 Think Tech Hawaii. Civil engagement lives here. If I looked at my watch now, it would say 12 noon on a Monday morning. I'm Jay Fidel. This is Think Tech, and we're doing energy. Mina, Marita, Marco Mangosdorf and me on Monday, MMMMMMM. And here they are, the daring duo. Well, maybe trio if you include me. And we're going to talk about energy in Hawaii is so many things to discuss. Mina, good morning. Good Monday morning. Aloha from Kauai. Yeah, Marco. It is a beautiful day. One day closer to real sustainability. Marco, how about you? Where are you in Hilo today? I'm favorite M and Jay there from a beautiful Hilo town. It's always a pleasure to have the terrific trio, the terrific triad on the same show. So thanks again for having me on and both of us on, Jay. Thank you. Sure, sure, sure. Well, let's go. We have a lot of stuff to cover. Let's talk about the permit report first. When we spoke, Marco, you mentioned that Oahu PV permits for February were up from 2017. What happened? What does it mean? I'd like to believe, even though two months perhaps don't necessarily make for a trend quite yet, but I believe and I very much want to believe that the Hawaii solar coaster bottomed out last year and is now building up some upward momentum after years of slowdown. So last last month in February Honolulu Department of Planning and Permitting issued 194 permits for solar electric systems compared to 154 in February 2017, which is an increase in 26%. And another notable data point from those numbers is that 60% of those 194 permits issued last month, 60% included battery storage. Nowhere else in the country is residential energy storage being deployed as part of new PV systems as vigorously as we're seeing here. It's also worth noting on the macro level, the energy storage arena has become, in my opinion, one of the hottest energy playing fields in the world. You've got the Tesla Gigafactory outside of Reno, which I was surprised to see has the largest building on the planet when you look at the total footprint of the Gigafactory over in Reno outside of Reno. And it's just one of a number of, of a growing number of battery, what I'll call battery mega factories, either under construction or on the drawing board in People's Republic of China and the Republic of Korea, also known as South Korea. So there's no doubt in my mind that the volume of energy storage hitting the global market is going up exponentially, and hopefully will be accompanied by declining prices. So it's coming in an opportune time, I think, and supports, like I said, the solar coaster, hopefully having bottomed out last year, and we're now beginning to in-shop in the positive direction. You know, you say that the photovoltaic permits are up and all that two months in a row, but just I wonder if you have metrics to indicate how the utility scale solar activity is doing. Is it also up two months in a row? Proposals, if I'm not mistaken, I believe that has been formally put out there for 200 plus megawatts, I believe, of renewable energy for Oahu, which can be wind or solar, amongst other things, 40 megawatts of utility scale renewable for Maui, 20 plus megawatts for the big island, involves a lot more effort, a lot more organizing, and a much longer, longer timeline because all of them, all such projects, if I'm not mistaken, have to be subject to Public Utilities Commission approval. So over the next 12, 24, 36 months, I have no doubt, are megawatts of utility scale renewables, but it's going to take considerably longer ground. I want to talk about Senate Bill 2100 pending in the legislature this session, but in ramping up to that, I'd like to talk about the governor's budget, which was 200 and change a million dollars short. What kind of environment do we have with a budget that's 200 million dollars short in a state where the constitution requires a balanced budget every year? Well, definitely one of the things that you can't identify without a balanced budget is the governor's priority. So I think we're in a sad state where he's going to rely on the legislature to make the cuts to his budget in order to balance the budget. So here you have an administration which hasn't identified its priority. Yeah, it's a problem. We need to have leadership on that. So how does this effect Senate Bill 2100? It's a very important bill having to do with energy. Bill that's active in the White Legislature right now, which would change the current renewable energy, state renewable energy tax credits values up until now. There is no sunset date to that. And as I've pointed out in the past, it has accounted for the largest sum of money not going to the general fund to the tune of from 2013, 14 and 15, the three most recent years that I have data for those three years amounted to almost half a billion dollars, somewhere close to 500 million dollars worth of tax credits claimed. So when you talk about a shortfall in the governor's proposed budget of 200 million, I mean, that's not chump change in any type of tax credit is going to be some hit on money going to the state general fund. So Senate Bill 2100 is again the third attempt in three years on the part of various legislators to do two things. In my opinion, one is to change the renewable energy tax credit law, also put a sunset date or ramp down good and perpetuity. And then the second point from 2100 would be establishing separate state tax credit to add energy storage after