 This is Think Tech Hawaii, Community Matters here. Okay, we're back, we're live. It must be Monday, but it's not Monday, it's Tuesday. It must be the first business day, broadcast day of the year. I'm Jay Fidel. This is Think Tech. This is Mina Marco and me. Mina's not available, but Marco joins us by Skype Audio from the Big Island Provision Solar. Happy New Year, Marco. Well, I can't think of a better way to start out 2018 than with my good buddy, Jay Fidel. So how old are you, Marco Hikiyo, to you, my friend? Yeah, Shinyin Kuala, may I add, yeah. So first, before we get to our principal topic, which is all about Hawaii State Energy Tax Credits in the legislative session coming soon, how does it look in general for energy? What is the mood in the state? What is the mood in the country on renewables these days, Marco? Got any thoughts about that? Well, I think maybe a good way to start on that subject is to go over some of the numbers. I had the opportunity to write a piece, not that piece for the star advertiser last week looking at some of the most recent data provided by our friends at the State Department of Taxation every year about this time over the past year. So they've been presenting a report looking at the entire credit, the tax credit dollars that were effectively provided, these various tax credits, not in the previous calendar year because it takes some time, of course, for the state to gather all the tax returns. So they were provided this report to the public posted it last month, December, and it covered 2015, so we'll have to wait until the end of this year to get to 2016. So I've been keeping an eye over time on the amount of dollars claimed for the Renewable Energy Tax Credit, and it's kind of striking now that we're reaching the point of, for the four most recent years which we have data, which is 2012 to 2015, Hawaii tax filers have filed for as much as about half a billion dollars, half a billion dollars worth of tax credits for renewable energy in general, but the vast majority of that is for solar energy systems, and I'd say the biggest chunk of that is solar electric with a smaller chunk going to a solar, hot water heating solar thermal. So half a billion or so from 2012, 2013, 2014, 2015, and my estimate would be that 2016 will probably be somewhere in the 80 to 90 million range claim for 2016, and I'm going to guess for 2017, somewhere in the 70 to 80 million range. So if you do the math over the past six years, 2012 to 2017, the total amount claimed for the Renewable Energy Tax Credit will be probably somewhere in the 650 to 170, 100 million dollar range, which is by far the largest category in terms of tax credit dollars claimed in their whole bunch of other state tax credits, but by far, by far the Renewable Energy Tax Credit has been the biggest chunk over the past years. Just a comparison, at the top of it, the cumulative amount that was attributed to the high technology tax credits under Act 221, which existed for, I want to say, eight years was 150 million, a fraction of what we're talking about for energy credits. It's interesting. And at the 150 million, the legislature had serious reservations about it, and ergo, they terminated it earlier, they sunset it earlier. So it's interesting, it becomes politically charged, if you will, if I can use that term, when you talk about tax credits in large amounts this way. Well, and, you know, I know that over the past couple years, the 2016 legislature, which means from January to May, 2017 legislature, that there were bills that made it through to the final conference committee at the very end of the session that would have modified the Renewable Energy Tax Credit, would have done at least a couple of things, if my recollection is correct. It would have started to ramp down the 35% Renewable Energy Tax Credit over time, because right now there is no sunset date, no ramp down for that tax credit, and it also would have added a specific carve out for battery storage. And in both sessions, 2016-2017, the bill did not make it out of conference, which meant that it did not get to the governor's desk, which means that nothing happened, nothing happened to change this tax credit law, this bill. Can we unpack that for a minute, though? I think it's very interesting to look back at that. I know that there were members of the solar community, I mean, your industry, who were working for a ramp down of that 35% years ago, I want to say four or five years ago. And I guess for some reason, it was always overtaken by events, and it never happened. What was the political play on that? Why would members of your industry wanted to have created a ramp down, and who opposed it? And why did it ultimately fail, including most recently last year? Not actually having a seat at the conference committee table. I can't give you firsthand feedback on that, Jay, but my understanding, I mean, if you look at the participants of these conference committees, two of the principles are the chair of the Senate Energy and Transportation Committee, and that is my friend Senator Lorraine Inouye. And then on the House side, there's the House Energy and Environment Committee, and there's my friend Chris Lee, who is the chair of that committee. And there were differences of opinion between members of the