 Mena, Marco and me on a Monday, welcome back to Think Tech, welcome back to Mena, Marco and me on a Monday. We'll be talking about energy today, we'll be talking about some very interesting developments that have happened. Mena joins us by Skype from Kauai, hi Mena, good to have you back. And Marco joins us from Provision Solar in Hilo, welcome back Marco. Actually, the beautiful People's Republic of Santa Cruz, you guys have a certain vintage that you will remember, a mama's and papa's song that goes along the lines of Monday, Monday, ba, ba, ba, ba, ba, with Mena and Jay, ba, ba, ba, ba, ba, thanks for having us on again, Jay. Thank you. Wow, it's a good thing you're in energy, not in music. Anyway, you guys, we've got a chock-a-block today, we've got three important things to discuss. And the first was the ruling that came down last week from the PUC, the Public Utilities Commission, which after what, seven months, eight months, they have made a decision about the PSIP, the Power Supply Improvement Plan that was submitted by Hawaiian Electric last year. So, Marco, how about reporting on that? I'd be happy to, Jay, so just to kind of bring everybody to the same page, this has been about a three-and-a-half, four-year process and project. What I'll call the Proto PSIP, the Proto PSIP, was really the last integrated refuerced plan, IRP, which was submitted by the company, Hiko Halkomiko, back in 2013, and that morphed to what was the first Power Supply Improvement Plan submitted to the Commission August 2014, and that was deemed to be inadequate by the Commission. They came up with the next rev, the next iteration, and submitted it April 2016, and that was deemed to be inadequate by the Commission. They submitted their last PSIP December 23, 2016, and they passed that. They gave it a passing grade and the decision in order, which was issued Friday afternoon, that said there were a number of guidelines and caveats, which to me made very clear that while they were passing the term paper, so to speak, just haven't come from teaching myself at UC Santa Cruz this past quarter, while they were passing this document giving it their seal of approval, they made very clear of their concerns on a number of levels and their guidance in terms of what they will be requiring the Hawaiian Electric Companies to do as we move forward. That's kind of the 50,000 foot sketch that I get. Well, what is the Power Supply Improvement Plan, and what did this one say? You were talking about the actual PSIP, which was submitted back in December? Yeah. I mean, it was a very long document. My recollection is some were under 2,000 pages, so I'm not going to try to characterize the document of that length in just a few minutes, but their focus in their executive summary, HECO's focus was on the near term, which they were asked to do by the Commission in previous guidance, the near term being the present 2017 to 2021. And Hawaiian Electric did a better job, according to the Commission's DNO, focusing on the near term in the next four or five years. And one of the things that was mentioned as a DNO on Friday is that the ambitiousness of the near term plans of Hawaiian Electric over the next four or five years is truly rather stunning. And reading specifically from one of the pages there, the companies, the companies being Hawaiian Electric, the company's resource plans include procurement of nearly 400, 400 megawatts of new renewable resources across all service territories by 2021, which is really a very short time away. Collectively, this represents the largest new generation procurement ever undertaken in the state. So, Hawaiian Electric has worked it out for them and then some to try to come anywhere close to 400 megawatts of cost-effective new renewable energy online in four-and-a-half years. Well, what kind of renewable energy did they say? If it's a 2,000-page document, surely they would have said what it was. Well, in the executive summary of the last piece, they provide data, and I don't have it right in front of me, Jay, but they provide numbers for each of the five islands that they serve in terms of X number of megawatts of wind, X megawatts of utility scale solar, X megawatts of demand response, X megawatts of coming from other sources as well. Again, I don't have all that memorized, but if you add up all those from rooftop solar on the micro-level to utility scale, it comes up to 400 megawatts worth of additional generation, which represents the largest effort of new procurement in such a short period of time. One of my main takeaways from this decision order, and this just leaps out at me in a number of places, is the focus of the commission on cost, on cost containment. And they're concerned that, according to the piece, the cost of electricity over the next five and ten years across the foreign electric service territories is going to go off significantly. And it's clear, again, my takeaway is that it's a principal source of concern and discussion for the commission. So does this mean that those 2,000 pages are approved and that now, for the first time since what, did you say, 2013, wine electric is free to proceed on the basis of the plan that it submitted last year? Is that what this means? Well, that's my take, Dan, and I'm happy to turn it over to Samina. It's a yes, but that's my take. Yes, it's approved, but we are going to be scrutinizing carefully any new power purchase agreements. We're going to scrutinize carefully the rate increase proposals that are before the commission right