one, whether the one is a homeowner or state tax credit to add in a facility heard in Chris Lee's Energy and Environment Committee a couple of weeks ago, actually on the 15th was passed out of the Energy and Environment Committee on the 15th. And there's now been Sylvia Luke's Finance Committee, which they have to hold hearings no late on it either this week or next week. Last month, the ledge, which is in April, prior to the legislature closing down for the year, essentially by in the first few days of May. What I call the solar parties in terms of the way the Senate Bill 2100 HD1 House Draft 1 is written now that would bring the credit down to 25% from 35%. And the kind of the iron law is that once you have a subsidy or an incentive that particular industry that benefits from it is low to give it up. But if this is any small business owner, and I think it's more than offset, would be more than offset by a separate tax credit for energy storage, if in fact this bill were to get through the legislature and end up on the governor's desk. Yeah. Well, Mina, how do you feel about it? What parts do you like? Well, I hope, you know, I like the ramp down, of course. I don't like the idea of a special or separate tax credit for batteries. I don't believe people should double dip on the tax credit regarding a solar system, the entire system that, you know, batteries should be a part of it. And it is now my understanding the way to interpret it, you know, the tax credit can already be inclusive of a battery system when it's designed as part of the system. But for those who have taken the tax credit earlier, I feel like they're being overly subsidized by taking a second tax credit. And many of these systems already benefit from metering. So you have subsidization from the taxpayer as well as the rate payer that needs to be considered. Yeah. And, you know, given the state budget and the impact of the state budget, I mean, this is a huge issue that should be looked at carefully. Let me shift to other pieces of legislation that are in play. One is the barrel tax, as in every year there are various proposals about redistributing what comes in on the barrel tax, changing the rate of the barrel tax and all that. Where the barrel tax was originally intended to incentivize green energy now, it seems to go in a lot of different directions and it might go in even further directions this season. What's happening? I think it's really difficult at this point to go in and ask for an increased barrel tax. And mainly because, you know, if you're looking at an administration that is not showing any kind of leadership, how can you justify that these monies are going to be spent wisely? We've had a really critical auditor's report on the energy office. I'm not sure what the priorities are at Department of Agriculture. And I'm not sure what the overall strategy is on energy and food security. And, you know, sometimes you have to be careful what you ask for when you open up Pandora's box at the legislature. So you might go in for a redistribution or an increase of the barrel tax and come out left. The bill might be used as a vehicle for something else. Marco, where are you on the barrel tax? Where do you think about it? Much, but I mean, I kind of think to that other cash flow was that it was an attack on cigarettes that was supposed to go 100% towards trying to reduce pushback on people buying tobacco products and the legislature sees a pot of money like that and they start picking at it. And diverting it in other directions. I mean, it sounds similar to what the barrel tax has suffered is that you have something of an appropriation that's specifically targeted to achieve a certain goal. And once the money starts developing in a kitty, so to speak, then there are hungry eyes to look at and say, well, gee, I have a place I'd like to spend some of that money to. Well, this certainly raises the issue of gems, the Green Energy Infrastructure Fund started out at $150 million on bonds guaranteed by the ratepayers. And before you know it, the legislature is taking huge pieces out for issues that are not really, purposes that are not really related to the original intention. Mina, what do you think about what's happening to gems? Yeah, the thing, when gems was proposed by GBID, and this is under the Abercrombie administration, those funds were supposed to be deployed immediately. They're supposed to have all of these programs lined up and at the time I was at the PUC and we were very concerned because the saturation of PV panels already on the system. I mean, and so were you going to get many subscribers there for the gems program? And here we're at four years later, the money is sitting there, we're paying interest on these bonds. The energy office is in disarray. What can I say? It's screwed up. Let's talk. The best thing that they can do is find one big project and deploy the fund for that one big project. And people have to remember these bonds have to be repaid. And so you have to find an income-producing project that can pay off the bond. Yeah, amen to that. We're going to take a short break, you guys. Marco Mangelstorff, Mina Morita. Marco, Mina, and Marco and me on Energy on Mondays. We'll be right back after this short break. Good afternoon. My name is Howard Wigg. I am the proud host of Code Green, a program on Think Tech Hawaii. We show at three o'clock in the afternoon every other Monday. My guests are