 Live here at the 12 o'clock block, here on a given Monday with Marco Mangostorf. Marco, me, and Mina maybe sometimes on Monday. Welcome to the show, Marco. Always nice to have you. Well, Monday wouldn't be Monday without starting off with my dear friend J. Fidel and all our loyal viewers and listeners. So thank you again so much for having me, Jay. Well, we want to follow closely what's going on in energy. We want to get the real sea changes, find out what's really going on. You know, I looked for news about energy in Hawaii and I found a lot of news. I found, you know, there was wave energy projects for Kanoi. And there's a Tesla that we know about this one. There's a Tesla facility just opened in K-I-U-C in Kauai. It's an energy storage project at UH Hilo. They're putting money into that. Good for them, for their campus. And there's thermal power plants at Pearl Harbor and Hickam and a biofuel plant at Schofield. And then there was an article about the fact that 26% of generation among the HECO companies, the one electric companies, comes from renewables. Although, as you mentioned in our pre-conversation a minute ago, most of the benefit there is on the big island and least of it is in Oahu. And those are, you know, the stories that you expect to see. And of course, we know one underlying story is the PSIP, which was submitted what in December after a lot of preliminaries and the PUC is supposed to review it. It is the most important thing happening, but it is not happening. And gosh knows when it will actually be approved or even commented on. So that's, I can't say that's news. It's just something on my radar anyway. But you were quoted again in a newspaper article about solar. And I want to talk about that because I think that solar and the health of the solar industry has got to be the most significant story here because it is the one that counts going forward in real terms and economic terms. Can you talk about it? Yeah, I'd be happy to. And I couldn't agree more. We live here in Hawaii in a multi-ring circus, Jay, when it comes to energy issues. And it's kind of dizzying sometimes to try to keep up with everything that's going on on so many different fronts, seemingly all the time. And of course, as a small business owner in the solar electric industry, I'm most concerned and interested in what's going on in my field and industry. And I crunched the numbers for the PV permits issued by the Sitting County of Honolulu Department of Planning and Permitting for February last month. And they were the fewest PV permits issued, 153, by my count since I've been crunching this data. Going back to 2011, it represents the drop of 66% compared to February of 2016. And I just reminded, painfully, of the disconnect between the projections and the rhetoric of dramatically increasing rooftop solar distributed generation solar and what I'm seeing and what we're seeing on the ground. And as we've talked about before, it kind of brings to bind an existential question in terms of how much value should we put on rooftop solar versus typically cheaper utility scale solar. Should we just double, triple, quadruple down on utility scale because it's cheaper? And that's the way to go. Or should there be a balance or mix between rooftop solar and utility scale solar? And if so, who will determine that mix and how can the local PV industry be adequately supported during this very difficult and challenging transition time that we're in? Well, let me ask you. What comes to mind here is how does the demise, or at least the decline of the solar industry, the rooftop solar industry, if you will, affect the plans and hopes of all the utilities to build utility scale solar farms? Does it have any effect on them? Does it have some effect? You know, I've often thought that in the crisis among that industry right now, what they could do is go to the utility and make proposals to build utility scale solar, but I don't think that's happened and I'm not sure it can happen, but I like to hear from you about the relationship of the demise of the industry and the ability of utilities to do utility scale solar. I think they're kind of parallel track and there's not a whole lot of crossover between those parallel tracks in the sense that you have utility scale solar typically being done by much larger companies, oftentimes based outside of Hawaii, whether it's Solar City or REC Solar, who have been doing utility scale solar in our state, whereas the rooftop solar is much more, I think, focused or being served by local companies, and if you look at the power supply improvement plan, which is submitted by the only electric companies back in December 23rd, they are proposing, at least in the near term, 2017 to 2021, a mix of rooftop solar and utility scale solar in various proportions depending on one of the five islands that they're looking at at the time, so I'm not sure if that's really answering your question very well, but ultimately they see a mix between rooftop solar and larger scale solar. Can they get a bigger piece of the action on utility scale solar? I mean, after all, they've installed an enormous tens of