 Welcome to Stan Energy Man here on Think Tech Hawaii. I'm Stan Osterman and I don't know where to say I'm from anymore. I'm just retired now. I'll just say I'm retired from Kailua. I'm a concerned citizen and energy guru. Yeah, I like the guru part. Anyway, thanks for joining us today here on Think Tech Hawaii. Where we try and bring you the latest and the best things, all things energy for the community. Today we have a special guest coming to us from the state government from D-bed to be specific. Ryan Homadon. He's here from the GEMS office which I had Gwen Yamamoto-Lau come in a couple, seven, eight months ago and talk to us about the GEMS program, which is a great program and I'll let Ryan kind of describe what it's all about. First of all, Ryan, tell us a little bit about yourself and how you got into the GEMS. Sure. First of all, congratulations on your retirement. Thanks. I'm sure you're going to enjoy it and make good use of your time now. So far I'm enjoying it. That was good. Like Stan mentioned, I am the senior program officer at the GEMS program. We are actually part of the Hawaii Green Infrastructure Authority and I've been with the program for about almost coming up on two years. My background is in the finance industry. I've worked at various banks here in Honolulu. So that's where my strength lies when I was hired. And as I worked on a job, I acquired the knowledge about energy and have to quickly learn about ins and outs of the solar industry here. With the help of the various stakeholders that we interact with, the contractors, the clients, the nonprofits and the energy associations built up my knowledge. And I try to contribute where I can to make the program accessible. Great. Tell us a little bit about the background of GEMS and how it got started, what the intent was, and so we can kind of fill people in on the program itself. Sure. Quick background. So this program was created about five years ago. And the program was part of the whole state's initiative to be 100% renewable by 2045. But the state realized that in order to do that there are certain sectors in our islands that are considered underserved or hard to reach and they may need assistance in achieving green energy. So recognizing that the state loaded a bond, the legislature authorized a bond issue to fund a program targeting these hard to reach sectors. And those were defined on the consumer side as low to moderate income households. And on the commercial side, the underserved were defined as nonprofits, multifamily properties, and small businesses. Hopefully with the creation of the program we were tasked with reaching out to those sectors and helping them achieve green energy. So the initial bond was for like $500,000? $150 million actually, yeah. Okay, correct. Yeah. It was pretty substantial. It was, it was. And there was a lot of expectations when it first was issued to quickly get the money out. And our agency did get some flack at the very beginning for not dispersing the money quick enough. There were a lot of changes going on during that time when the bond was issued. Then disappeared, number of solar contractors decreased from 300 plus down, I think now we're probably less than 100, I think, you know. So there were some challenges that the program faced. But I think the model and the programs that we created that we are implementing now really have helped achieve that goal of getting the money out. Efficiently and to the right people. So what was the actual process at the beginning? Because I want you to talk about the changes. But in the beginning, if say I was an underserved, you know, multifamily dwelling thing. And I wanted to apply for this funding. How would that process look, what would it look like? Back then? Yeah. I think you would come to our agency, submit your proposal application, and the agency will be tasked with determining, first of all, are you an eligible participant in our program? And secondly, does the proposed installation achieve savings goal both energy-wise and financially? That was a challenge. Okay. And then so assuming you pass those wickets, you qualify, it's a worthwhile project. Then how does the money actually get to the individual and what were the terms of repayment? Yeah. So the criteria to qualify the program hasn't really changed. It remains the same because it's set in the regulation, the guidelines set forth by the community. The method of getting the money out did evolve. But once you do qualify for the program, you are an eligible applicant and your project does meet the guidelines. Then our agency works with the contractor to make sure that it gets installed properly and that end product is resulting in what they set out to do, which is to save money and save energy for the office, for the nonprofit, for the homeowner, for the multifamily business. And so did it usually entail like a power purchase agreement where the contractor would pay back the money to the state or the homeowner or could it flex either way? Yeah, so we were able to craft the program where we were flexible enough to accommodate these power purchase agreements because as people in the sole industry know for a lot of nonprofits, it's difficult for them to install systems. Sometimes it's financially difficult because of the lack of practice. It is available to nonprofits if they don't pay taxes. So how do they reap the benefits of the taxes that are out there on the federal and state side? One of the ways is through power purchase agreements. We devise a way to finance investors who own the PV system, or the creators of the PPA financing their project and making sure that the agreement between the off-peaker and the PPA owner that it is benefiting the nonprofit and user. Our underwriting makes sure that there is a tangible benefit both energy and finance before the off-peaker. You also mentioned in there that one of the changes that happened as Jim came on board that kind of was an inhibitor was NEM. That's Net Energy Metering. That's a Hawaiian Electric thing. You see Hawaiian Electric where people could sell back electricity basically to the electric company. What overall impact have you seen because of NEM going away? On a large scale, not just for Jim, but as an energy thing. Has it been a real big negative to see that go away? It's been with NEM's