 This is Stink Tech, Hawaii. Community matters here. Okay, we're back. We're live. It's Monday, and it's Meena, Marco, and me, except this time it's Marco and me. And we're talking about energy in the state of Hawaii. We're getting current on it. And today, you know, the show, of course, is about developments in energy, news, and events about energy. And Marco is a great resource for that, and we can have great discussions with him. Square, fair-minded, straight-ahead discussions. And we're going to call this, as a tagline, we're going to call this Hawaii a state of energy dysfunction because we have some things that lead to that conclusion. Welcome to the show, Marco, again, yet again. Well, the more we talk, Jay, the more I just fall ever so more deeply in love with talking about energy with you. You bet. This is where it lives, honestly. So let's talk about a number of things today. We've got a shock-a-block kind of agenda today, and I'd like to cover it with you. And for number one, I'd like to talk about this thing with D-Bed. D-Bed's going to spend just about a million dollars on looking at ownership utility models. And I'd like to get the facts on what's going on and I'd like to discuss what it all means. What's going on? So back in the 2016 legislature, the legislature passed a bill that was signed into law by Governor Ike that appropriated, I believe it was $1.2 million for the Department of Business, Economic Development, and Tourism, of which there is an energy office in the D-BedT acronym, to look at utility ownership, electric utility ownership models for the state of Hawaii. And keep in mind this was in the throes of the decision remaining to be made or arrived at by the Public Utilities Commission regarding the attempted purchase of one electric industry by next year energy out of Florida. So as we know, July 15th of last year, the commission would thumbs down on that purchase and the next Monday next year pulled its stakes up and went back to Florida. But nonetheless, this bill signed into law appropriating money for D-Bed to be able to send out a request for proposals, which they did for a consulting company to do a comprehensive analysis and present that analysis to the legislature looking at utility ownership models with the three main ones being investor-owned utility, which we have in the form of Hawaiian Electric and Miko, Hiko, and Helco. We have the co-op model, which we have on Kauai right now, in which my group, Hawaii Island Energy Co-op, has been espousing and promoting for this island as well, for the big island. And then finally, there's the muni model or municipal model, where you would have a city or a county actually being the owner of the electric utility and you have that places nowhere here in Hawaii, but you have it on places like the mainland. Or on the mainland places like Palo Alto, Santa Clara, in my home area of the Bay Area and many other parts of the U.S. So this study, the bid was won by a company called London Economics, which is based on the East Coast. The winning bid, they bid somewhere I believe around 980,000, if I remember correctly. And they are on Island or they're in the state right now and they're doing a number of public forums where they're soliciting the input of the public on all the islands that Hawaii Electric serves, Oahu, Lanai, Molokai, Maui, and the big island. So the two meanings that you're going to be on this island, one is going to be this evening over on Kona at the Nelha, the Natural Energy Lab of Hawaii, which is right off of the Queen K Highway there close to the airport. And then tomorrow is going to be the one at Hilo. We're at Waiakea High School at the gym at Waiakea High School. So I'm actually going to be meeting with one of these scout teams tomorrow for lunch and I look forward to my conversation with them then. So they're on an intel gathering mission here. And the goal from what I understand, Jay, the goal is to have a report ready to be submitted to D-bed by sometime by the end of 2018 so that it would be ready for the review by the legislature when the legislature meets next, or not next, but in early 2019, sometime January 2019. So we are more than a year away, most likely, from seeing what the fruits of their labor is going to be and what the fruits of this $1.2 million of taxpayer money is going to what it's going to look like. I've got some questions for you, Marco. They're rhetorical, but maybe we can talk about them a little. So this was done in the 2016 legislature, which would have been over by May of 2016. Here we are now. We're cruising into the last quarter of 2017. And only now we get a successful contract. What held it up? How come the state cannot move faster than that? Well, it was awarded. I don't remember exactly when it was awarded, Jay. I believe. And then I wouldn't want to go to the bank on this. I believe it was awarded January of this year, OK? And why it's taken London Economics the time it's taken for them to come out and talk to the peeps on the ground here. I really can't say I'll have a better idea after I meet with them myself tomorrow. But as to what the delay has been, I don't know. I mean, the likelihood, I mean, it's an impossibility. They're going to have it ready for the next legislative session, which of course starts January, you know, just several months away, January of 2018. So as to why these things take as long as they do, you got me, my friend. I don't know. OK. Yeah, let's just have a lingering question and issue. And it does get in the way of energy and everything else in Hawaii. The other thing is why not Kauai? Why aren't they looking at Kauai? I mean, maybe they'll come up with some