now for HECO and HECO and soon to be probably for MECO as well, and that they are very concerned about affordability. About affordability to the rate pairs of these higher projected rates. So, Meena Marita, you were always concerned about affordability when you sat on the commission. But since, how do you feel about the PSIP? How do you feel about the approval? Okay, so make sure that this is a blanket approval. This is just an acceptance of the plan and that any major capital investment would have to go to the commission for approval. So the overall plan has been accepted, but the parts of it will still have to go through PEC approval. And just in general, how I feel about it, I'm glad we're out of the planning focus and getting into the execution of near-term action. But I do have the concerns, again, about the cost. I do have concerns about the ability to execute and execute what I mean is the ability for HECO to put out RFPs that are really resource and technology agnostic to give us the most cost-effective ways to move forward in a way to mitigate, for a way to mitigate repair impact. There was a warning, wasn't there, in that decision in order indicating that the commission would expect them to be very thoughtful and analytical about trying to reach affordability. And it was not convinced that they had considered that, but it wanted them to, am I right? Yeah, I mean, it's always been one of the basic objectives is affordability, reliability, and accessibility so that everybody's entire system can benefit from clean energy policies. One thing that strikes me is that this is actually a plan that has long awaited approval years and even the last iteration in eight months. And if a Hawaiian Electric wants to build 400 megawatts in the next, what, four years, as Marco pointed out, that depend, and each element of the plan has to be approved, each RFP has to be approved, then whether they can make that four-year target really depends on whether the PUC will act promptly when they submit the RFPs for approval. Isn't that true? Yeah, that's one of the one of the challenges that, you know, when they go in, that, you know, everything is reviewed in a timely way. Yeah, it strikes me that if we want to make that goal or any goal, we're going to have to move with great alacrity at this point. Marco, do you have any closing words on this before we take a break? Yeah, I just back up, that completely in terms of the procurement is that the commission makes clear of places that they're concerned about the procurement process. They write, the company should not assume the commission will waive the competitive bidding process for any of these proposed projects that they're going to be really looking at the bottom bottom line, how much of the costs in there they make explicit that they and see the sentence here. The commission expects the companies to strive to procure resources at the lowest cost possible and at cost lower than estimated in the near-term action plan. So as before, certainly during your day, the commission will be looking at affordability on every deal. But that's fine, isn't it? Isn't that the way it's supposed to work? Yeah, the eco-company being able to make the business that this is good for the company, this is good for the rate pair. So yeah, they have to strive to do that in their business case. Well... On why investment is necessary. Am I right to think that while this plan, especially the last iteration submitted last December, was pending without being approved, that put a cloud over things and especially in the wake of the next era deal. And so there wasn't a lot of RFP work. Am I right during this period? And now that the lid is off, now that presumably they can go forward, then they should be submitting RFPs left and right. Now that this approval has happened last Friday, am I right to think that we're going to have a lot of RFPs submitted and that we're going to move ahead at full steam? Am I right about that? Again, it's a matter of prioritizing and what investments are you going to make to get the biggest bang for your buck and that's what you should be focused on. So I think we're still on the same trajectory. What you're really operating from is a principle of no regret that whatever you do whatever you're asking upon we're not going to regret it five years down the road. Yeah. Okay, well now we've got to wait and see what happens. If there are RFPs in the pipeline, maybe they'll come forward now. Maybe Humane Electric has already lined them up and is negotiating them or organizing them and we should expect to see more soon, don't you think? I mean one of my concerns right now is how does this all get reconciled again? Actually it's already on the table. Yeah. Okay, when we come back from this break we will discuss that very thing and one of the things on the table is Ho Hanua and we come back from this break we'll talk about that and how that's doing and will do. Here on Mina, Marco and me on a Monday we'll be right back. For a Better Life. Aloha, my name is Raya Salter and I'm here to see live from 1 to 130 every Tuesday at thinktechhawaii.com and then later on YouTube. I am an energy attorney, clean energy advocate and community outreach specialist and on Power Up Hawaii we come together to talk about how can Hawaii walk towards a clean, renewable and just energy future? To do that we talk to stakeholders all over the spectrum from clean energy technology folks to community groups so please join us Tuesdays at 1 o'clock for Power Up Hawaii. Okay, we're