 Bingo! We're back. 4 o'clock, Brock. I'm Jay Fiedel here on ThinkTech, and now you have our flagship energy show for the week. It's Hawaii, the state of clean energy, and it's supported by the Hawaii Energy Policy Forum, and we are lucky to have our co-host and the co-chair of the Hawaii Energy Policy Forum joining us today, Mike Hamden. Hi, Mike. Hey, Jay. Thanks for having me on. Yeah, nice to have you on. Always. Love to see your smile and face. And we're talking today about whatever happened, part of our Whatever Happens series, whatever happened to biofuels, and I didn't write this, neither did Mike, but some woman who might be Sharon Moriwaki wrote this, the title of our show is The Good, the Bad, and the Ugly, OK, with Robert King. It does not refer to Robert King's good looks, because he is good looking, and it has nothing to do with the title. OK, welcome. Robert King from president of Hawaii Biofuel Technologies. Nice to see you smile and face. All right. Nice to see you, Jay and Mike. Make that Hawaii biodiesel technology. You feel better when I say it right, don't you? Yeah. How about Pacific biodiesel? Pacific biodiesel. Yes. Yes. We might as well get the name. Yeah, OK. Now that we've spent a minute on that. And then from here on, everything is up for grabs. So we want to join the energy team for a look back at the various past promises of renewable energy in our Whatever Happened to series, and we want to explore where Hawaii is today. And Bob King, the president of, let me say it right, Pacific biodiesel technologies, is going to have a discussion with us of the hurdles, the successes, and the failures by our most intrepid renewable energy developers, and he's going to share conclusions on what he has learned from this particular journey over many years now that can be instructive for the future of renewables in the state of Hawaii. So that's a mouthful. And let's begin, Bob, if you don't mind, with what exactly is the state of biofuels in the state of energy right now? Well, let's see. It's different between Hawaii and the mainland, of course. But here in Hawaii, I guess unfortunately, we remain the only liquid biofuel manufacturer. We've been here for 21 years, and I think it would have been nice to have other players in the field by now, but we still remain the only one. Have there ever been any others, have there ever been other players who might have gone away? There's been a lot come to town to look and think about it and get close, but nobody's actually made liquid biofuels here, except us. We had ethanol there for a while, but that didn't really happen to us. We never really made it here. Ethanol. Yeah. I mean, there were lots of proposals to do that, but I'm not sure anybody got a commercial production operation going. Yeah. There's not going to have any event. A couple for drinking. Right. But not for fuel. So, why is that, though? Can you tell us why are you the only ones? Either smart or stupid. I'm tending towards the latter there. I mean, if you really wanted to spend your time making money, this is not the place to do it. This is not the industry to do it in. But it sure has been, I think, for me personally and for my team, we like it. We really feel like we're making a difference, and that's pretty important to us. Can you give us a minute on the evolution of your company, Pacific Biodiesel? You started out much smaller than you are now. You had some good technology. You expanded to the mainland. You expanded to agriculture more than before. I think you started, you were just taking a restaurant oil. And now you have oil from some land in Big Island, I think. Tell us about the evolution of the company. Okay. Briefly, when I was in a diesel mechanic, I was the Cummins engine dealer in Maui County before I started this. And then learned about this thing called Biodiesel and just decided to build a plant and start making it on Maui. And didn't realize back then how young the industry really was. But we were maybe the second waste oil biodiesel plant in the world. We're the oldest biodiesel company in the U.S. now. Built another one in Japan. Built a bunch of them on the mainland from coast to coast and Alaska to Texas. And a lot of them in little patches. There'd be nothing for years and years. And then we'd build a whole bunch of plants in two or three years. And then nothing again for another length of time. Again, government incentives, focus of others in this industry. So it's been up and down. Roller coaster ride and now we've got our plant on the big island which is making really spectacular distilled biodiesel which is super clean biodiesel and we make it from waste oils. And as you said, we're moving into ag, which is for Hawaii, that's where we have to go. We collect all the waste oil in Hawaii right now. Us and others. We're moving from others. So ag is the future of liquid biofuel for biodiesel in Hawaii. What kind of crop? Jatropha? Is that your primary one? We've done jatropha, we've done sunflower, safflower, campmelina, played around with soy and peanuts and a whole bunch of other different pieces, pungamia, we're hoping to get some pungamia this year. It all works. Bob, are your operations in other parts of the country and other parts of the world? Are they primarily based on a waste oil base and then you're