thousands of solar rooftops in Hawaii. They must know a thing or two about putting down panels and connecting them up. Why can't they do this work? Why aren't the utilities involved in actually installing rooftop solar on customers' homes? No. Why can't the industry, the rooftop installers, the residential installers, do the large-scale solar farms? Why can't they do that? Why does it have to be from the mainland? Well, that's a good question, and I think I don't have a really good answer for you. I think it has to do at least partially with the fact that mainland companies have much deeper pockets, and in the case of, let's say, SolarCity, I mean, let's be really clear here. This is a company that had just completed a project and deserves a lot of accolades on Kauai Island using Tesla battery storage to the tune of 50-plus megawatt-hours of storage, which was definitely groundbreaking. And it might have soft David Bussel and his whole crew over there at KAU. Yeah, mine, too. But the reality is undeniable. J, which is SolarCity, is the company now part of the Tesla Group. It's a company that, since it was opened to stores in 2006, someone on 11 years ago, has never made a penny worth a profit. In fact, last year they lost over $800 million. They've never been profitable. So, you know, it's my lament, my frequent lament, that it's really hard for local companies here to compete against the likes of big giants in elsewhere, coming from elsewhere. Well, you know, isn't the natural process of a successful industry? In fact, for that matter, a consolidating industry to do mergers and acquisitions and have a lot of these little guys come together in bigger capital concentrations where they can do bigger jobs and have deeper pockets. Why hasn't that happened? Well, I mean, it has. There have been attempts. But I think what I can conclude after being both a participant and a keen observer of this industry over the years is that making a profit can be incredibly elusive, depending on the market segment. In this particular case, when it comes to the finance end or the project development side, when you look at the likes of SolarCity or Sun Run or Sun Edison, which is now dissolved because they couldn't figure out a way to make it work, or Vivint Solar that got effectively chased out of the state, I mean, it's rather noteworthy to say the least that to date, at least over the past 10 years or so, that very little profit, if any, has been made by these companies. So what sense does it make if you're losing money to have one losing company merge with another losing company, losing money to have a company? So I mean, this is all kind of over my head to some degree, Jay, but I do know how to read a 10K form. I do know how to read a balance sheet and a profit and loss, and it just continues to astound me that there are as many active players as there are who have been notorious in terms of losing money, losing money, losing money, and they're still somehow playing in the arena. Well, let me ask you this. I mean, it just comes to mind. I mean, why are they losing money? This is such a hot industry, or at least a hot prospect, and it's so important to Hawaii, and people will pay, won't they? Why is it that all these companies are losing money here in the epicenter of renewable energy? Well, they don't break it down in terms of they're profitable in this market or losing money in that market, or maybe they're losing money in all markets. I don't know. They don't go into that level of detail in their financial disclosures. But I mean, again, really simplistically, you lose money when you are selling whatever product or service that you are offering at a loss. In other words, it's costing you more to do it than the revenue coming in. Now, typically the law of capitalism is that those companies that lose money get winnowed out and they die. They go away, right? And that's the vast majority of capitalist companies live and die based on profitability, right? That doesn't make a PhD in political science or economics to make that observation. But you've got a very small percentage of companies who are still the beneficiary of having new money come in from investors who believe that it still makes sense to invest in the company. So, you know, it's almost kind of Quonsy Ponzi scheme. Like, you take the new money and you pay off the old money, and as long as the new money is coming in at a fast enough clip, you keep the company business until the new money starts drying up and then that's when the alarm bells start going off which is what happened with Sun Edison, obviously. Sure. But you know, what strikes me, though, is that especially with the sort of Ponzi approach to things to try to understand things is that the guys who are succeeding, say, Solar City and, I mean, in that project in Kauai with Tesla batteries, it's all very close in. Are they really making money or are they going to have a loss too? Is this like the fair wars, the solar wars, if you will, where everybody's losing money but they keep on making proposals? You know, you make it up in volume, you make up your loss and it's a joke, right? It's