recommendations that would change the way Kauai works, too. Is this really just an attack on Hawaiian Electric? Oh, I wouldn't constitute as an attack on Hawaiian Electric in terms of why not Kauai. I'm looking at the schedule of the meetings. And in fact, they will be there on Thursday in Lihui, meeting a public meeting on the island of Kauai. So they will be most likely these scout teams, I believe there are two of them, are going to be meeting with various energy stakeholders, including utility companies, interest groups, and also members of the public. So I would think as part of their analysis, they would look at how KIUC has been performing in terms of serving their members over the past 15 years. You know, there are other options other than just IOUs, investor and utilities, co-ops, and munis. There's also the ITO, Independent System Operator, which is what we have in California. There are also regional transmission operators as well on the U.S. mainland. But I don't think, given the fact that our islands are not interconnected and won't be for the foreseeable future, that any type of ISO or RTO models necessarily make much sense here. So it's just going to be very interesting to see what kind of conclusions they come to. You know, it also strikes me that I've seen this before. I was part of the Hightech Development Corporation for a while in the early 2000s. We get these, you know, huge contracts, million dollars for consulting. I'll take that deal. And, you know, the question is why we really need to have an East Coast company who's not familiar with Hawaii. Hawaii is unique. It's a sui generis. It's an island state. You know, in the middle of the Pacific, it's different from every other market, every other energy arrangement in the world, really. And they take some consulting company on the East Coast, and these guys come out here and they talk to everybody, and everybody talks to them. I saw this happen in D-bed when I was associated with it. And then they regurgitate exactly what we told them. And that they get a million dollars for. You know, and I think often it's an abdication of the part of D-bed. D-bed gives all these big contracts out to get all these reports. They put the reports on the shelf. Nothing happens except we spend a lot of taxpayer money, and there's actually very little input from the guys, from the energy officer who is supposed to be running energy in the state of Hawaii. Why can't we do this ourselves? Why can't we actually sit down and do the hard work ourselves in the PUC, in the legislature, you name it, actually talk to each other, actually find a model that suits people? Why do we have to bring in million-dollar contracts to talk to us and to regurgitate what we tell them? What are your thoughts about that? That's a great point, Jay, and I don't have a satisfactory answer for you. I mean, it's not the first time, as you know, that this has happened. So Maui County had some money left in their budget and Mayor Alan Aracau has spent, I believe it was somewhere in the $70,000 range to pay a, I believe it was Oklahoma-based, Oklahoma-based company whose name escapes me right now to look at the possibility of what the possibilities are for the county of Maui getting into the electric utility ownership business if they were to, let's say, make a move on taking over Maui Electric. And that study made some blurbs in Pacific businesses when it came out, but it certainly didn't rock Maui in order to lead Mayor Aracau to move in the direction of doing any kind of hospital takeover of MECO. So, I mean, as an academic, I find those kind of analyses always are typically interesting to read. But to your point, in terms of why do we have to spend so much money with hired guns from the mainland to look at this and then issue their reports and get a little bit of press, and then we put it on the shelf, like you said, and it gets dusty, I don't have a good answer for you. Okay, but we can continue to talk about Maui for a minute. In Maui, we have an interesting phenomenon. We have bad news about the affordable tech industry there. PV permits are down 62%. There were only like 100 permits in the last quarter. And gee, it looks bad for PV in Maui. What's happening with PV? I thought we were on a roll with PV, but apparently not. And Maui is only one island. I mean, it's also to some extent happening in Oahu too and around the state. What is wrong with our PV system that we're not maintaining the same momentum we had earlier? Well, it's the vicissitudes of the solar coaster that's been named in terms of the ups and downs and the hills and the valleys. And I think fundamentally, after net energy metering came to an official close October of 2015, just about two years ago, that the solar coaster has been slowing substantially. So you can look at the incentives for those who haven't gone solar PV, of which the large majority of homeowners and business owners have not. The incentives have decreased, have been decreasing over the past couple years. So it's harder to make the value proposition convincing, harder certainly than it was prior to NEM coming to a close. So that's one big part of the puzzle. The other is that our island utilities, as I've been saying for a number of years and kind of stating the obvious, they are fixed grids. In other words, you can only have a finite amount of power being generated in a finite grid. And there's no such thing as an infinite grid that Elon Musk may dream of such things in terms of energy revolution and smart grids and so forth. But the reality right now is that the grids are finite. You can only feed so much power into a finite grid. You can't just continue to add, add, add, more