 Okay, we're back, we're talking about options. I'm Jay Fidel, this is doing energy, Hawaii, the state of clean energy with Eric Kvan. And we're talking to him today about his energy law services, D-E-R, does that mean distributed energy resources? Yes, that's correct. It's a monthly report. Distributed energy resources. Welcome to the show, Eric. This is not the first time. We love Eric. He's out there analyzing and researching and spreading his analysis to the community. We really appreciate that. Thank you, Jay. Thank you. So tell us how you spend your day writing reports like that. How I started was going down to the PUC because I was curious, like, what are the rules? What kinds of decisions is the PUC making? And this is before everything was online. Now you can access all the reports and the filings online. But when I started out, which was actually 11 years ago doing that, yes. You look pretty good for the wear then, so to speak. Thank you. Thank you so much. So I was photocopying decisions and orders of the PUC to figure out what's going on because it presents as a very complex picture. Where does one start in doing that? And so the D-E-R report is a culmination of a lot of study over the years to try to present a coherent picture so that we understand something fundamental such as what is the utility's planning process? How do they go about making the plans that they've made and submitted to the Public Utilities Commission? So in the first part of the report, I talk about that. What is the utility's planning process? I mean internally. How they formulate these plans? Well, that's a very interesting question because in the report, there's actually two planning processes. There's the internal one and then there's the one that they're ordered to do by the Public Utilities Commission. I knew I was going to like this show. I'm already liking it plenty. Go ahead, Eric. So in the first part of it, I talk about the planning process and the plans that they've been ordered to make by the Public Utilities Commission. And we were talking a little bit before. I was thinking about a point that Mark O. Mangelsdorf made when he was here on the show on Monday. I watched that program and a point he's made before about this disconnect because right now the PSIP for the most recent one submitted provides for about 70 megawatts of distributed PV here in Oahu during this year, during 2017. And at the same time, we have a PV industry that's seeing its new orders plummet as revealed by Mark O's figures on permit applications. When we attend DER meetings, one hears the reasons why we can't really do that now. And yet here's the plan that says 72. So what's come into my mind recently is understanding what is the source of that disconnect, okay? Why are we getting plans that are very ambitious and yet what we don't see are decisions to implement what's in the plans? Doesn't the PSAP have implementation provisions? Well, I talk about that in the longer brief that I wrote in the PSIP docket. It breaks the topic into, in the PSPs, they have what are called the resource plans, which are the set of options going into the future that they might want to implement. And then they have separately what they call the action plan. And when you study the action plan is a plan separate from the resource plan. In other words, the resource plan does not have in it a step for actually implementing the options in it. And when you study the action plan, okay, basically it lists, it says that we're going to continue doing the things that we've been doing or that we're already committed to doing. But it's not connected directly to implementing that to the options in the resource plan. Can we back up a little bit? What is the expectation here as far as the PUC is concerned? I mean, they ordered this PSIP and we've waited a long time for everything to gel. There were some rejections by the PUC of earlier plans. That's correct. So here we are and it's sitting there and nobody knows but maybe some deity when exactly it'll be approved or even responded to. But what is the expectation of the PUC? What do they want from this plan? Oh, the PUC wants plans containing energy options that will actually get implemented. Okay, that's what the PUC wants. That's what everyone, that's what everyone wants. Options and then a choice of options and then the plan to actually implement that choice. Right, they want, well, they want to see implementation of options. They don't want to see a plan for implementation. They want to see the actual implementation. But they want to approve it too. Right, they want to be convinced that, and this has been shifting in the different plans that have come along, okay. In the past, they said, well, give us a reasonable plan. And they said that in IRP, they said it in the first two rounds. Did you use the word reasonable just now? A reasonable plan. A reasonable plan. A reasonable plan. You and I are both lawyers. Right. You have a lot of experience in law and language. Reasonable is a very hard word because nobody knows exactly what it means. Well, what it, and I, in my report, I talk about what that means to me and what it means to the people at the utility who are the people, you know, told to deliver a reasonable plan. And in fact, they've done that. They've done it three times. They've done it a fourth time in the most recent PSIP. And what happened in the order leading up to this most recent PSIP was the commission started inserting the word optimal into their order. That's a word just like reasonable, I think. Right. But it has a different meaning. Okay. It's more than reasonable. Right. It means the best. Okay. Not just something that's okay, but the best. The best in the circumstances. Right. Optimal is not an absolute. Right. Oh, no. It's the best. Yeah. It's the best in the circumstances presented, of course. And this requires a whole lot of discussion about what those circumstances are. Exactly. Exactly. So, where to go with it? Well, what do they expect? Okay. What do they expect is