back with Mina Marco and me here on the Monday talking about energy in the state of Hawaii a lot going on. Marco, you wanted to show a slide and show some of the points that were covered by the PUC's decision in order. Can we see that slide now? Marco, what have you got on this? You're killing that up, Jay. I'd be remiss if I didn't say and I mean this sincerely I have a tremendous amount of respect and admiration for really the thousands and thousands of hours that the folks at Hawaii Electric put into this multi-year process of power supply improvement. I mean it truly represents a monumental effort and there's definitely to be commended for doing that. To me the money quotes from this 40-some-odd page document from last Friday is the following from the commission given the substantial increase in rates forecasted in the report the piece up. The commission is concerned that the companies have not fully considered the affordability of their plans. The companies have provided only limited responses to the commission's instruction to analyze customer and implementation risks. The companies do not appear to have evaluated the capital investments, financial investments and resulting increasing rates in the context of affordability to customers and the risk of stranded assets. I think to me those three sentences really hammer at what the commission's most serious concerns are. And you can bet that they'll be following those concerns or examining everything with those concerns in mind going forward. But what about this chart? What does this chart show us now? This is a chart from the PSIP? Well this is actually from the commission decision and order and it is showing what today the commission believes or took away from the PSIP in terms of the projected increase in rates across the HECO territories and it's rather striking for HECO their projecting rate increases by 17.8% in the next 5 years to 2021 and by 44.1% increase over the next 10 years for HECO 25.1% over the next 5 years 42.9% for the next 10 years MECO 18.2% for the next 5 years and 23% for the next 10 years. So it's been an interesting contrast kind of almost counterintuitive as our island utilities bring on more and more lower cost renewables that the rates are not commensurate in terms of going down on the downward side of the slope compared to in relation to the new renewable generation brought online. Now I know full well that that's only part of the puzzle and that there are all sorts of costs that it goes into running a utility company beyond what you're paying for power. I get that. Still it's kind of striking that our utilities are buying hopefully cheaper and cheaper power and yet there are still upward trend significant upward trend, not trivial upward trend according to Hawaiian electric projections of higher rates over the next 5 to 10 years. So this chart was actually created by the PUC based on the information in the PSIP and in doing that it sounds like to me although they have concerns about it they're essentially acknowledging that there will be increases, no? Well, I mean we'll know much more tangibly in terms of that acknowledgement after they finish what they need to do with the two pending rate increase request for two of the three that are before the commission right now. Yeah, that's the tension isn't it? Mina you have anything on this? Yeah, well I mean there's always been the concern right and how we're affecting you know economic dispatch by the way the PPAs are constructed by the inability to control net metering Yeah, all of these are coming to a crisis point. Yeah, well this reminds me of a comment by Lu Putirisi on our energy in America show last week he said there are some places in some situations where renewables simply we can't afford them it's too expensive to build the infrastructure and if we think we're going to get there quickly we're not because of the costs involved and because people won't pay the costs involved and I mean I guess what I would put to you both is can we do this? Does this shed some light? This is a tension that's going on for some time that is progress versus cost are we going to have a problem getting there? Does this reveal an inherent problem in moving to renewables? I think you know it's really understanding that getting to 100% is difficult it's going to be a real challenge and that it has to be done periodically laying out the foundation of things that need to be done to get to 100% what we've done in the past the past decade is we picked up all the low hanging fruit and as we get into higher integration numbers it's going to be a more difficult challenge Is it doable Marco? Do you think it's doable? You need to write to be able to integrate and that comes with substantial investments to modernize the grid and one of the first things that we need to modernize is giving the grid more transparency so the system operators can see what the hell is happening on the other side of the system so advanced metering is a critical investment to be made One of the points raised was we need to have more research, we need to have more sophisticated equipment for that infrastructure in order to move ahead at the speed we'd like to go and maybe we should wait till the technology catches up with what we hope to happen before we execute all the expansion and this is a comment that's been made I'm not sure that applies to Hawaii but I wondered what your thoughts were What we need to do is to be making the right investment in order to move forward and one of the investments