generating capacity and many circuits across the Hawaiian Electric and KIUC service territories are just reaching a point of relative saturation. So the ease of which the utility companies were able to accept new systems to be tied into their system and feeding power into their system, the ease has become substantially more challenging. In other words, it's much more difficult right now compared to just the handful of years ago. So you combine these factors together and fewer consumer choices, less incentives, more of a challenge to add more rooftop solar to these island grids. And I think that's what we're seeing is a substantial decrease in the number of PV systems sold and the number of PV systems that are being permitted. I mean, Q3, from Maui County this year compared to Q3 from Maui County in 2015, the drop was 84%. So it's hard to spin anything real positive out of that. And I wish I had better news. Well, you agree with me, Marco, that if we made up our minds and said... It's hard to come up with a scenario where there's going to be a dramatic uptick and the solar coast is going to start climbing, climbing, climbing to the higher hills that we enjoyed years ago. You agree with me, Marco, that if we made up our minds and said we are going to have Maui or some islands or all islands in an integrated statewide grid, which I haven't forgot about, that if we made up our minds and said we are going to have a lot of solar and renewables on it and we're going to have batteries on it, we are not going to have fossil fuel, we're going to stop all the fossil fuel plants, that this is doable. It's not an infinite grid. It's a grid that we can manage. They have the technology to deal with it. It's just they don't have the money or political will. But if we had that, if we made our minds up to do that, it's doable, don't you agree? Yes, in theory, yes. But in practicality, that's where the challenges are much more manifest. And I think one really just has to look at it more specifically on kind of an island by island basis and what's doable, what's practical, what's cost-effective. That's politically acceptable. Even though I've had some issues in principle with this Huho Nua decision where the plant up in Pepe Kea up on the coast from Hilo is going to go back online using biomass, burning eucalyptus grown here on the island, that's scheduled to go online later, late 2018. So let's say the first full year of operation will be 2019. And although Helco can't predict with 100% accuracy, most likely with Huho Nua in operation, that's going to bring Helco's renewable percentage to somewhere in the 70% range, which is pretty darn fantastic. Oahu has more manifest, more challenging issues than the Big Island does. So I think you really have to look at it on an island by island basis because, I mean, unless there's going to be some incredible large s and billions of dollars are going to come relatively cheap or free from the feds, which seems highly unlikely. And the cost of running inner island cables, even when it comes to the very, the simplest, quickest, shortest routes are between Lanai and Maui, Molokai to Oahu. And we want to talk about money spent, Jay. I mean, there's been substantial money spent by HNEI. If I'm not mistaken, another is looking at studies, doing studies, spending millions or million or more dollars looking at inner island cables and what's come out of it. I mean, yes, we understand more. We understand that if we're estimating, if it's going to cost a billion in reality, it's going to cost probably substantially more than that. Substantially more than that. Substantially more than that. I mean, look at what's happening with the rail fiasco on Oahu, right? So I just don't see inner island cabling probably in my lifetime or yours. Yeah, no, and I would not disagree. And I think it's a question of distraction in the fickle finger of fate moving on and people forgetting about studies and analyses that are on the shelf gathering dust. And, you know, I mean, I haven't forgotten, I haven't forgotten inner island cable, but I think the state has, and it's not going to go anywhere. It's no longer not only in favor. It's no longer, you know, being thought about and LNG no longer being thought about. And, you know, for that matter, I'm not so sure the alternative business model analysis by London Economics is really on the table. We can have a study. We can have a hiatus of a year or more before we get results. But, clearly, whether we have moved on beyond that past that and we're into some other level of distraction right now. Speaking of which, we can take a break and get distracted in the break. But when we come back, we're going to talk about a factor that definitely has an impact on the solar development in Maui and elsewhere. And that's the competitive bidding process for renewables in the state. Is it efficient or are we in a state of dysfunction on that point? And how does it affect the development of renewables? We'll take the short break marker. That's Marco Mangostoff of Providence & Solar in Hilo. And we'll be right back. This is Think Tech Hawaii, raising public awareness. Guys, don't forget to check me out right here at the Prince of Investing. I'm your host, Prince Dykes. Each and every Tuesdays at 11 a.m. Hawaii time. I'm going to be right here. Stop by here from some of the best investment minds across the globe. And real estate, finances, stocks, hedge funds, managers, all that great stuff. Thank you. Absolutely right. Marco, you're absolutely right. And I hope the audience realizes that we have the most incredibly profound discussions where we find out the truth. So back in December of last