 Hi, I'm Jay Fidel, it's 12 noon on Monday and here we go, and we're going to do, we're going to do Meena Marko and me, except it's Marko and me this time and it's about energy in Hawaii. And Marko, welcome back to the show. Ho ho ho, and happy aloha Monday to you, good friend Jay Fidel, thank you for having me on. Absolutely, always. Marko, we learned so much. So let's talk about the hot news you mentioned just before the show began about Sun Run. It's very interesting on a number of levels. What happened? Well, there was a piece in the Wall Street Journal today, that bastion of business reporting owned by our friend Rupert Murdoch and Fox. And the news was that there were several former Sun Run employees, including managers, who have now gone on the record stating that they believe they felt that they were under pressure by their superiors to not report in a timely fashion, to not report cancellations of sales in the lead up to Sun Run doing an initial purchase offering in IPO in the middle of 2015. And the reporter cites, like I said, a couple or three managers, including the manager of their Hawaii operations over from February 2015 to February 2017, they quote him on the record in the Wall Street Journal piece, saying that he felt that he was asked essentially to hold off on reporting this essentially bad news about customers who had signed up previously to go with Sun Run, but who backed out in an effort to try to boost the IPO price when Sun Run went public. The fellow quoted in the Wall Street Journalist Darren Jennings, Darren Jennings who says he was the regional sales manager in Hawaii, as I mentioned from February 2015 until February 2017. That's against the law, isn't it? Well, you're the attorney here, my friend, so you're more in a position, I think, to make a judgment on that. Oh, so it sounds like a material misrepresentation, you know, with due expectation that the public will rely on that misrepresentation and, oh gee, that's, if it's not criminal, that's certainly civil and not good for Sun Run. You know, these days you make a public statement, you better be, you better do your due diligence, you better be right, you better be correct, you better not be lying. Now look what happened to Volkswagen, gee, that really hurt Volkswagen, it still is hurting Volkswagen. And now Sun Run, we have dishonesty in Sun Run. Not so good for Sun Run and not so good for the solar energy industry and not so good for energy as a matter of fact. You don't need scandals like this. Well, according to Lynn Jurich, who's the longtime Sun Run CEO and co-founder, she said in a statement according to this piece, while not directly addressing the question of whether employees delayed reporting consumer cancellations, but said the company had, quote, reviewed the digital audit trail in our systems and turned up no evidence that our sales employees changed cancellation dates in our systems to delay the reporting of cancellations. I proudly stand by Sun Run's workplace culture, our values and our unwavering commitment to customer satisfaction and the principle of integrity upon which our company was founded. Well, it's not exactly black and white, is it? Well, I tell you what is black and white, Jay, is that the solar finance companies have been noteworthy over the years for losing a tremendous amount of money. It's a business model that I think certainly in the near term has proven by the demonstrable data has proven to be rather spectacularly unprofitable. And last year, while Sun Run had a peak year in terms of gross revenue, they also had a peak year in terms of losses. And according to their 10K filing with the SEC, they lost more than 300 million with an M, 300 million dollars. So it kind of has led me to wonder whether there's something they know that we don't know or perhaps, you know, are they the next example of the Jeff Bezos Amazon model? Well, you know, I looked into Amazon a bit for the class I'm teaching, my energy politics class at the University of California, Santa Cruz. And Bezos started Amazon in 1994, 1994, way before the digital marketplace became the monster than it is now, right? And for 15 years, Bezos lost money each and every year, Amazon lost money. And since now, eight years past 2009, 15 years after 1994, Amazon has become profitable. So are these sort of finance companies perhaps going down, optimistically going down a similar direction where they lose money, lose money, lose money year after year. But then at some point, they do a crossover from the red to the black and they start making money. I don't know. One of the biggest companies around with a global footprint, company that I was well familiar with when they started way, way back when was Sun Edison and Sun Edison, of course, failed spectacularly last year imploded as well as a number of other sort of finance companies have gone similar direction. So it's just kind of a mystery to me how you can, how a company, how a business model can continue to lose such dramatic and accelerating amounts of money and yet still continue doing what they do. I just, I don't have an answer to that. I've talked to a number of my colleagues over the years and there's a fair amount of head scratching going on, but what's clear is that there is, has been up until now substantial financial backing from, from institutions and from the usual sources of hundreds of millions of dollars of funding, you know, you can't continue to lose money unless you have new money coming in, right? Unless you're printing it yourself, of course, at the federal expense. I would draw a big distinction between, you know, Sun Run and Sun Edison and, and Amazon. I mean, Amazon, you know, had and still has, in my opinion, a huge market that it hasn't