a joke. I don't understand why they keep doing it if they're losing money. What's the difference between a company, if there is one here in Hawaii, that makes money installing solar and the ones that loses money and goes out of business? There must be something that one group can learn from the other. There must be some distinguishing business practice that some companies use to keep in business and others, well, they don't use that and they go out. What's happening? I think, my dear friend Jay, I probably need to go back to school and work on my MBA to give you an answer to that because it's all rather befuddling to me at times. And again, I have a rather narrow selfish interest and then I have a company that necessarily has to be profitable. Otherwise, I go away and we are competing, myself and other local companies are competing against other firms who are able to lose tremendous amounts of money and stick around. So it makes for a difficult environment. Well, let me ask you this then. Why are those firms piling the money in? Why are those firms willing to take a loss? They must have some long-range plan or expectation that makes them stay in the game and continue to take losses. What is that? Do they think that there's a rainbow, a pot of gold at the end of this very difficult rainbow? Well, you would think that new money coming in would have some assurance or high probability of getting repaid, right? So what that rainbow or pot of gold at the end is, I'm really not clear. I'm not a historian in terms of the history of Amazon and Jeff Bezos is a success and clearly the guy seems to be from all upwards. Appearance is quite successful, but I mean, Amazon was losing money year after year after year after year. I believe they're profitable now, and he's gone on to bigger, better things, buying Washington Post and other acquisitions. So I'm sure there's an MBA dissertation or thesis that are somewhere to be able to answer those questions more directly. I agree, Marco, and that's why I'm offering you this one-minute break so you can crack the books for a minute, and then when we come back, we'll try harder, and we'll also try to figure out what we can do as a state and for that matter as counties to try to continue installing solar. We'll be right back. Aloha, my name is Justine Espiritu, and I am the co-host of Hawaii Farmers' Series. This is my co-host, Matthew Johnson, and we are live with you every Thursday at 4 p.m. at thinktechhawaii.com, and our show focuses on Hawaii's local food community. We feature not only the farmers that are producing our food, but we also feature the supporters and other folks involved in the community that are trying to promote local agriculture. My name is Raetsu Chiyaba, and I'm from Kalihi Palama. I spent 20 years in Tokyo, Japan, and I came back after the Great Earthquake. I watch thinktech all the time, and hope everybody follows it on the Internet because it is a program that is devoted to the future of Hawaii and brings all concerned citizens together to create a better society for all. Okay, we're back. We're live. Now we know more, and by the way, I heard, Marco, that this, you know, talking about this cyber-terrorism and all that, this show is being tapped. There are people actually listening to this show, Marco. Hope it doesn't trouble you. Well, maybe people like Kim Jong-un in North Korea and all his peeps, you know, if they're listening to you, Jay, that gives me a little bit of hope about the Korean Peninsula perhaps not blowing up in some big fireball. Okay, Kim Jong-un. You know, if you're listening, don't do it. All right, so let's talk about what can be done here. You know, we have a declining solar industry. We have outside companies pouring money into projects that may not be successful. We do not have, I think you will agree with me, we do not have a sustainable arrangement for installing solar either on rooftops or in larger facilities because nobody's making money. What will happen? I mean, ultimately, in say five years, and also what can we do about it? Is that all you want to ask me? That's all I want. How many hours do you have? You had a minute to look at it, and now you should be ready. Oh, boy. Well, I guess maybe we'll fall back on the executive summary from the Power Supply Improvement Plan submitted to the Commission PUC back in December 23rd of last year, and it gives a really useful kind of projection roadmap of the Hawaiian Electric Company's plans for their five islands, Oahu, Maui, Molokai, and Lanai, and the Big Island. And they're showing a mix of, you know, from essentially solar and wind, from big solar to little solar and mostly big wind. And interestingly, I just spoke to one of the reporters from the Hawaii Tribune Herald, which is the Eastside paper here on this island earlier today, and he's going to be looking at how the P-SIPs look, how the P-SIP for this island looks specifically. And it'll be interesting to see what he comes up with, because I mean, I give full credit to my Hawaiian Electric friends for spending a tremendous amount of time and effort and money and resources to put out this last