conference committee, both in 2016 and 2017, in terms of how to proceed, that led effectively to an outcome of no bill being voted on out and passed out of conference. I remember the people within the industry, and I guess outside the industry were thinking, this is back four or five years ago, that it would be a good idea to ramp it down to avoid the shock and the disturbance of just chopping it off at a certain point in time. And that was considered, at least by them, a more rational way to deal with an increasing political pressure to terminate or at least reduce the credits. But now it's an interesting, your articles have been valuable, your calculations of the number of installations going on for the last couple of years have been very instructive. And what we see is a huge decline in the installation for solar. So why would anybody want to reduce or cut or even ramp it down at this point? Don't we need to incentivize it? Isn't this 35% a good number, which we should continue in order to continue our march to 100% renewables? No, your point is well taken, Jay. I think there's a general exception that subsidies and of course the tax credit is a subsidy. It's a subsidy that I think has been well worth it for our state in terms of the return of investment in that, as I noted in my piece, the jobs created the millions of barrels of oil that were not imported into the state for power generation. And interestingly, which is something I think that even the job editor at the server ties or some email saying, are you sure about this? And she was thinking that I was making a factually incorrect statement when I said, what you power plants burn more oil, burn more oil in our little 50th state than the rest of the continental US combined. So whenever we reduce the amount of oil needing to come into the state from far, far away, that's a good thing. So I think tax credits in general have been beneficial for the state overall. But that said, there's no doubt that there's been a increase in mass adoption of solar rooftop solar across the board. Prices have come down. And at some point, it's reasonable to discuss and to question whether subsidies need to be maintained at a certain level. For example, the federal investment tax credit, which has been at 30% since 2005 under George W. Bush, that at this point is scheduled to be 30% this year, 30% next year in 2019, and then starting in 2020, ramp down to 26% in 2021, ramp down to 22% and then by 2022 to go down to 10%. So there's overall consensus that these subsidies for renewable energy have have achieved their their purpose, their targeted purpose. And that it's an okay thing to do to ramp down on the level of subsidization from the government trough now. I'm not sure I would agree offhand to that for Hawaii. But let me just look at that for a second with you. And that is we've had a we've had a serious decline in the number of installations. At the same time, we were moving closer year by year to our goal of 2045 or 2040, depending on who you listen to. And so the goal seems to be further away, not closer, because the assumptions we were making would be that solar was going to continue at the same rate. Well, tax incentives are supposed to change the way people make business decisions and personal decisions. And so isn't it isn't it all very quite appropriate to maintain this tax credit? If we want to incentivize people to continue, you know, to to install solar, and if we want to reach our 100% goal, we have to continue to incentivize it doesn't happen by magic. So tell me why we should cut it right now? Have we spent our have we spent all the low hanging fruit and there's nothing left? Or is there plenty left? Well, I mean, that's that's the $64,000 more like 64 million with inflation question, in terms of how much of a market is left? How much of the low frame low hanging mangoes have fallen or picked from the beautiful mango trees across the state? And that's there's not a know what all definitive answer to that. I mean, the thing with solar is that it's different compared to a normal kind of consumer items, where you're going to get a bed on average a new bed every X number of years, you got to get tires for your car, you've got to get other appliances for your house because they don't last forever. Well, there's not that kind of predictable turnover for solar PV. In other words, if you get a solar PV system on your home, you're not going to trade it in for another model in four or five or six or 10 years. So we also happen to live in a state where the highest percentage of I'm not mistaken, the highest percentage in the whole country of people live in a rental unit. So that kind of leads into the other interesting event of the past week or so, which is the Public Utilities Commission, the PUC, signed off on moving forward with a custom community based renewable energy or CBRE for short, but that will allow in reality, if and when not if I shouldn't put pessimistic that one is implemented and executed, that folks who are renters will be able to essentially enjoy fractional ownership and benefits of a PV system somewhere else on the grid. Why has it taken so long for them to come around to that? Community solar has been on the books for a couple of years already. Well, it was passed by the 2015 