yet fully tapped and it has technology that it hasn't yet fully, you know, developed and exploited. So there's a long way to go and if I were an investor and Amazon came to me even though it was losing money, I would, I would invest on the prospect of what's going to happen in the future, you know, exploring that market and expanding into new markets and, you know, developing new technology that makes it faster and more efficient and cheaper to operate. But in the case of, in the case of solar, the solar cells are what they are. You know, the equipment around them is pretty much stable, I think. You can talk more about that. There's no, you know, dramatic new technology in the pipeline, really. There's no dramatic new market to expand into. And, you know, the Chinese are expanding into it, but I don't know if we have the market. All the low-hanging fruit has been, or much of it has been taken. So if I were an investor and they came to me and said, you know, we're losing money, but, you know, look at the prospects, I would say what prospects? And therefore, you know, it suggests to me that we ought to discuss what is wrong with the model. The model, you know, essentially is flawed because it doesn't, it's not profitable. But what can be done to improve the model to make it profitable? Or is this whole thing, you know, going to implode? Not just one or two companies, but everything. Indeed, you know, the solar and solar companies here in Hawaii haven't done well either. And you can't say that it's the fault of the government. You can say that with the government they did better. But right now, the business model here seems to be flawed also. Comments? Well, of course, as you know, I have a very vested interest in the solar industry here, being an owner of a solar company here on the Big Island, a portable tech design installation engineering company. And I'm not sharing any great pearls of wisdom when I say that any company needs a certain amount of volume to pay expenses, a certain amount of volume in terms of revenue, right? And as well, not just revenue, but profitability, that you're making something more than what you're putting out in terms of expenses. And the contractors who have largely focused not on solar PPAs, power purchase agreements with solar leasing, those who are selling essentially cash systems or systems where the homeowners financing themselves, I think most of us have been relatively healthy, but up until now. But the big but is that, as I mentioned, that requires a certain volume, a certain revenue. And if you look at the PV permit numbers, which I crunch on a regular basis, I mean the numbers are so far this year, first four or five months of this year, have taken a very steep dive compared to the previous period last year. And last year was a steep dive the worst year in terms of the PV industry, compared to the previous five or six years. So there's a fair amount of pain going on there. I'm feeling it. My colleagues are feeling it. And the big question mark is what kind of revenue, what kind of demand for our products and our systems can we reasonably expect in the months to come? And with all the kind of bubbling uncertainty in the regulatory side as far as these various dockets before our commission, such as the Distributed Energy Resources docket or DER docket, what's coming after NEM? I mean, that energy metering was done away with October of 2015, although it's died a long and long and long and long lingering debt that a lot of us are still installing NEM systems. But that's going to end sooner rather than later. So what is it that we can offer in terms of interconnect agreements and in terms of value for this new frontier where it's battery storage, battery storage, battery storage, and there's just on the 17 years I've been doing this here to say there's, I think, more turbulence now in the air and needing to buckle one seat belt tight and not get bonked around is greater than ever. Well, it strikes me that in what you say is a call for the industry to reinvent itself, not necessarily with pushing legislation through, although that could help next year to expand the battery storage tax credit. But some other creative, innovative twists on how to do solar, how to install solar, how to maintain, how to finance solar, how to find new technology to make it better. So maybe the solar installer industry has to reinvent itself. I'd be interested in your thoughts about what it could do, what you could do, what you might think about doing in order to do that. Well, there are a number of companies across the state that have been looking to and actually have been diversifying into other fields, including doing PVAC, where you have photovoltaic system, a small PV system that is powering a DC-driven compressor, AC compressor, and a system like that does not need utility approval because it doesn't interact with the utility power at all. There's energy efficiency that can be part of a product lineup, doing energy audits for people's homes, showing them where they can save energy by changing out light bulbs for getting new appliances and so forth. So there's no shortage of creative other means to try to generate revenue, Jay. What is of concern is that all these other avenues, they're rather moneney, are rather small in terms of the revenue stream per sales transaction compared to selling 20, 50, $100,000 or more photovoltaic systems. So that's where it's a real challenge as a business owner is to, you know, I have to decide what's worth the my time, what's worth the time and energy of my staff in terms of ancillary products other than our bread and butter photovoltaic system design and installation. Yeah. Well, we're 17 years of experience, Marco, and you've seen