sunsetting. It's been more of a challenge to achieve the financial savings on that part. The NEM program was very generous in the way that the accredited the homeowners of the businesses for the energy that was sent back to the grid. The interconnection agreements available now are not as generous. The way it's set up is the energy that is purchased back on the utility by the off-peaker, by the rate payer, is not at full retail price. So the cost benefit back to the rate payer is a little more challenging to achieve that. But we try to accommodate that issue also in our underwriting group. Has there been any really dramatic changes since the early days and now with how your system works? You said that the qualifications are basically the same and the criteria is kind of the same, but I know it's expanded a little bit. Correct. The biggest change to our program and we've seen a large spike in applications because of it is we finally got to launch our on-bill repayment program for our GEMS program. It's been in the works for a number of years and we finally got it approved and implemented thanks to the work of the U.C., the legislator, the legislator, and the Hawaiian Electric in implementing our on-bill program. Can you describe the on-bill program a little? The on-bill program allows us to further reach out to certain sectors who may not have access to additional credit. That's one of the goals of our program was to make green energy financing available to more people. But a lot of people encounter problems getting financed for whatever reason. You go to a traditional bank, they rely on credit scores, cash flow, income to determine qualifications for a loan. But with our on-bill program is we look at the potential savings that the great payer, the applicant, will achieve post-installation. That savings we will use to repay the GEMS opportunity. What's the typical savings that you see happening because of that? Well, to get approved, the project must achieve a minimum 10% savings, including the repayment cost of our GEMS obligation. We look at their historical utility bill and we say SA Homeowner A has been paying $500 a month for utility cost. The way our program is, we look at the repayment history for that homeowner. If they've been paying that $500 average utility bill on time for the past 12 months, if we see no disconnect notices from the utility, then they're eligible to apply for a program. Once they get pre-approved, they're an eligible applicant, then we take a look at the project itself. Does it achieve savings for the great payer? And we look at that savings and we define it as if their bill is averaging $500 a month, pre-installation, post-installation, we kind of estimate what their new utility bill will look like. Let's just say for discussion that it turns out to be $300 a month. They're able to reduce their utility consumption down to $300 a month. But now they have this added cost of repaying our loan. Let's say that adds $100 a month to there. We add the $300, our $100 program charge to repay it. Now their total out-of-pocket utility cost is $400. We compare $400, post-installation, $500, pre-installation. If there's at least a 10% savings gap right there, then we can approve the system. I note too that initially the GEMS program was kind of focused just on the PV installation itself, but somewhere along the way storage became backwards. Well, can you talk about it? Because that's a big difference too, because you have storage in terms of batteries to back up your PV, which is a lot more, I think, practical for the average household. A lot of people don't understand if you just have PV on your roof and you're connected to the grid and the grid goes down, you don't have any power. Because ECO can't allow power to come back into the grid and back to the grid if they've got people working on the lines. So basically your PV is cut off as long as you're connected to the grid. But when you add storage to the PV, now you have a system that can disconnect from the grid and operate autonomously and come back. So that storage piece is kind of critical. Can you talk a little bit about that? Sure, yeah. I'm talking to a lot of the contractors now and a lot of the systems do incorporate batteries and some of them do require batteries. So at this present moment our program is we're unable to finance batteries. When the program was created back five years ago, batteries are not an approved technology for the use of our batteries. So one of our goals is, and again this is feedback from our customers and the contractors saying yeah, a lot of time batteries are required to achieve the savings. We're looking at ways to perhaps modify our program to allow battery financing or perhaps we have other sources of funding outside of our present GEMS bond which prohibits batteries. So we're looking at another source of funding for our program that perhaps we can lend on batteries. So the energy storage pieces, something I talked to Gwen about a long time ago, you're still working on that. Correct. That would require PUC or legislation or both. It would require approval by the PUC to use our current GEMS bonds money. But like I said, we are, Gwen is actively looking at different sources of funding for our program. She just recently came back from a conference on the mainland, a national green bank. We get together at a conference on the East Coast. And there has been legislation introduced on the congressional level and the federal level to establish a green bank, sort of like a federal reserve one for a green energy project where agencies like ours can borrow money at a low cost from this central green bank and then re-lend it out to programs like the GEMS program. So that's been introduced, hasn't been passed yet on the congressional level but there are supporters of that idea on the congressional level. We're going to take a quick break here and we'll come back and talk more to Ryan about what's going on in GEMS now and maybe even look at how the program has changed and what they're looking for. Thanks to our think-tech underwriters and grand tours, the Atherton Family Foundation, Carol Mun Lee and the Friends of Think-Tech, the Center for Microbial Oceanography Research and Education, Collateral Analytics, the Cook Foundation, Dwayne Kurisu, the Hawaii Community