building from there or how the other ones work? For us, for our company, we kind of specialize in waste, the waste oils. So a base of used cooking oils and animal fats and waste grease. But it depends on what's in their area. So in the United States in general, about half of the biodiesel is made with soybean oil. And then the other half from everything else, corn oil. The corn oil, they get off of ethanol plants, which is a low grade corn oil. And animal fats, vegetable oil, cooking oils. We did one in Japan and they used rapeseed and used cooking oil. Again, all the waste oil plants will take virgin oil, but not the other way around. Right. So I get the sense that in the mix of renewables, there was more talk about biofuels and biodiesel specifically, say five years ago than there is now. I think the focus has been on photovoltaic and solar and to a lesser degree wind. But not so much in biofuels. Am I right about that? Is there a relative lack of interest in biofuels these days? That is an interesting one because there's more biodiesel being made today than ever before. In the U.S., it's, I think it'll go definitely over 2 billion gallons in the U.S. produced. Again, ethanol, maybe 11 or 12 billion gallons. And the price has been pretty good on it. Oftentimes it's cheaper than petroleum at the rack. But you're right, the talk about it, the interest in it is not there. A lot of the interest here was the need to firm up the intermittent power. And there really aren't a lot of alternatives to doing that. I mean, there's certainly geothermal and there's some hydro, but everybody, including the utilities, we're holding out for biofuels as being a way that they can get a firm source of power to mix in with their intermittent solar and wind. And that sort of seems to have dropped off the table. Well, I think part of that, Mike, it must be part of it is the focus on storage, on batteries. Because if you want to avoid intermittent problems, then you buy batteries. And the technology, I guess it's very interesting. It's high tech. It's exciting. Expensive? Expensive. There you go. But that's sort of the natural progression. First, you have the technology of solar and PV, and then you have the technology of batteries. They kind of go hand in glove. And biofuels is just not discussed in that context. But my question to you right now— But it is the backup of that. It is the backup. If you use biodiesel as base load power, in other words, don't change anything. Don't get PV. Don't get solar. Just put biodiesel in instead of petroleum diesel. That was never our idea and it wasn't a good idea. But when you talk about, like Mike was saying, as a backup now, as that quick spinning reserve, we can bring more PV, more wind, onto the grid. Because if you have a little bit of biodiesel and use it as sparingly as possible, you could instantly react to those lulls in power. And that's most of our fuel. Right now, today, goes to Hawaiian Electric to run the Campbell CIP generator on Oahu. And that's the purpose of that generator, is to balance the ups and downs of the grid. The other challenge for Hawaii as a state is if we're going to go to 100% or 70% of clean energy, the transportation sector is lagged heartily behind the electricity sector. And a lot of people are holding up electric cars and PV and electric cars is the answer to that. But you can't run trucks and buses on electric. Well, that's true. And you must have a substantial part of your biodiesel market must be in transportation, certainly, because it's very easy to convert a diesel. In fact, biodiesel runs in a diesel engine, doesn't it? All right. No conversion necessary. So how popular is it and what's the relative price point? Well, that's interesting that the market that I think could get the most use out of it. Heavy trucks, that's the easiest one. They don't have a lot of options, you're right, hauling around a couple thousand pounds of batteries or a huge tank of natural gas or something. It's just a difficult diesel. They don't do anything. They just fill up the tank and go. That said, that market is very, very price sensitive. So when our fuel goes up a penny or two, a gallon, they're off. They're out. Really? They're back to diesel. And so that's been the challenge on the heavy truck market is when it's good, they're all on. If our price is more expensive, they're all off. So how is it now? What's the parity point? How close was the average price of a gallon of biodiesel as opposed to a gallon of diesel? Well, yeah. What time of the day is it? What day of the week is it? The last two years when the price of fuels dropped out, dropped really low, we actually became a little bit more expensive than diesel. Before that, we were cheaper. So we were cheaper than diesel. We had a lot of trucks, fleets coming on, using it, either as 20% or 100% biodiesel. The price of fuel went down. They said, well, we'll just stay off for a few months until it comes back up. Well, that few months lasted, as you know, into a couple of years now. Still yet, we're only about, I don't know, on the wholesale that the best price folks were, a nickel or a dime, over the price of petroleum diesel. That's pretty close. Now, is there anything you can do in the production process that would drop that to parity or below? We are. We're