specialists both from here and the mainland on energy efficiency, which means you do more for less electricity and you're generally safer and more comfortable while you're keeping dollars in your pocket. Hey, aloha, Stanley Energyman here on Think Tech Hawaii where community matters. This is the place to come to think about all things energy. We talk about energy for the grid, energy for vehicles, energy and transportation, energy and maritime, energy and aviation. We have all kinds of things on our show, but we always focus on hydrogen here in Hawaii because it's my favorite thing. That's what I like to do. But we talk about things that make a difference here in Hawaii, things that should be a big changer for Hawaii. And we hope that you'll join us every Friday at noon on Stanley Energyman and take a look with us at new technologies and new thoughts on how we can get clean and green in Hawaii. Aloha. Hey, you're back on Think Tech. I'm Jay Fidel, our energy show on Monday. Me and Amarco and me on Monday, of course. And so we'd like to take the second half of the show today and talk about whole state of things that affect the PUC. The first thing is G. Wiz, David Igay's nomination for a six-year term of a new PUC commissioner. This would replace Lorena Kiba, I guess. Goodbye, Lorene. Thank you for your effort and your service over the past, what, six years. And hello, Jennifer. Jennifer Potter. So, Marko, what do you think about this appointment? Well, if at least partially a wonk, I applaud the governor's choice because I think Jay Griffin, who he appointed last year to take over for Mike Champley, that Jay was a winner. And I'm in favor of more wonks. I mean, he could have chosen a politician. He could have chosen a lawyer and choosing a person who brings quite the pedigree that she does, is Jenny Potts, as far as experience in politics to determine kind of the future, the present future of utilities in the 21st century. Experience with Sacramento Municipal Utility District, also known as SMUD. She seems very, very well qualified. So I think not knowing the woman personally, from what I can tell, she was a great choice. And I believe it's just one port of call to consider her nominations to making the rounds amongst the 25 senators and get a meet and greet. And the legislature ends. She will have been confirmed and take over after Lorene departs on June 30th and Ms. Potts will take over on July 1st. Yeah, so we don't have a Champley situation here. He appointed early enough in the session so there would be plenty of time for a consent. So we don't have to go with the same kind of scenario we had with Mike Champley. But let me ask you this, Marco. Jennifer Potter is from HNEI. So is Jay Griffin from HNEI, essentially, in terms of the way his energy career has developed. That means two significant, two of three, two of three of the commissioners are from HNEI. Don't we need more diversity? I think both of you and Mina are much more well-equipped to kind of know the inside baseball stuff on that particular organization. Well, what about you, Mina? What do you think? Well, I think, you know, definitely she has all the qualifications. I'm glad that they found a woman to replace Lorene for diversity's sake. And my understanding is she lives in Lahaina. So that you have a neighbor item perspective coming in. I think people have to, you know, there's a real careful balance between a real life scenario and an academic approach, you know, so careful balancing. You know, I worked a lot with HNEI and part of it is to understand that careful balance that you could have technical and economic support coming out of the institute that will address a real life situation. And so I'm hoping that they will continue on the track. And HNEI has been pretty conservative looking at all issues moving on to the current energy policies. They're definitely a leadership organization. So what about the PUC in general? They've had an audit recently. Here we are at a time when there's such great expectation from the PUC. What's the tone and tenor of the PUC and its position in the energy landscape right now? Well, I think you have a careful, I mean, how can I be diplomatic about this, you know? You have a chair in the past. I mean, you have a chair currently that seems to be more autocratic than collaborative. So how will he now take these two commissioners with really good background and collaborate with them into resolving issues and attacking these really, again, complex dockets? Yeah, Jenny appears to be highly capable, but she can only be as effective as the chair allows her to be. Yeah, okay. Marco, you have thoughts on this? I actually wanted to ask Mina from her very valuable and unique perspective as having been chair of the PUC under Neil Abercrombie, other than you noting more autocratic tendencies under your successor, Randy Awase, compared to your tenure there. Mina, what other tangible differences or changes can you identify and comment on from when you were chair of the PUC to under Randy's tenure? My staff at the PUC was small, and we were in the process of trying to hire to fill positions. But even though with a small staff, we had a lot of experience amongst the staff. Going in four years later, the turnover has been really high at the PUC. A lot of senior people have left the PUC, and so you don't have that bench of experience and institutional memory, and especially with all these rape