 Bingo, we're live, we're back for the, gee, the three o'clock rock here on ThinkTech. And right now we have Energy in America with Lou Puglio-Ace of E-Princk. He joins us by Skype from Washington, D.C. He is the CEO of E-Princk. Welcome back to the show, Lou. Lou, it's nice to be here. Go ahead. Yeah, we live at interesting times. It's not necessarily interesting in the good sense, but certainly interesting, as the Chinese say. And I like to, you know, you're in Washington. As I recall, that's where everything happens or used to happen. Now it happens at Trump Tower. Exactly. It's like the people's real lives. So tell us, what does the president elect offer here, and how is it going to change energy among other things? Yeah. I think, you know, there is a lot of discussion of what the Trump agenda is, and I, discerning it, is not easy. I will be the first to admit that. I do think, as we talked about this a little earlier, but one of the, you know, one of the main themes you're going to see is a, I'm just not quite sure how much of a rejection of climate, but you're going to see a great deal of what we would call environmental regulatory reform. And this regulatory reform is tied in a very political way to what we might call the working middle class, the declining incomes, a traditional democratic group, which you would argue in this election, Secretary Clinton did not connect with at the level she should have in a historic. And you know, one of the things, it's very important to point out that of all the governorships in the United States, only 15 now are controlled by Democrats, including Hawaii, of all the legislative seats held at the state level. The Democrats have lost about a thousand over the last eight years. So even though there's a lot of activity in Washington, I think there was a growing, at least political recognition that there was a disconnect from what the elite wanted to do in a lot of areas, including the environment. And what the perception was among, rightly are wrongly, but was the perception among a lot of what we might call the working middle class, you know, the people out there in so-called flyover country. So two things... Well, you know, what you say really resonates with me. It's not just that, you know, the group who voted for Trump arose during the campaign. There was a dissatisfaction going on for a long time, and these, you know, Democratic legislators, a thousand of them across the country, were, you know, were evaporating over a period of years. So when we start connecting the dots on this, what you get is a process that didn't start a year ago. It started many years ago, at least seven or eight anyway. I agree with that, and I do think there is a disconnect. And I want to show you this in a couple of examples. I think we can get a little bit more to climb it and to solar and what's going on there, what it means. I think it means a lot less than people worry about. But there are literally hundreds of issues underway now, and in fact, there's something called the Congressional Review Act. You'll watch it in January in which they will take a group of regulations that were promulgated after May 30th, and they can be rescinded by the Congress, and I think Trump will sound them into law. In fact, the basic debate in the Senate right now is they don't have enough time to rescind all the regulations they want to rescind. So they're fired up in this issue. But I thought it would be interesting to look at where some of this resentment might be coming from. The first one is, I don't know if you can get one of these graphs up or one of these pictures up, but the first one is CAFE standards. And CAFE standards are... Let's put the picture of the car up. Take a look at Steve McQueen. He was always a hero of mine. So corporate average fuel economy standards are standards which determine what the miles of gallon that auto manufacturers must pay, both in terms of the footprint and the fleet. And these jobs-producing cars are by auto workers, auto workers in the U.S. And there are lots of trade issues that Trump talks about. But one of the first things we're going to see is we're going through what's called a midterm review on the auto, which we'll reset. The question is, should we go to a higher standard after 2018? Trump, in my opinion, will not do so. Will not do so. He's going to hold the standards where they are today. And he's going to do that because of the disconnect between what the standards call for in terms of the fleet and what the customers, the potential purchase of the cars want to buy. And if that disconnect gets too high, there's stranded capital. And there's also loss of jobs, a real chance of the industry losing some jobs. Because the regulatory program is pushing the industry to produce a set of vehicles that the customers do not want to buy. And some people say, well, this terrible need to get these higher standards and everything. And so I have this picture here of Steve McQueen driving in the iconic film bullet, driving a 1968 Ford Mustang GT fastback. Which, by the way, if you listen to the film, which had a soundtrack, you'll hear a lot of double clutching. This was, in fact, not required since this was a four-speed. What? Macho, plenty macho. What's interesting about the 325 horsepower Mustang GT that he drove at that time, that car generated, spewed out, about one ton of criteria pollutants. That would be volcanic organic compounds, nitrogen oxide, volatile organic compounds. All these bad things led one ton over 100,000 miles. If you bought that car today, if you bought Steve McQueen's Mustang, but you got a 2016 model, it would generate 10 pounds over 100,000 miles. That's a small, tiny fraction. A small, tiny fraction. So this gets back to a central theme, what I call the law of diminishing returns. Yet, the