year, the Hawaiian Electric Company submitted their third rev, their third revision, third edition of the Power Supply Improvement Plans, or PSIFS for short. And I'm looking at the executive summary table right here, which is, they did a real nice coloring job here in terms of making it very easy for lame brain people like myself to understand. For example, for Oahu in the next four years, four plus years, in other words, 2017 to 2021, they are proposing that there be 352.2 megawatts, 352.2 megawatts of grid scale PV on Oahu alone. Just kind of point of comparison, if I'm not mistaken, the typical peak demand for Oahu for the whole island for Hawaiian Electric is around 1200 megawatts, 1200, so 352.2 megawatts of additional grid scale solar is not Manini, it's not Chump Change. Maui, another six close to seven megawatts and another 62, 62 megawatts of grid scale wind. And if you look at peak demand on Maui, it's somewhere sub-200 megawatts. So again, these are rather substantial, would be rather substantial additions to these grid. And the other 25% more than what we had. Five megawatts of wind, ha, ha, that's never going to happen. The Illinois 4 megawatts of wind, the big island, 22 megawatts of wind, one megawatt of grid scale solar. So what's the takeaway here? The takeaway is that these numbers from Hawaiian Electric in terms of proposing for utility scale renewable energy projects are very bold and very ambitious. And the commission noted as such when they ruled or essentially agreed to accept the last iteration of the pieces that were submitted to them last December. So how do we go from these high-faluting numbers, these very ambitious numbers, and how does that translate to actual renewable energy, cost-effective renewable energy generation that's brought online? Well, as you might imagine or take too much imagination, you need to go out and find the easiest, cheapest, best way to bring these additional megawatts online. And the way typically to do that is you have an open bidding process, which is something that Hawaiian Electric very much wants to do. And they asked Hawaiian Electric, went to the PUC early this year. If I'm not mistaken, it could have been as early as January, but I wouldn't necessarily bet on that. Okay, they went to the commission. They said, we want to move forward with the request for proposals for these renewable energy systems across our service territories. What month are we in now, Jay? We're in October, October 9th. The commission has yet to rule on Hawaiian Electric's request for the commission to approve of moving forward with the bidding process to be able to get these bids, which will come from local companies, which will come from mainland companies, maybe international, in order to bring cost-effective renewable energy online. It is a torturous, relatively dysfunctional process if you talk to the folks in the utility business here. It just takes forever. It seems to be able to put out a bid. It takes, and I'm exaggerating, because, of course, it's not forever forever, but it takes a considerable amount of time and effort to get the bid process nailed down to submit the bids, or open the process to accept the bids, to review them. Every bid has to be approved. Every project has to be approved by the commission. They have to agree with the justification and the merits of each project. So I'm not saying it's necessarily a bad process or it's being done malevolently by any means. It seems to take a lot of time and a lot of effort and a lot of hiccups and a lot of starts and stops and 10 steps back, sometimes in order to bring all these much needed and much desired hundreds of megawatts of additional grid scale, solar and wind across our island. So to what extent the commission understands that there have been challenges and they need to do a better job. I don't know. That would be a great question to ask. Mr. Owase or Jay Griffin or Lorraine Akiba. But it certainly has been anything but quick or efficient or effective in terms of bringing online additional renewable energy generation in a cost effective way. So now we're at the end of 2017, the bidding process hasn't started and it's essentially kind of pushing almost the utility companies to try to be creative and what else can they do other than wait for the commission to approve of the bidding process that they propose to them. So I feel I've been talking a lot so I think I'll quiet down now and let you talk. Oh, I might have a thing or two to say about this. You know, talk about sea changes. I mean, we love to identify sea changes, examine them, how they happen, how they're happening, what was likely to happen in the future and so forth. And I remember a time when we didn't have renewable energy. I remember before the energy initiative got started in 2008, I think it was October, when the utility was building its own power plants and it was handling the generation and the equipment and structures for generating electricity. And that was going on for 100 years. And it was all kind of in-house. There wasn't a whole lot of engagement except on rates with the PUC. And all of a sudden it changed and now they had to go out and get contracts. I do not understand for the life of me why they just didn't do it in-house. Now maybe it's a legal issue or regulatory issue but it would have been a lot easier if the utility just did it in-house instead of always having to get a contract and this kind of examination. And I think if you count the years, what's it, nine years since 2008, increasing the PUC has been involved in every little detail of these deals. And my own question about that is, does it really need to be? Does it need to be involved