that's critical here is flexible generators and flexible generators that can run with the most efficient fuel that complement renewable energy Marco, anything more on this? We move forward with this major roadblock on keep telling ourselves no fossil fuel generators it's not going to be done affordably Okay, well we only have a few minutes left let's talk about Honeua and where that fits in the picture of development of renewables the PUC's view of things and cost What's happening with Honeua? So this is a power plant that is not in operation at this point, a Pepe Keo from the coast of the Big Island that used to burn coal back in Hilo Coast Power Company days long ago There's an attempt to revivify it by a company called Honeua based on the mainland and it would be burning assuming it were to get a regulatory approval of the power plants and the former trees grown on the Big Island There is a power purchase agreement pending before the commission right now Last Monday was the deadline for the party to submit their position papers and then today is the deadline for Honeua to respond to what was submitted last Monday and kind of the money question there in my opinion is will approve of a power purchase agreement that according to the reports I've read would have an all-in cost of roughly 22 plus cents a kilowatt hour 22 plus cents a kilowatt hour whether that's even remotely feasible or doable desirable given the guidance that we've been getting consistently from chair Randy Awate and in particular from this DNO on the PSIP so I'll just read one of the last sentences there the commission expects the companies to strive to procure resources at the lowest cost possible lowest cost possible and at lower cost than estimated in the near term action plan so given that assuming that they were to be consistent is there a case to be made of why this commission should approve a power purchase agreement for biomass produced firm power at 22 cents a kilowatt hour yeah what do you think Mina do you support this an analysis told me that the levelized cost over a 30 year period is actually 28 cents and that most of the risk has been shifted to the rate payer through fixed cost rather than the investor hmm well this doesn't seem consistent with all that concern about affordability does it that are going to rise but yeah I think you know yeah how do you reconcile projects like this well we visited Kauai a couple times in the last couple months and saw the solar farm there and saw the kauai green energy program which is very interesting it's not this similar from the Hohonoa model and what's interesting is that their cost per kilowatt hour is way less than 22 or 28 cents so now please Mina go ahead I think the cost 17 cents yeah and go ahead I'm done there's one important difference to be made between PV plus storage now versus burning biomass in a combustion plant now and that is that burning biomass in a combustion plant is firm power whereas we are not at the point yet in terms of the cost of reliability or the strength in the field where PV plus batteries can be considered firm 24-hour day on when you need power now I believe we will get there but we are not there yet so it's a false comparison in a sense to look at PV plus storage of 11 cents a kilowatt hour on kauai to what Hohonoa would produce on a firm basis so what would you do would you approve this we're talking about the green energy project which is a biomass project kauai that's 17 cents and they burn 24 hours a day and they are dispatchable and they are less I mean it's interesting that you have one that's actually in place happening right now in kauai at less and yet the other project in the big island is for substantially more and there it is on the table why is there a difference why can't the same technology and model be used in both of them so as to achieve at least comparable rates I got to imagine channelling Hohonoa and I have no information this is just me common sense that they need to charge a certain amount over the length of a power purchase agreement in order to break even and then some otherwise it makes no sense to enter into a PTA where they are knowing they are going to lose money keep in mind that the owners of Hohonoa have already sunk, if I'm not mistaken more than a hundred million dollars into that power plant in which they received zero in terms of compensation or return for so it's really a high stakes gamble and as Jim Kelly VP of corporate relations of the HECO put it in a piece not too long ago he said if the ruling from the commission is adverse to the Hohonoa proposal to sell power the lawsuit is back on the lawsuit that Hohonoa initiated last year I believe it was seeking trouble damages for our against Hawaiian electric and next year so this story ain't over my friend no it's not over and it's more complicated than it seems yeah I think energy is generally more complicated than it seems you know so correct so this is the developer's risk you know they bought the project from a a failed company so I you know why should the rate there pair be stuck for a bad investment if that's what it comes down to well there you have it and we'll have to follow this later I'm sure we will I'm sure it's not over as Marco says it's not over so thank you very much Meena Merida, Marco Mangelsdorf for joining us again on Meena Merida and Me on Energy on Monday and we'll do this again in two weeks time I look forward to more we didn't cover all we wanted but there's a lot more to cover next time thank you both