itself. There will be some things that need legislative change. I mean clearly we all understand that the way we defined the renewable portfolio standard which essentially sets the targets in the quarter for the utility to meet actually technically was misdesigned a bit. So it has a double count in the formula and we probably need to fix that. And that's a couple loopholes, we probably need to close those. So that at least when we hit 100% it really does mean 100% because right now technically we could be at 100% and actually only have 80% renewables on the system. So that's a legislative fix and we hope the legislator and the governor will leave that charge. At the PUC the essence of the discussion is how do we actually make the following principle real? If a customer should pay for the services it uses, but it should get paid for the services it provides, that's simple, very, very simple concept, very equitable, totally fair, but making that real in a small utility in a small place with that incredible transactional cost, that's where I think the art comes in and that's where we need the collaboration. And so what is that solution? Well it's not one solution, it really is around how do we price grid services, that's the essence, and whether you buy them or you sell them. And given that we're not going to be like New York, we're not going to be like California or Pennsylvania, we're not going to have big markets for people to bid into these services, so we won't be able to do that. How do we on the engineering level estimate the cost of these given they change over time, if they're in the day, to say here's a reasonable estimate that we can all live with for the next five years, let's try this, a new update periodically. The pushback we always get, the argument about really allowing for continued expansion of distributed generation, particularly when the issue has been over solar on people's rooftops, is that now net metering is gone and the argument is very much that if we allow those folks to get the fair market value or the exact value of what they produce, that puts the onus of the rest of the grid, the rest of the utility lines on the public that can't afford those improvements on their rooftops or wind on the top of their buildings. So I understand the concern, the principle I espoused eliminates that concern because of course, if you're paying for what you use and you're only getting paid for the value what you receive, what you're providing, then there's no equity issues. So that's why the principle is so important, but to the other point, there's two other things that are very important to think about in terms of equity. I think for almost a century, we in Hawaii have defined equity as equality of outcome. Everyone gets treated the same. In the modern age, we have to think of equity as equity of opportunity. Everybody had the same opportunity to participate, whether they chose to or not was their decision. They had to have the right to choose. They had to have the resources to be able to make them have that. And I think that's what community solar is all about. The knock on solar was it's just a rich people's thing, which it was in the beginning or the same thing with storage, a little bit to be a rich people's thing. With community solar and the GEMS program, now we're saying, look, you can be in an apartment, you can be a poor person, you can be a rich person. We're going to give you the financing, so you're financing it sometimes off your bill. That's on bill financing. We're going to give you loans when you need it. That's GEMS. We're going to allow the solar plant to be miles away and just buying a little, you're buying your own little panel. So that is a quality solar for the three programs working together. So that's a quality of opportunity, and that's a very, very important thing because then everybody, your auntie, my wife's mother has gotten her house up at Honano. They have a choice of making that choice with just a check of a box. So that is important. So that's a critical element of how to create equity as we go forward. Very, very important question. I'm glad you asked it. And so part of your effort at Ulupono, and we only have one minute left, is social impact investing. So obviously all of this has a social impact. But looking at that equity issue, I imagine that's something that you're also investing in. It is. How do we plan for this? How do we pull it all together? How do we, as you said, I think in your advertiser article, which was a very nice feature on you, really what you're about is getting people to work together and to make change. That's right. I think we invest in the ability of society to work together, and then we invest in the business balls and technologies that we need for everyone to prosper. So we're going to look forward to seeing how you're doing that, and I want to have you back again to give us an update. But this has been Sustainable Hawaii with Kyle Dada, general partner at Ulupono Initiative, and tune in to us again next Tuesday, where we hope to have Celeste Connors with Hawaii Green Growth. Aloha and Mahalo. Thank you. Mahalo.