that, let's talk about what they want. Okay. Again, what they want is a plan that they feel confident the utility people are going to actually implement, that they're going to implement the options in their plan. And so, what it comes down to is the planning process that's used to create the plan. The Public Utilities Commission orders plans, but what they haven't focused on yet is the planning process used to make the plans. They say, give us plans, okay, that we feel confident you're going to implement. And what they haven't done is they haven't focused on the process to make the plans that have been delivered to them. Internally. The process within the utility or some other process? No, just the process to make the plans that have been ordered. Remember, this is sort of like... Utility is making the plans. Utility is... So, it must be the process inside the utility. Well, I want to be clear about, because we talked before about two planning processes. An internal one and the one for the PUC. You could call it maybe an external planning process because there's a lot of public stakeholder input, things like that. It's ordered by the PUC. It's all... The transparency part. It's all out in the open, okay? When I talk about the internal planning process, I mean the planning process by which the utility people are actually evaluating options. Not because the PUC ordered them to, but because they want to have their own sense. Does this make sense for us? Do we want to implement this? What are the benefits going to be for the customers, the ratepayers? And what they do to make decisions to actually implement energy options. And that's the second part of my DER report. I talk about, let's look at all the categories of DER options, actually all the categories of renewable energy options, and let's look at how that utility actually, separate from the PUC-driven process, is actually evaluating these categories of options. Can you say options, you mean types of renewable energy? Right, right. And the way I break it down in my report is that you have energy options. They fall in four broad categories, which are generation, grid, T and D, transmission, distribution, energy storage, and demand-side management. And then that further breaks down into basically the imported fuel generation options. Imported petroleum, imported coal, imported, whatever, LNG. And then everything else is a renewable energy option. Everything else, including all of the renewable generation options, and basically all the other options that fall in the categories of energy storage, and T and D, and demand-side management, they're actually all mitigation options. What do you mean mitigation? In other words, you're able to put more renewable generation on the grid because you have your shifting load or demand to meet that generation, or you're shifting the generation, say with energy storage, to meet the load. And because that's what... So you're negotiating between the two parts of the supply-demand card. Right, right. Well, not the... Yeah, but from a physical point of view, right? Load always has to balance generation, otherwise your grid doesn't work, right? So this is the physical engineering... And that's what I mean by mitigation. Right, that's what I mean by mitigation. And so there's lots and lots of categories of mitigation options. And when you look at that, when I study what the utilities... How they're actually evaluating them, what you see is that for many categories, they're doing some analysis of... If we implement this energy option, here's how we can expect it to work with the grid. Does it improve the performance of the grid, the reliability of the grid? Or do we need more things to make it work with the grid? So for example, it might be possible to put on 100 megawatts of distributed export PV on the grid, but if you want to put another 100 beyond that, you're not going to be able to do that from a physical point of view, keep the grid operating without adding a mitigation option. And that mitigation option might be things like advanced inverters, it might be energy storage, it might be going out to the substations and putting in different transformers. There's lots of options. So we would expect, the PUC would expect that the utility will check out all these options and some of them will be options that don't work, that will not work, straw options if you will. And we'll look at that option and say, you know, all the things considered, that's not going to work. So we're not going to consider that. And this one has parameters, we have to be more than this and less than that, then it will work and so forth. And each option is evaluated in context of all the other options and then at some point there's the apotheosis, right? And what I mean by that is you bring them all together and say, well, this is what we want to do and this is why. Right. Okay. So you just shifted from, I was talking about the internal kind of evaluation that the utility actually does and you shifted it to what the PUC might expect the utility to be doing. Right. If they don't like it, they won't approve it. Right. If they don't approve it, it would be stuck in the doldrums yet again. Right. And that makes me, gives me a headache on both sides, thinking about that possibility and when I have a headache like that, Eric, I've got to take a break. Okay. We'll take a break. You're watching Think Tech Hawaii, citizen journalism from Hawaii, finding the intersection of our sense of place and our place in the world right here at home. Great content for Hawaii from Think Tech. Aloha, Howard Wigg. I am the proud host of Code Green, Think Tech Hawaii. I appear every other Monday at three in the afternoon. Do not tune in in the morning. My topic is energy efficiency. It sounds dry as heck, but it's not. We're paying $5 billion a year for imported oil. My job is to shave that, shave that, shave that down in homes and buildings while delivering better comfort, better light, better air conditioning, better everything. So if you're interested