 Okay it's Monday and that's Steve Holmes and I'm Jay Fiedel and we're talking about energy 808, the cutting edge, wow. And today with Steve, hi Steve, say hello Steve. Aloha. Yeah, former city council, former energy person knows a lot about energy, knows a lot about who honua, which is the project in the Hamakua coast there, which recently, I don't know if it's too early to say this, but it failed, it's gone, it's not happening. So Steve, let's try to educate people on what happened from an energy or I don't know if renewable energy is the right frame of mind, but an energy vantage perspective on this. It's been gosh, it's been well over 12, maybe as close to 15 years as this thing has been cooking around in Hamakua. So what was it about and what happened to it? Let's begin at the beginning. So it really started back in 2008 and they formed the group who honua and then they sought an exemption or a waiver from the competitive bidding process before the public utilities commission and that should have been kind of a red flag right there. The commission had adopted a competitive bidding process in 2006, about two years before and here they were already flashing a waiver for a project that was really quite expensive. Yes, okay, so that you begin with that, that it's got a waiver but for an expensive electrical supply and a lot of investment though too because this was this was what biomass, what was this, what was the special source of this project? Yeah, it's all about trees, Jay. They wanted to do something with all the trees they had planted on the Hamakua coast after sugar went out of business about 30,000 acres. They attempted various tree harvesting operations shipping it to Japan and China. Those were unsuccessful. I remember wood chips. Do you remember wood chips? Yeah. Wood chips out of the harbor there in Kauai High. Then one day there's stacked this huge pile of wood chips. There's probably 50 feet high, maybe 100 and it started burning by some kind of spontaneous combustion and the whole thing burned up and that was the end of the wood chips but it showed you how many trees we have on the Hamakua coast. We have a huge supply of trees. Do we need to harvest them? Was it necessary to do this? Why don't we just leave the trees in place? Isn't it better to have an environment with living trees? Yeah, just from an economic standpoint, we're getting solar now at around eight cents a kilowatt hour with no fuel cost adjustment at all. This project wanted about 14 cents a kilowatt hour just for the fuel adjustment plus another 22 cents a kilowatt hour for the basering. Way overpriced. We need to find something else to do with trees than to try and make power out of it. Nobody likes the idea of cutting trees down anyway but cutting them down and then burning them that's a further problem especially if you're trying to do carbon reduction of carbon emissions. What's interesting is though that perhaps it was a vision question, did these guys see into the future? If you're an energy, don't you agree Steve? You've got to see into the future. You've got to see where it's going and I think they were maybe looking backward instead of looking forward. What's your thought about that? Well there's been a lot of regulatory changes as you know Jay. The Ratepayer Protection Act has passed. They've adopted a new framework as a result before the PUC and how to judge projects and look at utility reform during the same time period that they were coming in for this project next era made a bid to take over Hawaiian electrics. So there's a lot of bad timing issues and then it got tied up in litigation. At one point they had 28 outstanding legal filings going on. They got into a bad issue with the contractor that was building the project. They got into a labor dispute. Things really got ugly and it just dragged the process out. The more years that went by the less that this whole project made any sense at all. Well speaking of lawsuits, I did see the complaint that was filed by Pujo Nua against I guess everybody on the block about Sherman Antitrust Act which that was really a spectacularly long leading. And that was like wow who paid for that? That has to be one of the most expensive you know complaints I have seen and it looked pretty sketchy as a matter of fact just reading it quickly. What about that Sherman Antitrust Act suit? You know so the US District Court would agree with your opinion Jay that it was pretty sketchy. They didn't buy the basic premise that this was somehow a conspiracy theory on the part of Hawaiian Electric and next era to push them out of the market so that they could come in with their own project and you know they were finger pointing at Hawaiian Hama Kua Energy partners which got acquired about this time. That was an old NAFTA plan. They've since been converting it over to biodiesel. So they kind of felt like the fix was on or that felt they were trying to spin it in court. The court didn't really buy it but after a long time they agreed that Hawaiian Electric would actually support a renewed waiver request and that they would come back in through the PUC and the PUC granted it only to have a challenge all the way up to the Hawaii Supreme Court where it lost. Yeah well that was a life of the land and Henry Curtis wasn't it. He challenged it on environmental grounds a few years ago saying that this would probably have a deleterious effect on the environment. What was the nature of his claim to you Cole? So he won on two specific items. One was a clean and helpful environment which mirrored a decision that Miko had to deal with Sierra