Foundation, the Hawaii Council of Associations of Apartment Owners, Hawaii Energy, the Hawaii Energy Policy Forum, Hawaiian Electric Company, Integrated Security Technologies, Galen Ho of BAE Systems, Kamehameha Schools, MW Group, the Shidler Family Foundation, the Sydney Stern Memorial Trust, Volo Foundation, and Yuriko J. Sugimura. Thanks so much to you all. Hey, welcome back to Stand in the Energy Man here and another just downright gorgeous Friday, a lot of Friday as we see in Hawaii. And we're talking to Ryan Hamadon from the GEMS program, which is a great program that's trying to help underserved communities in our state to develop clean energy projects to reduce their fossil fuel footprint and help reach that 2045 clean energy goal that the state has set for the grid. Ryan, we talked a little bit about how the program started. I know one of the challenges early on was a lot of the smaller investors or the smaller projects were kind of slowing things down or it just didn't seem like it couldn't get momentum. Can you talk a little bit about how that has been improved or what work can improve that? Yeah, I believe when the program first started, and that wasn't quite around, but I did hear about the program when it first started about five years ago, but my understanding is that a lot of the lending criteria and lending requirements were not as flexible to accommodate the different types of projects that were coming in seeking GEMS financing. Our challenge I think recently was how do we accommodate a variety of project types, a variety of different investors who have different needs or different requirements. How do we accommodate them while still adhering to the basic program guidelines? We came up with a pretty good way of handling the commercial and residential applications that come in and helping them. In the end, we want to get the money out and help people install their energy efficient renewable systems. So we definitely came up with a plan I think and teachers to efficiently go through these applications, ensure that the savings is there, and bringing everybody closer to the state's energy. Can you say that LaRaine just went to the mainland in the Screen Bank? Screen Bank conference, correct, on the East Coast. What's the kind of gist of that in terms of how would it affect the play? Definitely, like I touched upon, that could be another source of funds for us outside of our current GEMS bond. We could definitely draw upon that. Because the way our GEMS bond is structured is not a revolving account. Basically, once the money is dispersed and repaid, we're not allowed to re-lend the money. The money that's paid back is returned back to the PUC. There is a definite end date for the funds that we have in place. But because of the success that our program has had in the past few years, we're not asking what's going to happen when the money runs out. We're going to have access to more money. That's the challenge that we're having is finding either through more appropriations from the legislature, perhaps, or other sources of funds. Like I mentioned, you could possibly, if the Screen Bank program does get off the ground, that could be it. So as we look forward here in Hawaii with what we have in terms of our bond and things like that, what are some of the things that your office is looking to do with the legislature and the PUC to expand the program or to make it... Maybe somebody has a wind project or something that's not solar. To adapt those technologies or different criteria or maybe even larger, not necessarily underserved, but maybe more marginally served. They're not really... Don't meet that criteria that you initially set, but maybe just above them, it's still kind of tough to do. I mean, even from medium family income, it's tough to install. As the incentives start to go away, the net metering goes away. What are some of the things that you folks are looking at in the future? Yeah, definitely. We're always in discussion every year on how we can enhance our program, expand our program. Like I mentioned to you, one of the challenges of our program is that our general bond fund is a depleting fund. Eventually the money will run out. One of our goals is to find alternatives for funding. And we are working with the legislature to find out what's the best way to add money to our program, to extend it past its end date, whenever it may be, when the money does run out. We definitely are working with key legislators to draft the bills that would allow this program to live on past. So the program's about five years old. And so that bond has been out there for five years or so. And you have an end date out in the future where you've got kind of a target where you have to have future funding lined up? Yeah, so right now of the $150 million, we've committed about $90 million of that. Okay. Yeah. So right now we have about, I would say $30, $32 million left to lend. We're not quite in that critical level yet, but we do have to consider that the money is not going to be different. We definitely are looking to ways to expand the program. So if it's a bond then, and you've got 90, you've got like two-thirds of it loaned out right now, the part that's not loaned out, have those bonds actually been sold and are people expecting a return on an investment? Yeah, so we have been paying interest on the bond since it's been issued and all that. So part of the repayment is from the interest on the bond being paid through the repayment of our loans of the fund that we lend out. But that was always, it was critical to get the program off as quickly as we could. There was a delay at first, but now I think we've got some good momentum. We are looking at the success of our on-bill program. Definitely drawing upon that. We had a big influx of applications, especially on the residential side. Every single on-bill program was fun. And we're very thankful for the work that everybody put into this program. And just to mention, on the national level, we have been recognized for this on-bill program. I believe that we're probably, I think, the first in the nation to have this type of financing available. And people were impressed by it because it's the ability to be inclusive and comprehensive. So I think it's something that we should be proud of. It surprised you when you