in your future, you'd better tune in to me, three o'clock every other Monday, Code Green, Aloha, and thank you very much. Okay. We're having a study of logic. Here on energy, Hawaii, the state of clean energy with Eric Kvam of the Hawaii Energy Law Services, and they have just, he has just issued a DER report two weeks ago talking about in large part the PSIP planning that's going on that was submitted at the end of December by the utility to the PUC, subject to the PUC's approval, and I hope that happens soon. Anyway, so the question you raised, which Marco Mangelsdorf raised on Monday of this week, is exactly how can you, as the plan does, how can you suggest all these grand increases in solar energy, rooftop solar energy, when in fact the energy installer industry is going, is well, decompensating right now. Right. Who's going to do it? How's it going to happen? Who's going to come to make it happen? Is this possible? Was this considered when the PSIP was written to include all that additional rooftop solar energy? Right. What happened? Well, to get to an answer to that, it helps to understand how the PSIP was made. Okay. What was the planning process used to make that? And in the report, what I talk about is I break it down to its simplest steps, which is that the utility engineers are told, give us, told by the PUC, give us a reasonable plan. And so that gets us to 100% renewable energy. And those are the marching orders. Those are the marching orders, okay? And so they say, hmm, okay, that's a problem. How do we get to 100% renewable energy? Ah, we'll make a plan. And so they use their intuition, okay, which is how engineers usually solve problems. They start with their intuition, right? They use... Doesn't everybody? Yeah, but let me kind of like flesh this out. So they start by intuiting the benefits of those many, many categories of renewable energy options that are available to them, okay? And based on their intuition about the benefits, they sit down and say, okay, let's compose some plans that we think might work. And so they say, well, they look at the load profile and they say, well, right now, it's all these layers of firm generation and then as available generation and peaking generation, things like that. And we're just going to use our intuition to imagine what to imagine, what sets, what kinds of renewable energy options will still allow the grid to work, okay, to match generation and load and maintain frequency and voltage. And they come up with all kinds of candidate plans based on their intuition. And those candidate plans are combinations, sets of options. And then they look at those plans and they say, well, we don't know what the future holds. The cost of everything is going to change. There's so many variables, there's literally an infinitude of variables. So we're going to, again, use our intuition, select nine or ten or eleven of those variables, make forecasts about them, okay, run our candidate plans through computer models and see how they perform under all these forecasts, under all these guests, I call them informed guesses. They are informed and they are guesses. And then they say to themselves, okay, we can throw out some of them, it's not working. But and then from among the ones that do work with the grid and that look reasonable, okay, especially in terms of their cost, we're going to pick one and that's our resource plan. So they're going to use their intuition to select the resource plan. So the process begins with the intuiting benefits, intuiting the composition of the plan, informed guessing about that, and intuiting the selection of the final resource plan. And by the way, my guess is that there are all kinds of consultants, advisors, all kinds of people to consult with whom they pay and these people are all of the mainland and not just here. So my reaction to that, I'm not sure where your reaction is, but my reaction is that sounds perfectly reasonable to me. It is reasonable, absolutely. It's reasonable and that's why they can generate a 2000 page plan and say, you know, accurately to the Public Utilities Commission, you've asked us to give you a reasonable plan, here's our reasonable plan because the engineers and the planners that put together that plan, they can agree among themselves that, well, your intuition about what's a candidate plan is reasonable, okay. You can agree that mine is. We can come into agreement and to consensus among the people making the piece of plan that this is a reasonable approach. You know, it reminds me of that old thing in the law practice where they used to say, reasonable men can differ, reasonable women also. Reasonable men and women can differ. And so my question to you is the 2000 pages, which I'm sure you looked at in order to write your report, do you agree? Is it something, is your recommendation right here today, Eric Vam, that the PUC approve this plan as a reasonable plan? Yes, it was. That's in my piece of brief. I recommended that they approve it as a reasonable plan. Well, I guess that show is over then. Yeah. Okay. Why do you feel that way? Because there are other options, perhaps, that are not as reasonable, that are not within the kind of analysis that the utility is presumably expert in making. Well, the simplest way I can articulate it is this way, okay? Is that it's a reasonable plan. It expresses what the utility people might want, okay? It's what they might want. And so the caveat to being reasonable is that it does not express what they actually want. And because it doesn't express what they actually want, because they're not in consensus about what they actually want, there's no consensus to actually implement the options that are in the plan. So yes, it's a reasonable plan, it complies, and it doesn't get us to that implementation. Now, I guess you're talking about that part of the planning process where you unfold this in a public spectacular, and you have everybody come in and give you their comments one way or the other, and you have a room full of people, maybe