Club lawsuit on a similar type of issue where they were burning coal in the old sugar plant and they weren't looking at greenhouse gas emissions and state law required the greenhouse gas analysis. They didn't really do one for this project. They just made some big statements about being carbon neutral because it's trees blah blah blah and didn't really do true analysis and so the Supreme Court basically tossed it out and at that point they remanded it. They remanded it. They wanted further proceedings to examine the environmental issue on emissions I guess. So the latest is that the PUC decided to toss the waiver and so without the waiver from the competitive process there's just no way that this project is ever going to come back and be competitive. You know we're looking at solar now at 8 cents a kilowatt hour. I mean they just can't compete with it. It's just the market. Well then this is all intertwined. The Big Island is like a special three-ring model. This is all intertwined with the Pune geothermal venture which tells us that when they come back online or maybe there's already a PPA here I don't know when they come back online it's going to be cheaper still, right? So the PPA for PGV is going through renegotiation as you know. Previously it was pegged to the price of oil so not much savings for ratepayers there but now that it's being renegotiated without PERPA and Public Utilities Regulatory Policy Act so it's going to come in at a much lower price tag but that still has not become public. I've heard numbers but those are not public numbers at this point. In the meantime they had both the eruption that surrounded the plant with lava flows destroyed the substation cut off the power lines islanded the plant basically and it changed the resource previously when they were using their wells it was a water dominated resource a brine dominated resource with a smaller fraction of steam and now it's a steam dominated resource indicating that somehow the plumbing got changed to depth with the intrusion of magma underneath the power plant and so they're they're having to move wells previously used into a re-injection model category under the UIC or underground injection control program through EPA and then they're also looking to bring in totally new equipment in order to produce power to resolve resource changes so it's real questionable whether or not they're going to be able to drill new wells and actually meet objectives that they've laid out in their power purchase agreement. Why from an economic point of view or an environmental one? No, no just from a pure geology standpoint. It's real clear that with the changes underground people tend to think of lava flows on the surface but anybody who's studied geology like I have knows that most the activity is going on underground and even today lava is moving into the lower east rift zone we're seeing what's called inflation in the area below but above where the power plant is all of those things mean the ground is very dynamic the resource is very dynamic so it's tough putting a power plant on the most active volcano in the United States in the most active rift zone of that volcano. That's a quotable quote Steve. That's a quotable quote that could have been you know a basic truth back in the 90s even you want to put it on top of that you know you're going to have instability you know that. Yeah so they got lucky for a long time and we avoided a lot of oil as a result I mean I don't hold that against them I think that was a good thing but going forward we're looking one of the categories that we're looking at is resilience well what kind of resilience do you have when you're parking a big chunk of the power supply for the entire big island on this active volcano that's clearly showing you know Ellie's been doing a lot of dancing lately and it's going to cost them a fortune to get back to productivity and then they don't know if they'll be able to carry it forward they don't know if it's resilient and so what you have is a supply that may not be reliable. Yeah that's right and once again with new competition coming into the marketplace what are called truly distributed energy resources an old central power plant like PGP with large transmission and distribution costs some of the power lines go through albizia trees that are notorious for coming down storms all of those things you need to take a good look at and balance in the energy scales of the speak. It troubles me though because what I hear you're saying you know infillillier is it's all about solar it's all about solar you know when you finish the the trees in Hu Honua when you finish PGV it's about solar now you can get a good price on solar these days especially with you know with storage is that it don't we have more can't we diversify it. So when PGV went down the PUC moved ahead the point electric moved to add with a competitive process a phase one and they went out to bids to replace PGV and the solar projects two 30 megawatt each with four times that in terms of megawatt hours and battery storage which is pretty significant got approved by the PUC so those are happening they'll be online within the next couple of years solar goes in much faster than some of these other projects do just by their nature and they provide grid support, voltage support, a number of load shifting features that you don't get with a central power plant but the other alternative that's still quite viable is wind and Parker Ranch did some wind studies along with Siemens and these are grid quality studies so very good studies and NREL had already previously