 Yes, sir. Here we are on a given Monday morning, 12 o'clock rock. I'm J. Fidel Here on Marco and me sometimes mean a Marco and me on energy and Marco Mangelsdorf joins us by Skype Audio from the Big Island from Provision Solar in Hilo, Hawaii. Welcome back. Welcome to the show Marco Some Enchanted Monday, I will find my J. Fidel. I will find my J. Fidel across Cyberspace. Welcome J. Thank you for having me back. Okay. We got a we got a big agenda for this show Let's start out with a solar scene you presented a couple times at a conference at the Hilton wine village last week and the EU CI What did you tell them then? You remember back in the so-called old days J when Before we had GPS and satellites showing this beautiful blue orb known as the planet Earth There was a fear the ancient mariners had that if they sailed too far off in the business distance They may fly out fall literally fall off the edge of the earth. I Don't have a personal recollection, but I'm sure it went just that way I know it was a little bit before your time in my time but my impression right now is that we in the renewable energy business and solar energy industry business are Coming are kind of metaphorically in that Tara and Cognita, which is actually changing metaphors because that's you know unknown earth But we're really in uncharted waters here. I'll stay with my oceanic mariner metaphor here as far as What comes next and the fact that we're the first state in the country to really make the significant break or change from PV systems renewable energy systems rooftop solar that are export based where the Customer generator the person having the system on their roof or their facility It can get some type of credit value for exported a kilowatt hours surplus kilowatt hours And we're transitioning from that which has served us all very well for the past 15 or so years To one that is self-consumption based where no export energy is allowed into the grid which requires Battery storage, which we're just kind of on the beginning of the Dorothy in Munchkin land of the yellow brick road That we're we're starting on this long journey, and we know we eventually want to get to emerald city Which has low cost reliable energy storage, but we're gonna have to go through haunted forest Probably show the slide We're going to trip us up. Don't we don't we have a slide of Dorothy? I mean Dorothy is relevant in so many circumstances. Let's see Dorothy Well Dorothy of course was accompanied by her very trusty four-legged friend toto, so I think yeah is Again metaphorically speaking If we're gonna take the Dorothy mantle in the TV industry, then we're gonna need some trustee helpers along the way whether from the regulatory side from the legislature from other interested parties and Energy stakeholders here to make this this challenging and perhaps perilous journey Well, what's you know what? How do you see it though? I mean I? This is after NEM right after that energy metering now instead of getting you know credit you do it yourself self supply it was kind of waiting in the wings for a long time and the utility you know We I kind of expected it would go this direction, but you know, there's a lot of applications pending for it people are interested in it and Suppliers are selling it So what's what's you know, what's the rub is this okay or not? Well my dear friend Yeah, I think you've taken the bait of some creative headline writers from the associated press and also from perhaps our friends It's a whole new star advertiser To put it in perspective the customer self-supply or no export model has been available for about a year now a little more than a year, okay and To date as of at least let's say 10 or 11 days ago the grand total of all the the numbers for Hico helco and Hico for all three companies the grand total of all those who applied for customer self-supply was a whopping 342 342 for all three companies and by comparison the average number of PV permits at the city and county Department of planning and permitting has been issuing on a monthly basis on a monthly basis 400 plus PV permits every month, and here we've got 342 CSS applications for all three companies over the course of more than a year. So what's holding it up? What's holding it up is Adoption is interest in the product and the fact that up until a few months ago We had customer good supply which did allow for exported PV power But I'll be it at a lower rate than retail. So that clearly Was the more attractive option for homeowners who've yet to go PV They went with CGS and now CGS is no longer available And it's unlikely it appears unlikely that the commission is going to give us an interim increase in those CGS caps for Hico helco and Mico from what I can tell so the CSS is the only Close to the only option available, right? But so the you know the in that effect It really works out the same way you produce more power than you need and then you can use it later That you know that works. Well, you don't have to buy it from the utility. So the economics You know of the of the daily use of power They're pretty much the same because you can do the same thing except that it costs money to buy the storage and I suggest to you like your you know reaction is It's only money. It's the money to buy the storage system. That's holding this up. Am I right? Well, I mean easy for you to say my friend in that The cost of a PV system without batteries Let's say five kilowatts nominal four dollars a watt just to make them at the easy that's twenty thousand dollars installed Okay, when you put in adequate now highlight the word adequate storage for that same 5kw system You are looking at a out-the-door cost of anywhere from 2728,000 with the lowest cost option, which is right now from what I can tell the new Tesla Powerwall a Powerwall 2 is called from 27,000 for the lowest cost option to easily more than 40,000 coming from another supplier. So when you're going from 20,000 without batteries 27 to 40 plus, I mean that is not an incremental marginal increase in cost that's a Whack the consumer right between the eyes and keep in mind homeowners and consumers, you know, they're very Competitive in the sense of they know, you know a cousin or a