legislature. It was signed by the governor sometime, I believe July of 2015. Now we're the beginning of 2018. And the commission has put out a decision order on CBRE program, and the utility companies, the Hawaiian Electric companies in KAUC and Kauai have a number of days to respond in terms of how they're going to go ahead and implement this program. But I have my misgivings in terms of how soon this is going to be ready for primetime. And I think back to the feed and tear of the fit, which was a subject of years worth of discussion in the legislature. And finally went live December 2011. And in my opinion, fit has been largely fiasco. It's been detrimental to ratepayers has benefited a small number of investors who are guaranteed a revenue stream of 20 years, getting premium pricing for renewable energy is renewable energy has gone down in price feeding into the grid. And it's been relatively not a real good thing. So compared to fit CBRE, I think is is I won't say infinitely more complicated, but simple, it's certainly more complicated and execution by many orders of magnitude compared to fit. Yeah, that's the problem. Yeah. In principle, CBRE Community Baths Renewable Energy is a great idea. It's a really cool idea. And I salute people like Mike Gabbard, Senator Gabbard, who was behind it two plus years ago. But I really wonder how its execution is going to be in the real world. There's just so much. And I keep on going back to my metaphor of turbulence, the turbulence, you know, on the national level in terms of political situation, the energy situation. And in our own state is just so dramatic. And so I mean, compared to when you and I were younger guys, Jay, when I started here in PV 20, somewhat years ago, I mean, things are so much more complicated. And that kind of life in general, I don't know. That's that's absolutely true, Marco. Things are more complicated. And they're likely to be more complicated in 2018. Let's take a short break and we'll come back and we'll talk about, for example, whether Hawaii should adopt the same step down schedule that the feds have. We'll also talk about storage because we need to talk about tax credits for storage that second bill that failed last year, we'll be right back with Marco Mangelsdorf here on Mina Marco and me on energy on a Monday, which has become a New Year's Tuesday. We'll be right. Hi, I'm Ethan Allen, host of a likable science on Think Tech Hawaii. Every Friday afternoon at 2pm, I hope you'll join me for likable science. We'll dig into science, dig into the meat of science, dig into the joy and delight of science. We'll discover why science is indeed fun, why science is interesting, why people should care about science and care about the research that's being done out there. It's all great. It's all entertaining. It's all educational. So I hope to join me for likable science. Okay, we're back in 2018 with Mina Marco and me Marco Mangelsdorf joins us by Skype from Provision Solar in Hilo when talking about tax credits in 2018 and beyond. So yeah, you mentioned the step down procedure, the step down schedule that the feds have all the way into the 20s. And I want you know, that sounded like a reasonable step down schedule. Is that worth considering here? We copy so much from these say the internal revenue code, or at least as it used to be, in state tax. Why don't we just copy that schedule in state tax on energy? I guess, if I had my druthers, I would use to have the state renewable energy tax credit to not be on the same identical schedule as the federal ITC ramp down, just because I prefer, you know, as a parochially minded self interested business owner who does solar electric, did not suffer from a double whammy in each year. So I guess, you know, if I had my my preference, I would push out ramp down of the state tax credit, a little bit longer farther out there, and not have it be synchronous with with the federal ITC ramp down. Yeah, and the other I would add one thought is that this administration is unpredictable, maybe it's predictably unpredictable. Before you know it, we're going to be cutting out a lot of programs. And who knows what will happen to the tax credit? Was it affected by the Tax Reform Act? If not, you know, maybe it will be anytime in the future. So if we assume that that schedule will continue to apply, that may not be a valid assumption. Well, I do know that when the tax reform bill was in play, there was some discussion about some rule changes or interpretation changes regarding the federal investment tax credit. Without having actually read that, what is it, I think a thousand plus page bill that the President Trump signed. My understanding is that the ITC essentially did make it through intact. Now to the also important question is to whether it's going to stay that way. I think there is more of a across the aisle bipartisan support for renewable energy, which is typically, at least recently been more supported by Democrats versus Republicans in Congress. I think there is more of a bipartisan level of support from both sides. And you're always going to have the outliers in both parties. But at this point, I'm not overly concerned that the ITC is going to be messed with in the Congress, at least in the near term. I think their focus are much more higher