trying to do some process improvements and optimize our plant over here, making changes on a monthly basis to trim costs and get price down. And it's really kind of regular kind of stuff, buying materials in bulk, changing, economizing every bit of the system so we get the ultimate output for every gallon input. We just went on a biodiesel generator to make our electricity a few months ago. So all those things save money every month. On the other side, the bad thing that happened is January 1st, the only federal credit. We have federal excise tax credit for biodiesel went away again. It only goes on for a year or two at a time. So it's gone again. That's a dollar a gallon incentive. So our price, well, we can't go up a dollar. We just can't. So we had to take it up what we can and try to manage through another year of no help. This raises the question of what Donald J. Trump may want to do here in his energy policy. To me, actually, that's a very important question. It's a cliffhanger question. And you know, Bob and Mike, when we get to a cliffhanger question, what do you think we do? We freeze up. We take a break. We freeze up. 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. I'm Ethan Allen, host of likeable science here on Think Tech Hawaii. Every Friday afternoon at 2 p.m., you'll have a chance to come and listen and learn from scientists around the world. Scientists who talk about their work in meaningful, easy to understand ways. And they'll come to appreciate science as a wonderful way of thinking, way of knowing about the world. You'll learn interesting facts, interesting ideas, you'll be stimulated to think more. Please come join us every Friday afternoon at 2 p.m. here on Think Tech Hawaii for likeable science. With me, you're host Ethan Allen. Okay, Bingo, we're back. We're here with Mike Hamden, my co-chair and chair of the Hawaii Energy Policy Forum. And we're talking to Bob King, who's the president of Pacific Biodiesel Technologies, and we're talking about whatever happened to biofuels. I'm going to catch up on that. And so just before the break, we were talking about changes in federal policy on what credits and incentives. And we were going to speculate, and I hope Bob will join us in speculating what Donald J. Trump is going to do about it as part of his energy policy. Do you have any inside information on that, Bob? None. We throw darts at the wall to, I guess, to properly plan for the next four years. But it's kind of, I looked specifically on the RFS, a renewable fuel standard through the EPA. And, you know, where does he stand on that? And it's interesting. One point, he was for the RFS, and then he came out adamantly against it, this during the campaign, against the RFS, we're going to disband the whole thing, and then he went to Iowa and all of a sudden he's back, a supporter of the RFS again. So both sides of it, he'll be right, he'll have said whichever direction he goes, he will have said it before. But what's he going to do about it? I'm nervous with the fellow he put in at the head of EPA who doesn't like the EPA, and the head of the Department of Energy, I worked under him in Texas, and he was not a fan of anything that non-patroleum. So I think they'll do well for the petroleum industry, but that's our competitors. So are they going to throw a couple of bones out to the renewables, or not? That's the question. Yeah, well, part of that is the cost of oil, isn't it? Because it's been low a long time, and there are those who would like to see it controlled in production, and therefore see a rise in price, but that hasn't really happened all that much, and if you're going to speculate a result here, you'd probably predict that the price of oil will go up in this world. And when it goes up, you'll be in better shape in terms of parity, right? Yeah, exactly. Somebody that thinks through these things on an international level was kind of surmising that one of the reasons that oil has stayed low is that because of the success of wind, because of the success of PV, they're actually scared that they might not have a market when they get to the end of their oil. And so rather than trying to keep the price up and make it last a long time, they're thinking they better just get it out of the ground and sell it at whatever price it can get. Move on to something else. Because, frankly, the oil age may be over before we run out of oil. Of course, it's a possibility, we'll offer this alternative, a possibility that they don't want to keep the price low because that is a disincentive to the development of clean energy. It slows down the development of clean energy. And that probably helps them in the long term to slow that down. Hey, Bob, you mentioned the federal tax support going away. What's been put in the place, I mean, I know the answer to this, but the audience doesn't necessarily, what's been put in place in terms of incentives at the state level and what good have they done for the industry? Well, probably the longest and best incentive that's been on the state level is the road tax reduction for biodiesel. So everybody pays road tax. And in order to, again, to help our fleets who are very price conscious do the right thing, the state has reduced the tax on biodiesel to about half, which is about 8 cents a gallon savings. And certain