P-SIP, which was, by my count, either the fourth, third or fourth iteration of the P-SIPs gone by. And whatever they come up with... I didn't realize until you mentioned it a moment ago that there are sub-P-SIPs for each island in the Hawaiian Electric universe. Am I right about that? They're a sub-P-SIP. So each island has a plan. That is correct. So let's talk about the Big Island. Well, the Big Island, what stands out to me is that they're projecting 30-plus megawatts, just the next five years, 30-plus megawatts of additional rooftop solar, or DG solar distributed generation solar. And that's an increase of about a third or so of the existing, from the existing capacity of rooftop solar. So I'd say it's fairly aggressive. It's fairly ambitious. And it flies in the face of what I'm seeing admittedly very early on in 2017, late 2016, early 2017, that the permit numbers for rooftop solar are the lowest I've seen since I've been crunching this data. But there's a substantial disconnect between the more high-falutin 50,000-foot-level projections of 30.3 megawatts of additional DG PV on this island and what we're seeing over the past few months. Now, do I hope that things will change? Obviously. Obviously, but it just shows right now at least there's a substantial disconnect. For utility-scale solar, they're projecting one megawatt worth of grid-scale PV on this island. A note for the record, Jay, that there's not a single grid-scale PV project on this island, whereas there are projects on Maui and there are projects on Oahu and there are projects on Kauai. That is not the case for the big island. So they're making a very modest one megawatt of projection for this island. Why they did that? I don't know. And they're also projecting additional 22 megawatts of grid-scale wind. Now, note that right now they're about 20 megawatts at South Point here on this island. They're about 11 megawatts up in Hawaii. That's at 30 plus. And the water department has about 5 megawatts, but that's not really included because that's just used for water pumping, as far as I understand. So how likely is another 22 megawatts of grid-scale wind on this island? Where are these 400-foot-or-so turbines going to go? What kind of pushback is there going to be from the community wherever they are proposed to go? So it's not a Nambi-Pambi type of projection electric has put down here when they're looking at another 22 or 20-plus megawatts worth of wind. And there hasn't been new wind here that's been feeding into the grid for years and years and years. Are people in the Big Island down on wind? Like, for example, the people on Lanai dead down on wind. What about the Big Island? Is there an inherent resistance to wind? There hasn't really been much of a discussion yet, but I have no reason to believe that big wind turbines would be seen with tremendous amount of favorability or a whole lot of aloha. I think typically it's hard to get all warm and fuzzy feelings about 200-foot, 400-foot wind turbines anywhere in your view plane or somehow you're going to be affected by that very low-frequency vibration that can sometimes propagate over a great distance. I know my friends at Penn Yolo Power have certainly been looking into wind for some of their land of Parker Ranch, which there were major land-holding here. But I think in general, you know, big wind is kind of a hard slog. It doesn't matter what island you propose it on, you're going to get some of the usual suspects, as they'll call them, who will push back on it. But the thing is, I'm fully cognizant that any proposal or any plan is going to find resistance. So I don't want to just carp from the sidelines in terms of what Honelectric is proposing to do because regardless of the mix that they would propose, they would be criticized, they'll be challenged. But, you know, the thing is we can't just... So these things, now, they're in the plan. The plan is in front of the PUC. You've pointed out, just for discussion purposes, two things that, you know, that are practical problems, you know. One is that the, you know, that it's hard to find people who are willing to do storage. And it's hard to find people who are willing to do wind. And it's not just that the local residents like it or don't like it. Somebody's got to be willing to put the money in. And presumably, in the case of utility scale, well, they're both utility scale, really, both the storage and the wind. I guess the utility would go out and do an RFP and hope that, you know, it will be met, that there will be proposals. And the proposals will be funded, you know, by the developers. But if the developers don't have the money or are not interested in investing money in those things in a practical way, maybe worrying of the same issues you're worrying about, it won't happen. You can make all the RFPs you want. It won't happen. And then the question to me, and this is the question I put to you, is, so we have these practical problems and maybe investor interest problems. Are these the kinds of things that the PUC is going to consider in approving or tweaking, you know, the PSIP plan? I would think they would have