identified a world-class wind resource there between the mountain on a KF and Huau Wau Wau Wai Err excuse me not Huau Wai uh Kohala mountain and on Parker Ranch properties and where the cows probably aren't going to mind a few wind mills and that resource alone could provide all of the power for the big island and so he reviewed that I mean we had South Point South Point had a very early wind a lot of turbines down there back in the oh my gosh it must have been the 70s or the 80s maybe and and they were abandoned and they were an eyesore and everybody was ticked off that the developer never took them down or you know kept them going and then there was uh what is it the uh the ranch there Kohala in the Kohala mountains uh to top the mountains inside a kind of bowl I remember seeing it these have horseback riding up there I rode I rode horses among those windmills this is also maybe in the uh in the in the 80s um beautiful beautiful location you could not even see the windmills from outside because they were in the bowl okay I want to say a newer ranch there was a there's another ranch that was inside the Parker Ranch Kahua Kahua Ranch right yeah it was beautiful your good buddy Mitch Ewan has done a high-engined project we got to talk to him about this so you know and that also was abandoned I don't think that's functioning right now no both both the windmills are uh wind uh farms are working both uh Tal Hurri took over the one in South Point and they've put in new machines now they're quite as big as the new new ones that are on the market today they're bigger than what was there before and then uh also Hawaiian Electric is moving ahead on a large standalone battery storage system uh about 12 megawatts that's going to go in a cable way just above the airport there in Kona so they can handle uh the bars the variability of wind power that's on the creatine putting it into a large storage system and Kahua is operating now yes now what about the one right next to the coast guard there at Upodo that's the one I'm talking about I'm talking about near near the water no the one that's operating is up in Javi it's between the town of Javi and the old Upola Point airport yeah we're talking about the same thing yeah right yeah well that's that's encouraging to find out now is there a public resistance because Lord knows here in Oahu there's plenty of resistance about wind which I I do not fully understand in fact I don't understand it at all frankly um but what about the big island are people behind wind so Parker Ranch uh is a keeper of the economy in Waimea town and um they did a lot of PR work they went out to the community and worked hard and where they're proposing putting wind is well away from the town itself um Kahuku which used to be part of my council district on Oahu the windmills are really really close to the school close to Kahuku town well that's that's Oahu Oahu it's all incredible yeah yeah a million people on a much smaller piece of land than the big island so the big island's got room to put a project like that in where the visual impacts are not going to be as significant as they are on Oahu so if you had to make um there were completely objective rational cold-hearted choice between wind and solar what would you choose so my inclination on the big island is to start thinking about micro grids and not focus on just technology um it's geographically diverse as you know Kahuku which has the wind farm has no other type of energy generation and so if it gets cut off then those electrons but Kahuku has tons of solar it's dry the sun is always shining why why not just put solar in there with batteries wouldn't that be a better choice for that location yeah so they tried to put a solar project um in on some residential properties and it was kind of a shady deal and it basically went nowhere hit a lot of community opposition but you're right you should get away from the mountain get away from Montaloha and get down further into the flatter area she got a great sun down there so um you could put a micro grid together including battery storage wind and solar that would meet those community needs so I think the island should be thought of as a series of smaller micro grid projects yeah and maybe wind fits better in some places some locations and others you know one of the things that troubles me about wind is the same thing you were mentioning about about PGV you could have a wind storm extreme weather call it climate change weather right and that wind blows a what do you call it a couple of on the top it blows the turbine right off the stand which happened actually in Uluapalakua a couple of years ago it knocked off one of the one of the turbine devices and I think you got to be careful of that and you got to choose your location carefully so that you don't lose a multimillion dollar investment because it wouldn't necessarily be just one turbine it could be a whole field of turbines if that if the wind came down the plane so to speak um so who's so what what else is there in in the big island I guess that's it wind and solar that's the future right well at Nelha they're still looking at Otec my personal feeling is Otec still very expensive they've been looking at Otec since 1912 I think yeah and they've recently gotten some additional grant funds to put in another Otec they started out with mini Otec which was a floating barge system I remember now they're putting in one that's land source but the airport and Nelha are right next to each other and the airport's moving ahead uh under strong lead standards and they're looking to retrofit