neighbor or an auntie or some type of friend or family member Who got a PV system a year two three four years ago and paid that twenty thousand dollars and now I come along and say well Sorry, you can't get what your neighbor got. What boy do I have a deal for you? It's going to cost you thirty five thousand instead of your neighbor paying twenty. So it's a tough sell Jay, it's a really tough sell right now. Yeah, and that'll and that'll slow it down to three hundred and some odd The way it has what do you see in the future of people? This is their only option What are they going to do? Are they not going to do it? They're gonna forget about solar. Is that what's going to happen? Well, I mean speaking for myself and my industry I sure as heck hope that they they decide that they don't decide not to move forward But I mean there's going to be an adjustment time a transition time, which we're just starting in right now, essentially where the Better option the more cost-effective option the more affordable option is no longer an option So now the option remaining is more expensive. So how long is it going to take? for those homeowners of 80% or so of single-family homeowners who don't have solar for them to to migrate over to the battery option and That is going to be heavily influenced by the cost of batteries and by the performance and again You look at 342 like I just mentioned 342 CSS Applications across the pipelines essentially for the three companies, you know how many of those have actually been installed Handful given permission operate to yeah to yeah, yeah, I saw that you know the interesting thing though is that That it over time things will change the cost of batteries likely to go down somebody have a breakthrough like with graphene you know the graphene Technology and the cost of fossil fuel is likely to go up and when it when it goes up And then this whole self-supply thing will pencil out better and some people will be driven to it for the lack of any other option Jay, I don't disagree with you, but I tell you as a business owner. I Have to necessarily be most focused or very focused on What I need to do to keep my doors open to pay my employees to pay my bills in other words more kind of a Immediate term cash flow and I feel very bullish that energy storage will come down dramatically in price It'll become much more ubiquitous and once again, Hawaii leading the way and much of the rest of the country will follow over time But this transition is going to be very painful and if you have a chance to put on one of my other slides there I mean it shows rather graphically what the what the reduction or the drop of PV permits has been across the Hawaii 2016 compared to the same period 2015. I mean it's not trivial in terms of the the reduced number of sales reduced number of permits I mean 50% drop the 50% here on this island 30 plus percent on a wahoo and somewhere around a third 33 plus percent from alley counting Yeah, let's look at that slide. Is this the one you're referring to? I'm not seeing it yet This is brave new and unsettling post them CGS world PV permit numbers down compared to 2015 and it shows Oh, yeah, I see it here. Thank you for doing that. And yeah, I mean it's truly, you know kind of alligators waiting there They were afraid to fall into that Aloha, I can now I know there aren't alligators now in the aloha. There's pollution, of course, but not alligators, but I mean just a point of comparison compared to the health beyond days of 2012 I mean it's down 70% their PV permit numbers are down 70% So what's gonna happen to the industry? Sorry, it's gonna happen to the industry. You're suffering. They're all suffering. What is it? You know, we've had shrinkage already in the industry This could be a Mortal blow to the industry. No Well, that is my concern. That is my concern that We're in this transitional period now. We're all trying to maintain brave brave fronts and brave faces and I Think I mean it's inevitable that if these numbers were to continue It's gonna be a dramatic downsizing of the industry means there's already downsizing going on There are already a number of major players who have Left the state or all but left the state So, you know, who's gonna be left standing to just go out and the remaining real shake out Now what now one of the issues coming up this this coming session is gonna be whether to give tax credit for storage And that came up last year, but the bill failed Some kind of scramble as I recall some kind of inter internecine argument Now it is likely to come up again because it's such, you know, it's an important bill for everybody involved and The chairs are pretty much the same Lorraine Lorraine in no way is the chair of The Senate Energy Committee and Chris Lee is the still the chair of the House Energy Committee and I'll see in their co-chairs are well Mike Gabbard is the is the what co-chair of the Senate Energy Committee Vice chair vice chair, sorry and Nicole Well, Owen is the vice chair of the House Energy committee. So given that what's gonna happen with this bill coming January I would expect And I anticipate that there will be a bill bills introduced on both the House and the Senate side to carve out a specific tax credit state tax credit for energy storage and As we know, I mean, I don't have the figure right in front of me But out of each hundred bills that are introduced at the beginning of the session It's a teeny teeny tiny percentage that actually make it through the the entire session So, I mean, I would hope that there would be support. I know Mina our friend Mina Takes the view that it's not needed that essentially, you know, we've already incentivized Solar enough in terms of coming out of the general fund. So I certainly respect that position But I mean, it really depends, you know as the legislature and as a society Where is that we want to go here in our state? Are we willing to to have the state step in at least on a temporary basis to subsidize the cost of Expensive battery storage. Yeah, and on the other in the same notion. Are we willing to stand by while the industry shrinks and You know goes off the side and and solar installations are Dramatically reduced as they have been so