priority items. Concurrent resolutions are continuing resolutions to be able to fund the federal government come up with a budget that's going to pass the Social Security Medicare reform and so forth. So I think they're much bigger dish to price. So hopefully, the federal investment tax credit will be not in the crosshairs of opponents of of renewable energy. And one of the things I mentioned, my piece which I'll mention or reiterate to you today is the notion that renewable energy is unfairly or unjustifiably subsidized and should stand on its own is a really completely bogus and specious argument. Because according to the research I've done over the years, and this is all public data, renewable energy has been supported by federal and state subsidies. There's no doubt about that. But compared to conventional energy sources from oil, coal, net gas, nuclear, hydro, those other sources have received on average $10 for every single dollar. Renewable energy has been provided. So there's no such thing as a level playing field and energy. There's just too much attendant power and influence. So I think it's reasonable that the renewable energy should be should be subsidized and has been subsidized over the years. Yeah, I hope you're right. I do worry, you know, the Tax Reform Act passed in the last few days of 2017. And it wasn't a week until this morning, Paul Ryan is talking now about taking the wings out of Social Security Medicare Medicaid, because there won't be enough money. So the Republicans, you know, they make they make it so that we have less money because they reduce taxes for so many people, especially the wealthy. And once they reduce taxes, oh gee whiz, we don't have enough money. And we have to find more sources of revenue. We're going to cut back on Social Security. Now they may have a real resistance problem on that. Because a lot of a lot of people in this country, including the base, if you will, need Social Security. I mean, a lot of people need so and they're going to fight really hard to keep Social Security. AARP is I'm sure already gearing up for that. It'll be a big fight. Now, if the administration fails, as it did in health care, then the administration is going to have to look for other sources of revenue, make up for the shortfall represented by the Tax Reform Act of 2017. When they do that to be looking for everything, looking through the tax code, looking for through the social safety net to find sources of money. So it may be that nothing will be exempt at that time. It will be a squeeze. But I did I did want to move on, though, to the whole notion of storage, because storage is becoming has become already a couple of years ago. Anyway, part and parcel of PV and for that renewables in general that are, you know, that are that are not what firm and and we have to have storage if we're going to proceed to our hundred percent here and anywhere else in the country. And so, you know, it was a surprise to me that the legislature couldn't get its act together last session last year on including the credit for storage, storage facilities, batteries and the like. And that's that was really too bad. So what's what's the atmosphere like on that issue now, Marco? It's a big question. Well, I don't think it's it's not completely accurate to say the legislature couldn't get its act together. I think it's more specific to a number of legislators who couldn't get enough on the same page to be able to get something to the governor's desk. So I have no doubt that both houses and aside, there will be bills introduced that will probably try very similarly, if not identically, to do what they failed to do or what was failed to accomplish last year in terms of a bill that will include a ramp down of the state's renewable energy tax credit and also carve out a new category of state tax credit for energy storage apart from from solar. And the likelihood of it getting through to the end and going to conference committee, I think, is probably reasonable to say it's probably pretty high, probably pretty high. But, you know, we'll have to wait, essentially. And we're, you know, we're May, sorry, we're January 2nd. And the conference committee conference committees will meet the first week or so in May. So we're five months away, essentially from from knowing what's going to happen. And in a sense, you know, the January, February, March, April are all foreplay, in a sense. And we wait and see what's going to come get into conference and what if anything is going to come out of the conference committee. So let me let me make you the conference committee for a minute. You know, what are the policy points for and against storage? Should storage be linked with the, you know, the existing tax credit? Should it be a separate tax credit for separate installations? And what kind of dollars and cents or percentages would you like to see adopted? I mean, I know you're in the solar industry, but, you know, looking at it from the 50,000 foot level, what's an appropriate amount of credit in order to, you know, bring us closer to the 100 percent target? We probably it should be stipulated that storage is only tax credit to bull per se. If it is, if it is charged by renewable energy, in other words, not charged by the grid. But I think that needs to be a stipulation