expand the airport and make it more energy self-sufficient so putting Nelha and the airport together is a microgrid project really could be very attractive so why do you say microgrids are attractive at all is it because you don't want to spend the money for cabling them all together and it's because it gets expensive to cross the island crisscross with cables and if you and not only that but you degrade in the in the electrical signal over over long distances but am I right about that what what is the reason that you like a microgrid yeah part of it is you really don't want those electrons to travel too far or you start seeing a lot of loss you're paying for electrons under the grid but then you're losing their value the further away from the power generation you get so breaking in microgrids makes a lot of economic sense and we're looking at incentives now before the puc to encourage microgrid development so maybe that's the thing in the future isn't it as long as you have storage and so it's going to be dependent on whatever kind of generation system you have you have to have storage especially look look how well kawai is doing k i you see using that approach on source but why why are you interested in this Steve I mean you have historically as a career you know you've had plenty of time and energy why now is it is it a hobby or you want to run for office what is it you know I've I've spent my time in public office thanks jay you know I'm the father of the hawaii energy code I uh worked with Howard wig my good buddy and he was having no luck getting it through the state legislature so when I I got on the city council I put my energy geek factor at work and I passed the first energy code for Honolulu and it's been nice to see Howard get it amended recently in upgrade and I continue to work on a volunteer basis jay and energy projects I've been working with I've given against Lee who's very pro climate change some of the state facilities here could benefit from what's called energy saving performance contracts it's a third party financing mechanism where you can harvest savings out of state buildings reduce costs and create jobs in a pandemic economy so and I've also been working with hawaii county to do the same thing they have an an energy coordinator position with within county r&d and they're looking at doing a county wide energy saving performance contract much as Maui is doing now and also Honolulu. Honolulu has a very aggressive one jay that you should have somebody on your show talk about because they're looking to convert all of the wastewater treatment plants which are big energy odds converting them over to code generation and basically shedding those giant loads off of the grid they're one of point electorates and biggest customers and so making those energy self-sufficient is going to have a big impact the grid towards honor for that. That's great there are so many issues you know there statewide and so many possibilities a lot of a lot of these possibilities like OTEC has been they've been sort of clogged in the pipeline as offshore wind is clogged in the pipeline but you know it's nice to see that you're looking at this and I and I hope we can circle back and get you on our Wednesday show with Mitch Ewen and talk about you know everything really especially the big island which I consider more of a laboratory than any other island really but let me let me return back to the lessons of who Honua because I wanted to cover that with you there are a number of lessons and and if you put yourself in the shoes of the developers of who Honua which is now pretty much Marquet you know what what what what what do they what do we learn from that experience my recollection is they spent 350 big ones on that and their investors must be very sad about it and what you know very very sad about it what what can we learn from what what happened I suspect you're gonna see an awful lot of lawsuits I know you're you're a lawyer by background and I don't think anybody will be terribly surprised if lawsuits start flying left and right I've I've been quite frankly very careful in what I say today in your program because I would like to keep out of out of the way of that type of a lawsuit but you know they're they're able to write off losses federal laws allow for a certain amount of these types of costs to be written off um there's a single my understanding was there was a wealthy woman who was involved in this project so I I don't know how much money she has how much of an impact this is going to have on her personally but to move ahead and spend a whole lot of money Jay without having a power purchase agreement in your back pocket seems like a pretty risky venture to me that's just my personal view but the solar projects for instance that have been approved by the PUC most recently are moving ahead they they're waiting until that power purchase agreement is approved by the PUC before they move ahead on construction I think that's a wise approach for anybody in the energy business is to you know have full disclosure about what your costs are going to be with the PUC decide do all of the permitting that you need to do get your environmental assessments out of the way bird studies bat studies all of those types of issues that are out there so expect to spend some money do some time on those types of things but it is a good market to move into you know because of our avoided cost being so high well isn't a good time now you know I wonder where in COVID the economy is in the tank I think you know a lot of observers would say it's going to stay in the