we willing to sit by and let that happen essentially Well, you know, it's interesting Jay is there was a quote in a piece from last week Katie Nichols systems to advertiser Who talks to chair Randy was a fairly frequently it would seem in Randy? essentially telegraphed what I had already kind of been intuiting which is that He doesn't feel That the PV industry should be protected at all costs now I'm not that's not his word But his view apparently is more along the lines of well, you know It's not just the PV industry that we have to pay attention to it's also What seems to be hot on their agenda right now the commission's agenda which is community community based renewable energy or community solar for short and that this is something that seems to be Of a high-value item for them and it's not necessarily a less lesser item lesser value item for me, but the the concern I have is that it's going to take Considerable period of time a year or longer I'm afraid before community solar actually starts going in and able to benefit those people who can't have a system on their own Roup so it's all well and good to to put a value on community solar, but I You know what kind of industry we're gonna have left in a year or two. Yeah, I mean I mean he's right It's just a question of timing and degree. We need them both Let's take let's take a short break Marco and we'll come back and Talk some more would talk some more about the PSIP. I want to hear about that. We'll be right back Aloha, my name is Justine Espiritu This is my co-host Matthew Johnson every Thursday at 4 p.m. On theme tech We host the Hawaii food and farmers series We like to bring in folks from the whole realm of the local food supply and Agriculture anyone working on these issues any organization or individual that has plans or projects What kind of people have we had on us? We've had farmers. We've had chefs. We've had people from government Larger institutions everyone who's working to help make Hawaii's local food system that much better So you can see us every Thursday and join the conversation on Twitter and we hope to see you there Like three okay, we're gonna come back on slide three and we're back like three and four We're gonna talk about slide three and four. We're gonna talk about a solar scale I mean utility scale solar on kawaii. So Marco Let's let's look at slides three and four and you can talk about, you know, what the situation is on kawaii Well, it's really exciting what the folks at the Kauai Island utility cooperative are doing I think in terms of taking the lead not just in our state, but also nationally with not just talking about it They're actually integrating utility scale battery storage and they are going to be in flight three You'll see or people will see that they are moving forward with their fifth utility scale PV plant of a megawatt or larger And this next one one is going in right now. In fact that photo is a photo of the actual array that's being installed right now will be a 17 megawatts words of PV and The the neat thing is it's over 50 or be over 50 megawatt hours of storage and dispatchable storage And what that means is that when the Sun goes down Some of the batteries which will have been charged during the day during daylight hours will be providing power to To people when the Sun goes down, I see you put on the next slide But that's not the not the next slide. I wanted to see put on slide for side. Oh, yeah That's not it either Okay, well So, you know the bottom line here is that Kiuc as is often the case is very creative and somehow gets the job done And it's getting the job done on utility scale solar and maybe we should be watching to see how well they do As a solution. Oh, here's the You see utility scale This is the same slide as before the Kiuc slide Yeah, oh, here's here's the one. Okay, we have some construction Photos and I guess this is happening in Hawaii It shows what's actually going in right now. These are the Tesla power pack batteries. They're called power packs and they're 210 Kilowatt hours each so they're gonna have more than 200 of them They're on these concrete pads and then and and and enclosed so it's one of the first Utility scale dispatchable systems that Tesla energy is doing and they're doing it with Kiuc so it's just really exciting and I I look forward to hearing how the other system actually operates in this little utility company middle Pacific on the guard now is leading the way as far as innovative design and and New products to take us where we want to go. Yeah, but you know you were talking a minute ago about the demise of rooftop solar And that means residential rooftop solar mostly and how this utility scale solar is pretty attractive And then we are making progress that doesn't help the rooftop problem. Does it? No, it doesn't say but I mean I'm trying to take a bigger picture here as well I'm not just me me me me me and my company my company my company in my industry But also understanding that as I've said for quite a while it's going to take a mix or should take a mix of more cheaper utility scale solar which is Least to date cheaper on a per kilowatt per kilowatt hour basis compared to rooftop solar take a mix of utility scale and rooftop What that mix should be is in the eye of the mixer, I guess But no, I mean the utility scale solar doesn't help me, but it helps us collectively Well that leads right to the next question which is the power supply improvement plan Which is supposed to be filed by a Hawaiian electric by December 23rd coming soon with the PUC There have been three previous plans submitted and none of which have been approved And now the question is what will this plan say we do have a view of a vision of what it will say It's been discussed and how it will fare at the PUC. So what's happening? Well the the Hawaiian electric companies have had I think it's reasonable to say it a challenging time In terms of giving their their game plan In order to improve the power supply and improve it in terms of reliability, but also phase out Combustion fossil fuel based generation and phase in renewable energy over time to get to the the Emerald City goal of 45 2045 where we're 100% renewable in terms of power generation