regulators want to push this much further, right? And the auto guys are saying, what are you doing? The cars are pretty clean. Why do you want to go higher? Why do you want to impose a higher cost with such a low yield? Well, what's the higher, what are the detriments of going higher? The detriment of going higher is that you are spending a lot of money. And it depends what you've used a lot of money. If you talk to the auto companies, if you raise the cost of a car, four or five, $600, people leave the showroom. For a high roller like you, Jay, that's not a big deal. But for an average working man like me, that's a big deal, spending another $500, $600 for a car. And so it affects the total sales. And it's not really doing that much for the environment. We have some time, one of these times, we might talk about California, where the same thing is happening. The second decision I think Trump will make, and he will make this on the first day, is he will authorize the construction of the Keystone XL pipeline. And I sent you a graphic on that as well. Yeah, let's take a look at that graphic now, too. Now, that project, if I were to give you a map of the North America, of where all the pipelines are, you would hardly be able to see the map. Because the country is just crisscrossed by pipelines. But in that particular project, I think, where even the president said, and you can see the one section there that's been constructed, that it really was a symbolic gesture, more than a real one, that project would have provided jobs for working middle class people, lots of them Hispanics, black Americans, the international laborers organization. And when I went to the last hearing of that event, held by the State Department, in the middle of the room, where all the people who came early, and these were mostly young millennials and beards and sandals and their mothers, and to the right side were all the laborers in orange jackets, who had jobs and they couldn't come in the middle of the night and get in line to be the first to speak. And I just was wondering, for the Democrats, this is their constituency. Yet they were dissing these guys in a fundamental way. And you may see all these protests about Keystone XL and all that, but even the president's own analysis said, well, it doesn't really affect oil sands production from Canada, because they can move it by rail, outrock or other things. So I do think this is part of the political disconnect, where we moved the discussion on environmental issues from a technocratic debate, a technological debate, to a political ideological debate. Yeah, yeah. And I believe that Democrats are paying a price for this. I mean, I think there are lots of things going on besides that. But I do think- Well, talk about coal. Is it the same process? So coal is quite interesting. For me, for coal is that most of the adjustment in coal is taking place because of the rapid expansion of very inexpensive natural gas. Now, politicians like to take credit for stuff. And I think this is another elite problem. They wanted to take credit for all the great environmental achievements. And I believe the Democrats might have done that to some excess instead of saying, you know, the market itself is driving us to a lower GHG emission profile, because we have this fracking and we have all this natural gas. And it's driving out coal. Now, maybe I would argue the regulatory program in the Clean Power Plan is probably accelerating it. But the Clean Power Plan is also, I would say, dead. Now, one interesting thing after we go through all this is to see what it really does to the emissions profile to the US. My guess is we're on a certain trajectory now. And if the government pulls out, it's not going to have a major effect. But we haven't done the research on that yet. That's an important question. Yeah, it's an important question. I guess your proposition is it's not some of the things that he has been promising and some of the Trump and some of the things that he is likely to do are not all that bad. No, not everything is easy. And so now, if we get to the issue of wind and solar, these are driven in part by so-called production tax credits, renewable portfolio standards. And the production tax credits are issued at the federal level. I suspect those credits will not. They're going to phase out over a period of the next four years, whether they will get axed earlier, I doubt it. And they are largely and the use of these renewables within the utility sector is really a state issue more than a federal issue at this point. And I don't see these plans retreating substantially. We do know that if you don't solve the battery problem, you do have problems with intermittent renewables at 15% to 20% of the grid. So I guess it's a question of degree. At some point, the cafe standards simply not economic. At some point, coal goes away. At some point, you know. It's slow. You go ahead. The yield is too low, I think. You should allocate our environmental budget where we get the highest return. Not whatever hobby horse that sounds good. And this is actually really an elite problem because elites love electric cars. But some poor guys work in two jobs in East LA to mail the money to Sacramento, so wealthy Hollywood producer can buy an electric Tesla for $120,000, $30,000 rebate. This stuff is starting to come home. It's a subtle way. People don't really, they really can't put their finger on it, but they have a sense that there's a disconnect from their lives when they're having trouble making ends meet. You can never underestimate the importance of energy in our country and the world. And now you can never underestimate the connection of energy and politics. And I think we're going to see some very interesting changes here. And I guess there are two polarized camps on this, the