tank for a while months years who knows what one one said don't expect to to recover an economy in the state until 2028 whether whether that person is right or not as an open question nobody nobody really knows a query is it worthwhile now starting a big or even a middle-sized energy project now renewable and doing the right priorities which they didn't do in Huanua but is it just is this a good time or is this a good time to wait you know I I think the fact that they've already gone out with phase two and the other two projects are twice the size of the phase one project so they're 60 megawatts each so we're looking at a total of 180 megawatts plus 700 and I'll let you do the math 700 and some megawatt hours of battery storage so they got a good response I think investors are looking for a safe place to invest right now this this solar tax credits are still available depending on how the outcome of the election is Joe Biden for instance has got a very vigorous climate portion in his campaign if he can get support from a senate in the house to get it passed I think it could be an exciting time and because a power purchase agreement is a form of third-party financing jay and it can take advantage of historically low interest rates that are available today money's just really cheap that was a good time to do infrastructure so I'm actually encouraged and I think solar prices have dropped recently so I think that's another encouraging sign in the market both solar and battery prices continue to drop yeah and the other thing is that you build stuff and that means jobs for people a lot of people are you know getting jobs and getting paid it helps even when there wouldn't otherwise be an economy so we only have in fact we're out of time but let me ask you one last question I really appreciate your thoughts on this as well you know the public the public are so fickle honestly and they're fickle with energy sometimes they love it sometimes they hate it if it's in the backyard they truly hate it um and and then I think a lot of people don't realize that in the end we are going to have to have renewables it's not just a theoretical target to be resilient in this state you have to have renewables but I wonder if you could take a minute and just tell the public what you would like them to know what you would like them to think about the subject of development developing energy in oil yeah it's really a pocketbook issue the more we're stuck on imported oil the sooner we get off it the more we start seeing savings we're literally sending billions of dollars out of our hawaii economy every year in order to pay for oil imported oil and that has a multiplier effect in our economy and so the faster we get off of oil the better and so we want to see rates go down because those rates have an impact on everything we buy as consumers when we go in the Walmart store and they have freezers and we're buying frozen peas out of that freezer we're paying an energy cost that's embedded in everything that we buy in the economy and so when those costs go down that benefits all of us as consumers and it affects all businesses as well it's a big cost for them and so we need to make that transformation happen sooner than later there's every indication that the big island could get to a hundred percent renewables by 2030 15 years ahead of the state mandate for a hundred percent renewables and i i think given that the high costs of energy in the big island the sooner we get there the better so i would encourage people to take that bigger view which you said but it is important always to keep in mind a community opposition and to try and work with communities in Waikaloa for instance the Waikaloa village association owns the land where one of these solar projects is going so they're getting lease rent monies so this is a huge boon to them they need money to pay their interior roads or provide improvements to their clubhouse or whatever they need wind is going to be able to provide that without having to see their monthly maintenance fees go up and so there's those types of benefits so anytime you make the pitch for the project you've got to find a way to get buy-in from people i i did a wastewater treatment plant project in Honolulu and at the end of this presentation where we talked about this energy performance contract and millions of dollars of the safe taxpayers the very board employees looked at me and said well what a week it is and that's the problem isn't it so then i i talked about how we were going to be able to replace the aging air conditioning system and air conditions and additional areas in their workspace and suddenly everybody got all excited and the whole room and the attitude changed so you've got to be a good salesman jay you really have to find people where they are and reach out and touch them in that spot and to make things happen but for my friends who are environmentalists and they're complaining about an offshore wind project and those little blinky lights 14 miles off the coast i have a little sympathy for that you know as environmentalists we can't say that we want this as part of our future and promote it and the first time a project actually comes along we complain about those LED lights on 14 miles off the coast that just doesn't wash people have to find some middle ground area yeah it's very important to the state well steve it's great having you on the program really this has been very helpful and educational and i do want to circle back with you for more thank you so much steve home it's an honor jay take care below i'll take care i love you