cases going on. So I think that's a huge difference. What would you attribute to the high staff turnover, the high rate of turnover? What would you attribute that to? What's the cause? For a while, it was salary. The easiest thing that you could pinpoint to a salary that the salaries weren't competitive with similar positions in the private sector and in other agencies. Staff at D-Bed gets paid a whole lot more than staff at PUC. Interesting. And so just the ability to attract and retain. Well, presumably with every change in the composition of the PUC, that their thinking is only three of them will likewise change. And so the last point in our agenda today is HEI's purchase of Hamakua Energy Partners and a new docket to consider, quote, affiliate transactions, end quote. And I wonder, you know, does this new commissioner, you know, the current tone and tenor of the PUC, how is it going to react to this docket and other dockets like it? Are they more open about this kind of thing? What are your thoughts, Mina? Well, I haven't looked at this docket, but it appears that HIKO was sort of forced into this issue of going the route of an affiliate, you know, because there was no way that the utility could purchase Hamakua partners or renegotiate a new PPA under the circumstances. It didn't look like they were going to get approval. And what's really sad is, you have this asset on the big island that really could help, I think, with the integration of renewables because gas turbines and flexible units compared to other older units on the island, maybe a bit more efficient. And so I think, you know, just this hard, you know, position that the utilization of owning these kinds of assets may not have made sense given the circumstances of an existing facility and an asset that might be just disregarded. Marco, let me ask you, I mean, and you come at this at least in part from HIEC, you know, looking at the whole model of utilities in the state of Hawaii. How does the new composition of the, as far as you know, the PUC and these new type of deals that are being presented, is there a new world here happening? Does this signal a new direction in general of development of clean energy? No, I think it's too early to tell for one thing, Jay. I mean, the brief history of the past year or two is that Helco had a willing seller from a company called Arclight Capital that owned Hawaii Hamakua Energy Partners, which is the largest generating plant on the island. They had a deal to buy HEP from Arclight. That went before the commission. The commission turned it down middle of last year. HCI came up with an alternate strategy where they purchased, they closed the deal with Arclight to purchase HEP as a affiliated transaction. And that apparently got enough of the attention of the Public Utilities Commission that they said, you know, we need to open a docket to look at affiliated transaction requirements. So I don't see it necessarily as hostile to HCI's move to acquire HEP, but at the same time they wanted to revisit something that hasn't really been discussed in quite a number of decades, really, in great detail, going back to the so-called Thomas Report of the early 1990s, as far as wine electric industries being a non-regulated company. It owns, of course, publicly-regulated companies, in terms of HECOHECOMECO, but HCI is non-regulated. So they wanted to clearly generate some discussion on the boundaries of what a company like HCI can or maybe should not do in terms of affiliated transactions. So then I want to give a shout out to Henry Curtis for bringing this to my attention last week, as he, of course, is all over whatever the Commission does, and that's how I got one of it. So it's kind of a sleeper issue, but it's also very important, I think, in terms of discussion of what a company like HCI can or should do in terms of acquiring assets. And I think part of it is that there's been a general kind of poo-pooing of the notion that utility companies should be owning generation assets. There's kind of a bias against that, a growing bias against that. That might be changing, don't you think? Fundamentally, who the utility should be in the generation business, they should be in the T&D, Transmission Distribution Business, but, you know, that's all well and good on the mainland where you have interconnection from state to state to state to state. We got no such thing here on this island. So I think we're in a very tangibly, materially different position here in this state. So you wouldn't do it, this deal. I mean, would you approve it is my question. Marco has a really good point that, you know, we really have to delve into these issues more, you know, about these affiliate transactions and also related to that, whether the generation, I mean, whether generation should be owned by the utility. I mean, there's one round, because the other route was denied, but we haven't had that really deep discussion on our particular situation as an island state and how these kinds of assets should be handled. Wow, fabulous that we have new issues, new possibilities, new wrinkles. Marco, I'm so glad you raised it and good for Henry Curtis for raising it to you. Well, thank you, Marco Mangostorf. Thank you, Amina Morita. Great discussion as always. We'll see you two weeks hence. Don't leave town. But if you leave town, stay close to a stone anyway. Thank you very much, guys. Always a pleasure. Thank you both. Aloha.