environmental and, on the other hand, they call them the traditional energy people. And we're going to see this battled in the next few months, I think. Oh yeah, I think that's going to be, I mean, as they say, heads are exploding in Washington. Well, OK, that's Lou Pudirisi. He's the one with the funny University of Hawaii shirt. I guess they're wearing them all over Washington DC now. I do. And I think it's very nice that you put it on for our show. We're going to take a short break, Lou. When we come back, I'd like to talk about the decline of the solar installation industry in Hawaii and on the mainland. Why, what's happening and what will happen. We'll be right back with Lou Pudirisi. Aloha. My name is Carl Campania. I am the host of Think Tech Hawaii's Movers, Shakers, and Reformers. I hope you join us as we take a deep dive into biofuels in Hawaii over the coming weeks and the alternative fuel supply chains necessary for the local and global transition towards transportation fuel sustainability. We are going to invite in, and we will have significant interviews with various stakeholders, including our producers, which are our farmers and our scientists, our conversion technologies, including Tara Viva, who we'll see in two weeks, as well as our consumers. Within there, we're also going to have the investor groups necessary to make sure that this can advance. So I do hope you join us as we explore our deep dive into biofuels in Hawaii. OK, we're back. We're live with Energy in America, featuring Lou Pudirisi of E-Princk in Washington, DC, joins us by Skype. Now in this part of the show, as I mentioned, we're going to talk about the decline of the solar installation industry in Hawaii and on the mainland. It's been going down for some time. We've had regular stats on this from their building permit stats involving installation jobs from Marco Mangelsdorf. And you can also see a lot of these companies going out of business or going into some other business. Something dramatic has been happening in the solar industry, not only with local small companies, but with much larger ones. So Lou, what's going on? Why is this happening? Why is it happening nationally this way? And how serious is it? So solar is clearly an intermittent supply. In fact, you could argue that you might be able to place in some parts of West Texas and Midwest of the US wind, where you have a higher probability of lowering your intermittency. But the wind doesn't blow all the time. You can do research in fine places where it blows more than usual. But solar, we sort of know what its limitations are. It's when the sun is up. And we do know a couple of things. We know that when the utility grid itself, when the whole system to generate power, to deliver to families' homes and people's uses, when the intermittent supply gets anywhere from 15% to 18%, the cost structure begins to rise very rapidly. And I would say the grid can even become unstable. And this is not necessarily something that has to happen. If we had a way to store power, if we had a way to store power, and we could do it cheaply, and the cost of storing it and the cost of drawing it back from that storage facility will cheap, well, then the solar would be a fantastic thing. Well, I hear what you're saying, and that's really a provocative idea, that we having a problem now with solar installation, that whole industry, people are out of work. They're closing the doors and all. But if we had had, looking back retrospectively, if we had had cheap and high capacity storage systems, say five years ago, we wouldn't be having this conversation. It would have saved the solar industry. It would have avoided the decline. I think that's what you're saying, eh? Right, but the question was the government in Hawaii, and as well as the federal government, provided a set of subsidies and support, which actually resulted in very unbalanced problems. I mean, I think solar makes a lot of sense in Hawaii, but the question is, it is intermittent. It is by, it's very nature intermittent, and unless you solve that problem, and remember, I think the other problem is, of course, the people were permitted to sell power into the grid at average cost, when its marginal value, at certain times of the day, was put back into the grid for quite a long time. And so the, even the time of day pricing wasn't quite settled yet. And of course what happened is things got so unstable that HECO decided, well, not only are we not gonna let new customers sell to the grid, we're just not going to authorize the permission. And I think we talked about this before, the state budget of the state of Hawaii, I think at one time exceeded over $200 million in direct subsidies for solar installation. That's a lot of bread. You know, I remember that when we had a tax credit for technology here in the best part of the first decade of the new century, there was all kinds of resistance politically to the fact that we'd spent over 100 million on tax credits for the development of the tech industry. But that looks actually pretty small compared to what we have spent and what we could spend on solar tax credits. Yeah, and on these things, if you're going to do this, you just have to make sure, you know, the juice is worth the squeeze. And I might get, the payout, once again, the payout is just not there. It's just not there. That money would have been some, I think you want to have a vibrant solar industry, but there would have been much better off if they organized the subsidy program at a more slower pace to allow it to build out, you know, concurrently, but storage technology. Yes, yes, and support the development of the storage technology as part of these projects. But you know, it seems to me that when oil went down, not that many years ago, how long has it been, two years maybe, maybe