in every little detail? I mean, is this over management or micromanagement? What would happen if they got into a deal that wasn't so good as the PUC thinks it is? So what? I mean, the market will ultimately resolve that, won't it? The other thing is that why do they have to write these really long opinions, you know, in a judicial situation, and these guys are quasi-judicial, not judicial, in a judicial situation, frequently a court enters an opinion, a decision, per curium, as everybody agrees. And it says approved, disapproved, rejected, accepted, confirmed, denied, affirmed, you know, remanded, whatever it is. And I don't understand why we have to have these huge long opinions, and to your point, I don't understand why we have to have these year-long, two-year-long kinds of, you know, processes about really issues that should be resolved at the utility level, the management of the utility. They have to make some decisions themselves. And it's not after the facts, before the facts, so nothing happens until the PUC, you know, authorizes them. I don't think the system is really working too well, and I think it actually depresses the market. It depresses creativity, innovation. It depresses confidence in the utility and in the industry. It depresses confidence among the public. So we are moving a lot slower because of these delays and these, you know, bureaucratic involvements in what should be, what could be, you know, business decisions at the utility. Don't you agree? You said a lot there, Jay, and I agree with a lot of it in principle. The utilities of today are not our fathers or our grandfathers' utility companies, which were much more vertically integrated in terms of generation, transmission, distribution, sales. The trend over the past couple of decades has been across much of the U.S. I can't say I know for a fact through how much, you know, the entire world. But the utility company model has really changed substantially in terms of divestiture of power generation. So it's become much more competitive in that regard, but I think that works a lot better on the mainland, which is interconnected east to west, north to south, and round and round and round. And to what extent these trends or divestiture of the utility zoning power generation has really helped here. I mean, you can make the argument that that allows the market to and in bidders to come up with power purchase agreements that are going to be in the public interest that are going to lower rates or stabilize rates over time. But it just seems to me, and I've been in the arena here, you know, in the trenches for the past 17-plus years and for, you know, a partial observer slash participant for almost 40 years, but I have no doubt in the 17 years that I've been in the trenches here that it's just become so much more complex and so much more cumbersome to move forward. I think the Public Utilities Commission has always got to keep an eye on having whatever decision it comes up with to be appealed, even though it would be extraordinary that a PUC decision would be appealed and successfully appealed. In fact, I can't think of one single example, but that doesn't stop people like Henry Curtis, for example, challenging the Huonoa decision to approve Helco and Huonoa moving forward with additional combustion generation at this power plant because, according to Henry, they didn't take into account essentially the pollution and the contributing traditional, you know, greenhouse gases that burning eucalyptus would do. So that's not to defend what the commission does with these lengthy decisions, but I think part of it must make them as bulletproof as possible to appeal. But it's just become way more complicated, way more complex, way more burdensome and just much more lengthy in terms of, oh, we have a wonderful idea, everybody around the table who thinks is also a wonderful idea, and we hammer out a deal to move forward, but the deal moving forward with the consensus around the table is one thing, having actual power generated from said project is, you know, years away. And, you know, is there a way to break that bottleneck? I really don't think so. I don't know. I've become perhaps more cynical as I get older, but it just seems so fraught to be able to get from point A to point B, and I think, you know, to circle back to the efforts of Hawaiian Electric and Nextera to make a transfer of HEI to Nextera. I don't think either of those parties were able to really grasp what they would go through for the next 18 months, you know, until they finally got a know. And if they had had a better idea of what they were going to have to go through, you know, what they have pulled the trigger to begin with, but again, you can't Monday morning quarterback the HEI board of the Nextera board. I mean, they believe they had a reasonable chance for success, but it turns out, in the end, they didn't. Well, you know, if I would run the economics, you know, doing my consulting work on the issue of utility ownership models, I would definitely want to cover this too. I hope there's room in their contract to do that. And if you get a chance to talk to them, if anybody listening gets a chance to talk to them about the issues we're talking about, moving ahead about getting decisions made, about not being distracted from our ideas and our innovations, maybe they'll cover that too. Maybe that's within their purview or should be within their purview. Anyway, thank you so much, Marco. It's great to talk to you always, and I look forward to talking with you and Mina again in two weeks' sense. Aloha. That's great. Thank you so much for having me again, Joey. Always a pleasure. Always a pleasure.