the landscape evolve and change kaleidoscopically over those years. You've followed it closely. You've crunched the numbers and so forth. But I'd like to give you a hypothetical. I walk into your office and I'm young fella in my 20s millennial. I have some capital. Maybe my father gave me capital or I had some capital from some source and I want to get into business and I ask you straight up, Marco, should I get into the solar installer business? Yes or no? Oh, boy. Don't answer that question, Marco. We're going to take a break and I'll give you one minute to think about your answer. Tick, tick, tick, tick, tick. And then we'll be right back. That's Marco Mangelsorf here on Mina, Marco and me. We'll be right back. Match day is no ordinary day. The pitch hallowed ground for players and supporters alike. Excitement builds. Game plans are made with responsibility in mind. Celebrations are underway. Ready for kickoff. MLS clubs and our supporters rise to the challenge. We make responsible decisions while we cheer on our heroes and toast their success. Elevate your match day experience. If you drink, never drive. Back we're live. I'm Jay Fidel. This is me and Marco and me on Energy on Monday. And we left the cliffhanger. Young fella walks into Marco's office, wants to talk to the guru, wants to know whether he should get into the business at this point in time. Marco, what's your answer? Well, I think selfishly I would say no, because I just assumed there would not be any more competition than I'm already dealing with. But on a less selfish basis, I think I would also have to say that it's not particularly blossoming or optimistic time right now to be in this line of business, which as I've written about over the past month a number of times, and runs counter to the overall macro global trends and what's going on in the US mainland of PV reaching multiple new gigawatt records in terms of deployment over the previous calendar year. So Hawaii is not, I think, a really booming market right now, any of the islands in particular. So I guess the answer would be to the young Jay Fidel who were to walk in to my office asking that question. I would have to say I would probably dissuade them from taking that leap. Yeah. Maybe there's another time coming soon. Maybe there'll be some disruptive technology either in or around the panels themselves. Maybe that would change things and make it more profitable. But let's go to the next point in our agenda, Marco. There was a remarkable thing that happened on Friday, just Friday, I think. And that was the appointment of a missing PUC commissioner. What happened? Well, just to take people back a couple of weeks, Tom Gorak was acting as interim PUC commissioner, going back from what July 1 of last year up until April 30, or excuse me, May 5, I believe, of this year when the legislative session ended in Honolulu. Tom Gorak, being an interim appointee, he was rejected as fulfilling the rest of that particular term on the commission. They're typically six-year terms, if I'm not mistaken. He was rejected by a majority vote in the Senate. So he lost his job. And the governor spent a little bit of time looking at other candidates. And he announced on Friday that he was nominating Jay, also known as James, but to his friends Jay Griffin, to that appointment. And I think very, very highly of Jay. I think he's a real, real sharp guy, real good guy. And I was expecting the likelihood of the governor choosing one or more attorneys there in Honolulu who was steeped somewhat in regulatory matters. And as far as I'm concerned, he went out of the box on this one. David E. Gay did, and he went out of the park to kind of mix my metaphors a bit with the appointment. Out of the box, out of the park, what have you. Well, what is Jay Griffin's background? He was with the PUC, and he's with Hawaii Natural Energy Institute too. So where does he come from? What's his training experience? Well, he was with HNEI for I'm not sure how long. And he's now with HNEI until he actually takes the oath of his position, which hasn't taken place yet, but will happen, I believe, within the next couple of weeks or so. That said, he was on loan, if I'm not mistaken, from HNEI, the Hawaii Natural Energy Institute, to the commission over the course of the next year HCI acquisition hearings. Because I remember seeing Jay there, Jay Griffin, day in, day out, even though I wasn't there day in, day out. For those 22 days of hearings there at the Blaisdell. So he was hired by the commission to do, well, short-term stint there in terms of evading the commission in the process of evaluating whether it was in the public interest to approve that proposed acquisition after the merger was turned down without prejudice by the commission, by a vote of two to nothing with Randy Iwasse and Lorena Kiva voting against, and Gorak abstaining. He went back to HNEI. He has a PhD, so I feel some affinity and sympathy for anybody who's done that grind, having done one myself a number of years ago. I don't know the exact field, but he knows the regulatory field inside and out. I believe that he is a strong supporter of the governor's goals of greater and greater energy independence over the years and decades. So I think he just represents a very good choice, and hopefully will bring a new energy and dynamism to a commission with Randy and Lorraine. Yeah, it sounds like a shot in the arm, actually. Do we know how he feels about LNG? Do we know how he feels about the technology? HNEI is all about technology. Any information on that level? Dad, I do not know. Dad, I do not know. I just know what I do know about his support of renewable energy, which, of course, is almost universal in this state. And we'll just have to see