and This essentially will be the fourth iteration of them putting forward their strategic plan to the Commission the first one being the last IRP or integrated resource plan that morphed to the PSIP the power supply improvement plan So there was IRP the last IRP was found lacking by the Commission The first PSIP was found lacking by the Commission the second PSIP was found lacking by the Commission And then we're on to PSIP 3 now or I should say only electric is and it's due to the Commission After I think it was a three-week extension is due by the 23rd of December and I know my Hawaiian electric friends have been working their collective O'Cole is off to to get this ready for primetime and submit it to the Commission and and it's going to be Up to Randy Iwasi and Tom Gorek and Lorraine Iqiba and their staff to determine whether PSIP 3 is Adequate and if it's not then what I mean? Do they tell Hawaiian Electric to go for a PSIP 4 which is the fifth iteration or do they take more more dramatic kind of hands-on action in terms of Stepping in and doing and taking on more of a oversight or management Well, couldn't they do they have the authority to do that couldn't they they can say well We like this but we're going to change this part in that part and and we'll we'll we'll draft the final form If you don't mind they could do that right I just don't know I don't know I mean I'm not enough of a regulatory historian to know kind of where the boundaries are but you know in my experience the 16 plus years decades actually here in Hawaii in terms of being an energy player it seems to me that this Commission has been very active in in an oversight role for the Hawaiian Electric companies and What what the next step is for this Commission, I mean could PUCs aren't meant to actually engage in day-to-day ops decisions With the utility company, I mean they're the regulatory body, right? But if at a certain time they reach a consensus that that more proactive hands-on Behavior is needed on that part on and on their part then perhaps that's in the wings I mean, but I just don't know yeah, and I'm not suggesting that I do know but I and there's there's a reasonable anticipation that The Hawaiian Electric companies should be following the so-called inclination papers of about two-plus years ago Yeah, right. It's a little time. I mean a merida Lorraine and Mike Champley, right? And Randy West that continues to hearken back to those documents, which are really fascinating read. Yes, so That's the bar. I think that's the bar that they that was Provided to Hawaiian Electric more than two years ago and the question is how close have they come to the bar? You know the problem is that however this process is working when you have a you know, three three strikes potentially Like this you're slowing down the process and if we really concerned about climate change and all the negatives around fossil fuel Then we got to move out, you know 2040 not that 2045 is not that far away and We have to we have to gain some speed on this. I think we lost time over the next era deal and now we have to start moving again and Seems like everything you and I have talked about does not necessarily signify moving ahead rather it signifies you know not moving ahead and If the if the for the third time the PSIP is not approved it goes back for a further review revision rewriting What have you and we're gonna lose more time? I don't think we can afford this time I think we have to move ahead. That's that's the you know It's there are serious issues here that have to be resolved on a macro basis Well, then you throw in the fact that there's now a rate case first one in six years I believe a rate case pending before the Commission for helco that is always kind of a fraught time and Then the big bombshell of news last week with who honua this group here on our island It is seeking to essentially reanimate the old Pippa KO power plant which was using coal up until a number of years ago and Use biomass instead biomass grown here on this island and Just a brief history. I mean they had a power purchase agreement approved by the Commission between helco and who honua that helco cancelled earlier this year because of lack of performance and not meeting milestones and There were discussions. This is all public there were discussions between helco and who honua to come up with a new deal and My friend Jake Nassio at helco was quoted just last week is saying in the press that they were talking and then the very next day We get the news that that who honua folks filed a pretty humongous lawsuit in in u.s. district court alleging antitrust and suing not only helco, but suing next era alleging that they essentially collaborated in the and and what Blasting and cancelling the deal Inappropriately illegally and that they're seeking treble treble damages Wish if they were to get of course the big if would total more than a billion dollars of damages And I mean you know put that in perspective of what Jeff ono former consumer advocates Observed that a form I was at july of last year that the book value of helco is somewhere in the 700 plus million range So I mean again. This is playing things out. We don't know how it's going to play out in court But I mean suing for that amount of money Is you know, it's not a way to have a happy aloha friday for my friends at Hawaiian Electric So I mean that's that's the last thing they want to deal with is some unpleasant stuff like that So it's it's kind of a churning time right now Yeah, and that that's another what I call a distraction. We should be moving ahead and not being distracted and here We have another a significant distraction for the utility and all of us Which is not really going to move the needle ahead in any way except to suck up our time and resources Anyway Marco, it's been great. It's always great to talk to you I feel I feel so much better educated now after these two minutes And I hope we can do this again two weeks hence and I know there'll be more news and It'll be in the paper and it'll be here on sink tech. You'll see that's Marco Mangelsdorf Provision solar and Hilo Marco and me sometimes meet a Marco and me on energy every other Monday. Thank you Marco