three, oil went down so dramatically, that changed the spreadsheets. And when the solar installers would approach the homeowner, the whole transaction would be based on the appeal of those spreadsheets. Look at how much money you're going to save. Here's a dollars and cents, it's real, you can touch it, you can take it to the bank. And that just didn't come true. So, you know, the spreadsheets got thinner and thinner and are pretty thin now, and it's harder to sell. And the low-hanging fruit customers have already been sold. So, it's a real struggle for them. Yeah, I mean, there could have been ways, I think that there could have been ways in which the utility, depending on how it was managed, in which it could have engaged in very selective long-term deals, but they would have to distribute the solar in the right spots on the grid. It requires a lot of planning, unless they say central planning. Utility is a managed system. And unless you manage the whole network, you're going to get a lot of imbalances. Yeah, so where's it going to go, Lou? I mean, right now we are at a low point and I'd say that it feels almost long-term because some of the companies that were making a lot of money before doing a lot of installations are gone. Some of the expert installers are in other businesses, other trades, and people are generally discouraged about it. And I think they probably feel to go back to the first part of our conversation. It's the federal government's not excited about renewables anyway these days, or won't be starting January 21st. So, this is not a good time for the, so what's going to happen? I mean, solar is the backbone and development of renewable energy in Hawaii and probably the mainland. It's where the action is in terms of moving to those 100% goals. Sounds like those 100% goals are more difficult now. So let me tell you a story. Last week I went to a presentation at the Italian Embassy and a guy was there from SNAM. SNAM is the main infrastructure, monster infrastructure company in Europe based in Italy. And he threw up a final slide to his presentation and he said, you know, it's quite interesting. The European Union wants to electrify the continent, right? We've got electric cars and a lot of renewables. And the cost of electrifying the European continent by, I mean electrifying in a renewable sense, by 2040 was 250 billion euros. Yet, for a fraction of that cost, he could hook up gas throughout the European continent. And get virtually the same reduction in climate. That's not Russian gas, is it? Russian gas is slightly unpredictable these days. Yes, but they would be relying on Eastern Mediterranean gas and Azeri gas and USLG. So I do think that you have to have as broad a possible set of alternatives. If you commit to a single strategy, if you don't have something which is robust against uncertainty and you don't think about this uncertainty in a fundamental way, you're gonna get into a lot of trouble. Yeah, we haven't really come to terms yet with this. So what's your advice? Two people need advice on this. One is the president elect needs advice. Congress needs advice. And I, the homeowner, need advice. For that matter, you know, the regulators in Hawaii need advice. What advice would you give on how to deal with all the change we're having? Well, I do think that the, you know, they have to ask themselves, why are you doing this? If you're doing the solar to cut your utility bill, and it's not cutting your utility bill because it's fundamentally a costly process to produce power. And remember, power is not just the instantaneous part. It's the capacity to deliver it instantaneously across the entire day-night cycle. If, in fact, your strategy has a huge risk profile that spikes the cost, well, it's probably not a good strategy. And you have to go back and look at, okay, until we get some ways to store power, we're gonna need cost-effective dispatchable power. And cost-effective dispatchable power is by its nature not intermittent. I mean, it's unfortunate. I understand the problem people have, but... Well, that takes me to a show we had last week with a scientist from University of Hawaii School of Ocean Earth Science. He's into marine engineering. And he's a big fan of OTEC. In fact, in many ways, he's the father of OTEC here. His name is Hans Krock. And he's been teaching people all around the Pacific Rim about OTEC for a long time. And they're taking it more seriously in places outside of Hawaii than inside. But where do you feel OTEC can go? And I realize it's something you can only do on the coasts and near the ocean, and maybe on platforms in the ocean, and maybe only by using hydrogen as a method of storage. But what do you think? Where does it fit? Because it is dispatchable, completely dispatchable. It's constant. It has very little negative effect on the environment. Where does that fit in your picture of renewables going forward? I think it's a great idea. The question is, what does it cost? Can he deliver OTEC at 30 cents a kilowatt hour in Hawaii day in, day out? And what does it take? As we've talked about many times, inexhaustible does not mean inexpensive. If OTEC delivers, and if the environmental benefit, it's clearly does not generate energy emissions. But even if it has to, we have to kind of look at the numbers, as we've said. In God we trust, everybody else has to believe it. It always comes back to that, doesn't it? We're talking about a micro-macro-economic analysis, and we'll continue that as we go forward. This is Energy in America, always studying the larger picture, the macro-energy economic picture with Lou Pulirisi of EPRINC, who joins us regularly every two weeks on Skype from Washington, DC. Thank you so much, Lou, looking forward to our next time together. Thank you, Jay. That was a great thing. Aloha. Aloha.