in whatever bill were to come out in terms of what the amount should be. I mean, there's no way I don't think it could be higher than 35 percent. I think symbolically that we have an existing 35 percent renewable energy tax credit. So I don't think 40 percent, 45 percent, 50 percent or more is probably available to just from a from a common sense standpoint. So if it were to be somewhere in the 20 to 35 percent range for storage, I think that would certainly be acceptable to the solar parties, not that I speak for for them. But, you know, I mean, I wasn't able to join us. Meena Merida, I'll kind of channel for Meena if I may be so bold. And I think Meena would say no, enough already that there has been already substantial government subsidization and support for renewable energy and that if you include battery storage as a part of a new PV system, you can, you can in fact get a tax credit for that. So there is that side of the argument that says enough already there's been adequate subsidization already. That deal with that deal would leave all the people behind. And that there are other competing priorities for public funds and that the renewable energy is just one amongst the number. I mean, and that's a very valid argument. I mean, well it isn't really because that view would leave all the people behind who are already here, as well as, you know, continuing issues in education and caring for our Kupuna. So I mean, the list goes on and on. There's not enough money available to do everything we want it to do, right? Well, yeah, but that's what the legislature gets paid to do, right, to make hard choices from a limited lot of money. And you throw in the fact that we're an election year now. We've got Colleen Hanabusa challenging an incumbent governor, kind of rerun, redux of 2014 with David E. Gay challenging Neil Abercrombie. So, you know, what is an election year going to throw into the mix? It's going to be going to be an interesting ride, I'm sure. Well, that view, you know, do you agree with Meena Morita's view on that? I agree with the view you would construct for her. Because in fact, that would leave all the people behind who have solar and who did not, you know, use storage, did not spend the money and would spend the money now only in aid of renewable energy. It seems logical that you would allow them to do it for old installations just as for new ones. What's the policy point that would distinguish old installations from new ones and exclude them? Well, that's that's a great question. And I do know that there are efforts of foot from a number of parties to essentially get clarification from the Internal Revenue Service reference, the IRS, in terms of and conceivably someone who has a PV system, like me, for example, I have a NEM system on my house. If I were to add battery storage that is only charged by solar, in other words, not by the grid, would I, should I qualify my purchase of additional buying battery storage, not adding any more PV, which is battery storage, should that qualify for the investment tax credit? Is that in line with the letter and the spirit of the law, the statute on the books right now? And we in the industry are waiting, excitedly, you know, speaking for myself, for greater clarification from the IRS, regarding that really important question about being able to retrofit battery storage for existing grid type customers. And so what's the benefit other than let's say me having a power wall up Tesla Powerwall and I can have backup power if the grid goes down? Well, we are moving collectively into the smart grid present in future, even though I have I have issues with the smart grid moniker, but part of the smart grid is supposed to be where you've got battery storage systems across the grid, which are providing so called grid services in support of the utility company in support of the grid writ large. So it's not just the selfishness of Marco or my neighbor who wants to get battery storage added to their NEM system. But over time, having batteries placed by the thousands across a service territory, could be able to give greater resilience and robust reliability to a grid. And, you know, I think I've forwarded you that piece from the New York Times a few days ago, Jay, where 50% of the people on Puerto Rico 50% 50% are still without power now more than four months after Hurricane Maria clobbered that island's infrastructure. I mean, is the big island the same as Puerto Rico? No. So why would the same as Puerto Rico? Probably not. But at the same time, you know, look what happened to Kauai 1992 hurricane in Niki. Okay, we're going to have to continue this conversation. The public good by having battery storage across the utility service territory. And if we can do that and speed that with having some type of grid or some type of credit tax credit from the state to do that, I think an argument can be made to legislatures that that is a public good that needs to be supported. Marco, we're out of time. We need to continue this conversation. I have more questions I want to put to you. And certainly, we need to follow what happens in the legislature. Happy New Year, Marco, Xinyin, Kuala. And I look forward to our next discussion. It will be on a Monday, two weeks from yesterday. Thank you so much, Marco. Aloha.