said there is 90 million out now? Yeah. That's a huge improvement. Well, committed. Committed, yeah. These PV projects, especially on the commercial side, they're a construction project. So they went stages and steps and all that. So we don't necessarily disperse the full cost up front. But it is committed. But that's still a big improvement over when the program started. It was kind of just slow rolling for a long time. And I know that the people who have the bonds out there are going, hey, wait a minute, we're not loaning any money out, but we have to pay interest on these bonds. And the challenge is we do have to balance the needs. We need to get the money out as quickly as possible. But we have to ensure that the money that is out there will be repaid. So it's kind of fine balancing out. We're not a grant program. We're not there just to give out money. We have to have some level of assurance that it will be paid back. Correct. But with the on-bill program, because the obligation is based on the utility bill, we can kind of ensure that, yes, we will get paid back. So generally people, when they pay their monthly bills, electricity is just on the top of the list. So knowing that they'll pay their utility bill, which includes our loan repayment, we're pretty much assured that we should get repaid. Are there any specific pieces of legislation that your office is kind of looking where you need public supporting, you need public help from, or any dockets at the PUC that you'd like to kind of solicit public help, testimony, or contract yourself from the construction side? We're still in the early stages of crafting our proposals for the next legislative session. We just got through with our 2019 session. But we are probably looking at, definitely looking at different funding sources and perhaps looking for more money for our program. But it's always tough asking for more money and then it's just going to get tougher, trust me. Yeah, yeah, any program. But I think we've shown a level of success over the past few years that I think we can stand behind. So we're hoping that it will listen to us. But then again, we can't just rely on the state. So like I mentioned, we are looking for other sources outside of the state to help implement our current pool of funding. I'm just going to ask you an opinion question now. It's not necessarily GEMs related, but we've come up with our 2045 goal to be clean energy on our grid. And there's equally aggressive movement to clean our transportation sector up and get it probably electrified. Do you see Hawaii meeting that 2045 goal? I mean, the players that involved the PUC, the electric company, the transportation sector, Par-Hawaii, the oil refineries, these Hawaii gas, you see all of the players kind of coming up with strategic plans that are encouraging to you that maybe your program can help fund in other areas. No, definitely. I think there is a overall desire to get to that point. And it definitely will take working together of the public and private sector to get it done. But I'm sure everyone knows the government can't do it by themselves. And the private sector probably needs help from the government as far as regulation or permitting or that kind of thing in order to get their projects done. It definitely has to be a meeting of the minds. I do think it's achievable. It's going to take a lot of patience, a lot of hard work, a lot of sweat, equity to put into it to make it happen. But I think it is possible. Yeah, and I think people, they kind of see solar energy as free energy. And it's like it may be. In fact, I anticipate that the utility bills will start to actually go down as we move towards clean energy. The problem is the infrastructure we're using was built over the last 100 years and paid for over the last 100 years. And you can't just replace that overnight for free. But there is going to be an upfront investment to get us there. And I think my fear is that some of the players involved either aren't anticipating that fill up front or the legislature and the government aren't in a position to really help it. Like you said, the GEMS program was designed to give folks a leg up and get them started because they're the start of prospects. And I think we need to kind of look at that same concept on a larger scale. Maybe across the entire spectrum of income and income levels that we get everybody moving to help the infrastructure move forward. Yeah, there's no doubt that the initial upfront cost for a lot of these projects is high. If you look at the long term benefit of spending the money upfront, it should in a long run pay off. And that's the kind of the hurdle that we have to get over again. I'm sure the younger generation has that force, that site look past just the initial one, two, three, four, five years to say, yeah, in 15, 20 years it's going to be worth it. A lot of it would rely on the next generation I guess to help convince us older folks maybe that it's a worthwhile investment at this time for the future benefit. One of the power purchase agreements is one of the ways that people are trying to avoid absorbing that cost themselves upfront. Are they still pretty popular? They still are. The tax credits are still out there for the investors. These investors are their business people. They see the benefit of having the tax credit on the federal and on the state side helping them themselves. So I think there is still a definite appetite for these types of agreements out there. And one thing that is kind of sprung along recently is the sunsetting of the federal renewable tax credit. So that kind of incentivized a lot of these investors to get together and get projects off the ground before the end of the year does come 2021, 2022 the amount of federal tax credit will start lessing for this cost. Well, thanks, Ron. Thanks for being on the show today. Really appreciate it. Thanks for bringing us up to speed and what the state and team are doing. Glad to be here. We'll have to have you back in another couple of months and see if we can get the PUC to open their aperture a little bit or get some more folks included in your program. Thanks for being here. Thank you, Stan. Thanks for joining us today on Think Tech and Stan Energyman and I'll see you next Friday on Think Tech on the 8th floor of the Pioneer Plaza.