how things play out. It will also be interesting whether there are a number of hot tending topics and issues that weren't completed or really satisfied when the legislature ended their term earlier this month. I mean, rail is one of them. Is it conceivable that there would be a special session of the House and the Senate to come back into session in order to address the issues that did not get, perhaps, resolved adequately? And again, I'm not a specialist in terms of Senate rules or the procedure, but is it conceivable that they could come back into session and rather than have someone like Jay Griffin be an interim, just discuss whether the consumer protection consumer health was a health and consumer protection committee under the Senate and under Senator Roslyn Baker, whether that's something that they would take up, the nomination of Jay Griffin to be PUC Commissioner sooner rather than later. And that's, again, that I have no inside information on that. But that's something that certainly comes to my mind. Yeah, I mean, it comes to my mind, too, that if they're going to have a special session, this is one confirmation they could actually handle. I believe with you in short order, because he is generally held in high regard, he probably will be confirmed. There's nobody speaking against him, at least not yet. And for that reason, if they put it to a vote, he'd probably get confirmed right away, so it wouldn't take a lot of time. But the question is, we know what, A, whether there will be a special session, because right now that's very iffy. And B, if there is a special session, whether it will be focused on the specific needs for the special session, and that probably would be tax and rail. But the other thing is that we know it's not critical that he could confirm right now. It could wait. It could wait till the regular session in 2018, just as it waited for Tom Gorak. The irony is that Gorak was awaiting confirmation he didn't get. And in this case, we have the same thing a year later. A guy appointed outside the regular session who probably will have to wait until next year to get confirmed. Does that affect the operation of the PUC? Well, it's important to note that whether you are a, I mean, there's no such thing, of course, as a permanent commissioner. But whether you're there with a full term ahead of you, however many years are left from that term, that six-year term, or whether you're so-called interim, it doesn't affect your status as a commissioner. I mean, you are a full commissioner unless and until you're no longer a commissioner. So there's not kind of pending or junior or probationary commissioner status. I mean, once Jay Griffin is sworn in, I mean, he joins Mr. Oase and Ms. Akeba on the same level. So it doesn't matter, I guess, practically speaking, for the next months to come, whether he has an interim in his title or not, but I guess, I mean, if I were him, I think, or anybody who were nominated, I'd rather get that interim part off of my title or off of my subject line sooner rather than later. I mean, that only makes sense. But let me ask this, Marco, you got Randy Oase, a lawyer, a legislator, been around the block in politics, Lorraine Akeba, a lawyer, and to some extent been around the block in politics. But neither of them, prior to coming with the PUC, were specialists, experts in energy. And they both learned, you know, like when they got appointed. But Jay Griffin is a different kettle of fish altogether. He's steeped in it, as you said, he has a PhD in energy policy. He's been with the, you know, with core organizations dealing with energy policy for some time, and he's presumably totally familiar with energy policy and with energy technology at HNEI, and that's a completely different orientation. And it suggests that the makeup of this three-person PUC commission will change, that the weight of it will change more, if you know, assuming they all have a voice, more toward, you know, policy considerations. I mean, long-term policy considerations, such as you have at HNEI, and technology such as you have at HNEI. He's a different kettle of fish. And it will be, I suggest to you, that it will be a different kettle of fish with him on board. Do you think so? I do, Jay, and I really hope that's the case, because Mike Champley brought a lot to the table, I thought. Mike was from the energy industry, but more on the utility side. So, and in previous commissioners, you know, there's Carl Caliboso, John Cole. I'm trying to think, going back over time, was, has there been anybody who has the kind of cred and the bona fides in terms of, I know, a very deep and broad knowledge of energy issues prior to Jay Griffin? And I think he may be new in that regard, or our new type of commissioner that comes with that kind of really deep portfolio. So, I can only hope that that's something that will make a, and I expect it to make a positive difference as the commission wades through so very, very much on its plate. Well, Marco, I agree with you. It was a good appointment by David E. Gay. This one should get some real traction, and it should be beneficial to the commission and therefore to the energy community. And I'm happy that it happened, and I suggest, I surmise that you are too. So, let's be optimistic about this one, eh? Yes, and let's reach out to Jay sooner rather than later so we can get Jay Jay, Jay Jay and Marco for Joe, eh? There you go. Jay Jay and Marco. Well, thank you, Marco. It's been great. It always is great to talk to you on energy on Mondays, and I will look forward to talking with you again two weeks from now, and hopefully me and Amirita can also join us then. Thank you so much, Marco. Always my great pleasure. Mahalo nui, my friend. Aloha.