to. Jay, I mean, the pieces are complicated. They're very complicated. And I know that they are engaging with outside consultants and paying them, I'm sure, reasonable, if not pretty penny, in order to come up with something more definitive or as a final determination on this long process of the PSIP. So when the commission is going to issue a decision in order or decide to tell Hawaiian Electric, well, you know, you made some progress here and there, but you need to do it again, I kind of lean against that last scenario. I think they probably will come up with some type of DNO that is going to accept some of what Hawaiian Electric is proposed and reject other parts depending on what they get from outside consultants. So it's really kind of a big crapshoot right now and it's part of the three or four, what I call power docket, sort of before the commission right now that will be hopefully decided in fairly short order over the next six to 12, 18 months. Yeah, and rejecting the whole thing out of hand and saying, well, come back again. We've seen that before and it's not a pretty picture. And in fact, we've been trying to get a plan together for how many years now, and it hasn't happened. This is the upshot of what, five years of trying to get a plan together. I hope they don't just reject it out of hand. That would leave us essentially in the lurch, all of us. No, I mean, I agree. I think they're more likely to not tell them to go back to the drawing board yet a fourth or fifth time, but come up with some type of DNO based on the inputs of the intervenors of Hawaiian Electric, the consumer advocate, and their outside consultants to shape something that's going to provide the roadmap to going where we want to go, which is to ideally lower electric costs and also bring on more cost-effective renewables and keep the lights on. I mean, those are the big three. Yeah, but let me ask you this, though. Suppose for various environmental reasons and energy, you know, connectivity reasons, they decide they're going to go along with it and they're going to want big storage and they're going to want big wind or some, you know, some approximation of what has been proposed. Now, there are practical problems, but certainly we have a legislature out there and we have an energy office out there. We have a governor out there who could tweak the market. I mean, that's what you're supposed to do when you want to change human conduct. You have government come in and do incentive things or disincentive things, and you make it work. That's how Robert Moses, you know, built most of the transportation system in New York. He made it happen. He made a plan, then he made it happen. So is it in the works here that they would come up with a plan and the plan would say, well, yeah, we'd like to see this happen. We're approving this or whatever, or modifying it, whatever, we want the legislature to step in. We're operating on the assumption the legislature will step in. We're operating on the assumption that the energy office will do stuff. We're operating on the assumption that the governor will do stuff. We want you all to come along and be part of this process. It's not just between us and unnamed developers. It's between us and everybody, including other arms of government. Isn't that the way it can work? It's a longer time to get the courses to the tables, right? And I think, I mean, you can see the example right now of a bill that I'm not sure if it made a crossover last week or not. I have to look into that. But the bill, which we discussed a couple weeks ago, to make the commission go from three commissioners to five and also, essentially, very much insert legislative priorities into a reformulation of the utilities commission. So, I mean, while kind of on the surface, I like the idea of having five commissioners and greater neighbor island representation from what I know about other parts of that bill, assuming it's still alive, it had some areas that were less palatable. So, I mean, we already have an energy environment where we have so many different players that, you know, sitting down and passing the covable around is all well and good and consensus. But, I mean, you and I both know that there are so many, so many, so many examples of so many players being at the table passing the bold around that it can often lead to paralysis or at least years and years and years go by before action is effectively taken. I mean, is that really the best way to run a railroad? No, no, and we have to avoid distraction. Paralysis, distraction, it's all the same thing. We have to see the vision and we have to go for the vision and we can't let anything get in the way. Except, we're going to have to let two weeks get in the way, Marco. We're going to have to take two weeks off and come back two weeks from now and continue this very important discussion. It's great. It's been great. It's always great to talk with you, Marco. I look forward to our next time together. As do I. You are the master of the Segway J. The Segway Award. Thank you, Marco Mangelsor, Provision Solar and Helo. Aloha and we'll see you next time. You rock.