conceptually, but a room full of people, some of whom are hanging off a chandelier, giving you comments, and then you have to evaluate. This is the kind of thing that happened in the next era approval process, where virtually anybody who wanted to say anything could come in, and there was a wing in balancing. And I have a lot of problem with that, if you want to know myself personally, because I think it slows everything down, and then you have this very difficult task of evaluating what real input are you getting, how much of it is twisted, how much of it is for the common good, how much of it is the kind that you need to consider in making a working plan. So I guess you're worried or concerned about not allowing as much or more of that kind of input into this plan, right? No, I wouldn't say that's my concern. I mean, everyone's got opinions, everyone's got beliefs, okay. On the renewable side, there's the general focus for the renewable industry as stakeholders in this process is to focus on the options that are contained in the plan, because what do we want to do? We want to sell. We want to sell these options. We want to see them implemented. And so there's a focus on, is this a plan that's actually going to get implemented, and hence Marko's concern, right? We don't see the implementation happening right now. Well his concern was that, how can you build 70 megawatts without an industry to build it? Right, right. And the lines go down this way, but you're assuming they go up that way. So what's wrong with this? But the other part, which I'd like to catch on for a minute, and that is there are people out there, you know, I'm sure you can find somebody who will oppose any plan. They will come in for their own reasons, maybe environmental, cultural, what have you. They will oppose a plan because they, because you can. And then you have to evaluate whether that's a real opposition or something waste time. And so, you know, I'm just wondering, do you think, Eric, that you need to have public buy-in on the plan for the plan to be implement, implementatable? Do you have to have that? Do you have to have the public? Or can you, like Robert Moses in New York, my favorite hero, just make a good plan and then damn it all speed ahead? Okay. Well, what I think is necessary, okay, is that there be consensus among the people at the utility that this plan is not just reasonable, but that it's optimal. In other words, there's an agreement among the people that here's our plan, a set of energy options going into the future. And we've looked at, we've evaluated all the options in the plan. We've evaluated the ones that didn't make it into the plan. And we are confident that this first option, the second and third one, are the ones that deliver the optimal benefits that are the greatest benefits. We know that. We feel confident about that because we've compared them to everything else in a way they can be compared. And so we can say we're going to do this one, this one, this one, the first set of them. And now you've got consensus among the people at the utility that they actually want it, okay? You get passed. This is very important. It's central. You get passed, this is stuff we might want to, this is stuff we actually want. We agree. We agree. And so to answer your question, once the utility people are in that consensus and they can show to the PUC, here's the plan, continue the options. And here's why we want this particular option, okay? And why it belongs there and the amount it is and the order it is. Then the PUC can understand and appreciate that, yeah, that does make the best sense. And then everyone else, all of us other stakeholders, we also can look at that and say, okay, now we understand why you selected that, why you selected that option for your plan because we can see your evaluation of the key benefits, which are system performance benefits, economic benefits. But on that side, you're never going to get agreement. You might get agreement on the utility side where all the people involved agree. You might get agreement on the three people on the PUC, but you'll never get public agreement. There will always be reasonably men or maybe unreasonable men and women differing. So if you test the success of the plan on that, we don't get it done. Well, right now it's practically impossible to have a conversation about what to do, okay? Because none of us are working from a set of evaluations that looks at options, okay, in a way they can be compared. So people offer opinions like, this is the best option, but if the utility isn't doing a baseline evaluation of, here's how this particular option looks from a system performance point of view, from an economic point of view. You see your matrix. You have a matrix. So everybody can see that you examined it all. Exactly. And you're comparing and contrasting. Before we close, we only have a minute left. I just want to raise one thing, and that is this, we've had so much delay in arriving at this point. I feel that in the modern, in the 21st century, things can and should move faster. I also feel that plans like this have to be subject to change because- Oh, absolutely. You can't operate intuition for 30 years. You can't do that. So what you need to do is remain nimble and say every next year that we're going to look at it again, we're going to adjust it, tune it, whatever, all that stuff. The problem is that if you take five or six years to make the damn plan in the first place, how can you be nimble going forward to tune it? You'll take every five years, you'll have this kind of angst, this kind of experience, and you won't be able to tune it sufficiently quickly. That's why you need to focus, I would suggest, you need to focus on creating a planning process that takes what you said into account. There it is. There it is. There's the message. The part by role of our show, you've got to create a planning process that will allow you to be nimble. Exactly. Yeah, that's key. Thank you, Erin. It's wonderful to talk to you. Reach that conclusion.