counties have done more. So I think Honolulu is 75% reduction. Howie County just did 100% Hawaii and Kauai are both 100% reduction. So, you know, it kind of, it does hurt them eventually on their road tax, what they need to do with the road tax. But at this point, it's incentivizing the early adopters to move into renewable fuel. So that's been in place for, you know, in various levels for maybe 10 years or so. The last year we, during the last legislative session, they put a production tax credit in for all renewable fuels, whether gas, liquid, ethanol, diesel, whatever. It's a production tax credit that goes to people who are actually making renewable energy here in the state. You supported that, Bill? What's that? You supported that, Bill? Yes, for about eight years, I think. I guess so. Congratulations. All things in time. All things in time. Yeah, it's, so what we're hoping is that when, when that will help bring more money into the space of, because of investing in these types of technologies and, yeah, you know, you got to be a very intrepid investor to say, I'm going to put money into renewables, those into our kind of renewables in the state. What would it take to expand biofuels in the way you'd like to see them expanded? What would it take in the marketplace? What would it take in public opinion? What would it take in the, in the energy organizations that are moving clean energy ahead? And what would it take in the legislature to realize, you know, the future of biofuels as you, and biodiesel as you see it? Well, there's a few aspects to that. But let me, let me frame it up first as to what our piece of the long-term game is. And our piece, I think ours is as in biodiesel now, the replacement for diesel fuel. Our piece is going to be for tugboats in our island. A few options. Heavy trucks and heavy long-haul buses, not city commuters, but anything that's going across the polity or across the big island. Tractors that are in the fields and they're never in the same place. These are things that are the most difficult for us to displace with any of the other technologies. So when I look at that and quick spinning reserve for the utility, this is the emergency backup for the grid until they can get something else fired up. Not baseload, but quick spin. Phenomenal fuel for that. So when I look at that and I look at our ag land and how much we could, our future now is growing the crop to make into biodiesel. So I think we have a potential of doing maybe 50 or 60 million gallons a year of biodiesel. And that's enough to run all of those pieces that I just described at 100%. So 100% of the trucks, 100% of young brothers, some spinning reserve for the utilities, not baseload. And that would take about maybe a third, maybe a little bit more depending on the crop of the ag land that's out there. So it's a significant capital outlay in both hardware and manpower to do this. But that's assuming we get a lot of wind and assuming we get a lot of PV, assuming that cars get become electric instead of liquid fueled, it actually fits. It actually works. I remember Richard Ha saying there was a discussion over at Coneo and Marine Corps station about energy and agriculture and biofuels. And Richard said, you know, if you can't pay farmers 65 cents a pound, they ain't going to grow it. And how does that price point for you guys? Well, that's a price point right now that doesn't work at that price for oil seeds. But we've got, you know, there's some other ways to do this. And, you know, farming agriculture has always been, what do the pig farmers say, use everything but the squeal? You can't just grow oil crops for energy. Right. You have to use all the bits and pieces. It has to be a two-fer or a three-fer. Right. So we're actually, we've been farming, you know, dabbling with oil seeds for about eight years now. And we just got a couple hundred acres on Maui. We're going to take another larger shot at it. But it has to be integrated with the ranchers to take the feed. After you press the oil out, you've got really high-value feed. You know, how do they turn that into top dollar? Right. For locally produced beef or chickens or whatever. The oil that we get, you know, can we make food crate out of it and run it through restaurants first? And I think our tourists would love to have, you know, a dinner with using locally sourced frying oil or locally sourced salad oil. So these are, you know, it's not rocket science, but it's marketing of how do you, how do you get the people who want to see this happen to help fund the farmers so that they can make their money? If you could get a share of the crop going this way. The farmer's in the field. He's already got a tractor. He's already got his irrigation stuff. It's easy to add more acres on. But if you don't have any of that, if you can't get the farmer started, then it's a tough uphill battle. Well, gee, sorry to hear that. But at the same time, it remains an important, you know, an important possibility in the array of renewable energies. And you're still doing it. You're still trucking. That's kind of a pun, I suppose. You've got lots of cheerleaders, Bob. Lots of cheerleaders, Bob. We're all with you. We want you to succeed and keep on trucking. I feel good. I think there's a wet path. I think we're going to find it.