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EMILY KWONG, HOST:
You're listening to SHORT WAVE from NPR.
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DAN CHARLES, HOST:
Hello, Short Wavers. Dan Charles here. And I am joined by Julia Simon, an independent journalist in California. Julia, welcome.
JULIA SIMON: Thanks, Dan.
CHARLES: I saw that you took a trip to Hawaii recently but not for the beaches.
SIMON: No, it wasn't for the beaches; it was for the sun and the wind in a very different way.
SIMON: OK. Basically, if you know me, you know that I nerd out on utility regulation. It's not everybody's favorite topic, but I promise you, it is very exciting.
CHARLES: So you went to Hawaii to look at power plants. I got to ask you - why did you have to go to Hawaii for this?
SIMON: It's really about the people behind the power plants. In many ways, Hawaii, they hope to be what they call the postcard from the future, and what they mean by that is they are on a mission to get their state off of fossil fuels.
CHARLES: And we're going to need that clean electricity for our transportation, for our home heating, manufacturing, all kinds of things. So basically, the future of the planet is at stake, and you found a path to a better future in Hawaii.
SIMON: Yes, it's very important. The issue is, is that we've been doing things the same way for more than a hundred years, and that's why Hawaii's regulators are trying something new.
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CHARLES: Today on the show - how Hawaii is fighting climate change by pushing the state's power company to make clean electricity. It's throwing out what's been standard practice for decades. And guess what? The power company says it likes it. You're listening to SHORT WAVE, the daily science podcast from NPR.
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CHARLES: So, Julia, I remember back when the Biden administration first came into office, it promised to cut the country's greenhouse emissions in half within 10 years, and the centerpiece of that whole effort was a program that would pay electric companies to make that switch. But that apparently is not happening?
SIMON: It isn't happening at the moment. But we have an issue in America where 60% of our electricity comes from fossil fuels. And we're going to have to get renewables online, and the question is, how do we motivate utilities to do that?
CHARLES: Right. So you, you're sitting there in California, and you're thinking about this problem, and you say to yourself, I hear that there is a possible solution in Hawaii. Is that pretty much how it played out?
SIMON: That's basically how it went down. I heard Hawaii, Hawaii, Hawaii - a lot of people kept saying, Hawaii, Hawaii, Hawaii. And I said, man, time to book a ticket.
CHARLES: And what did you hear about Hawaii?
SIMON: So essentially, what's going on in Hawaii is regulatory reform, which doesn't sound interesting. It sounds so boring. But I'm telling you, it is where the juicy, juicy energy transition lies. And, you know, you have these regulators who are saying very loudly that the way we regulate utilities, the way we've been doing this, it's just not working; it doesn't fit the era we live in. We have climate change. We need to get more renewables. We need to build infrastructure for electric vehicles and get home solar - all these things. They're like, this system that we've been living with, it's not fit for today.
CHARLES: So let's start with the specific circumstances in Hawaii because it's very similar in, you know, a lot of the country. As I understand it, wherever you live in Hawaii, you get your electricity from one company, right? That company is a monopoly.
CHARLES: Why is that?
SIMON: Yeah. I mean, most of Hawaii. There's one island where it's a little different. But basically, the state has monopoly utility - Hawaiian Electric. And that's not unique. Most Americans get their electricity from monopoly utilities, and the reason for that goes back more than a hundred years to when America first got electricity. There were all of these different companies competing, competing to power America, and at some point, this electricity mogul, you know, with an interest, said, wait a second, people; what if one company provided power to everybody? It's more economical. It's safer. And essentially, this idea of the monopoly utility was born.
CHARLES: But then monopolies have all the power. Consumers can't go anywhere else to get electricity. So I guess that's why states have set up regulatory agencies, like public utility commissions, to approve electricity rates, make sure the utilities don't rip off consumers.
SIMON: Basically, the idea was keep the utilities in check, make sure that they didn't abuse their power. So it wasn't just a monopoly utility; it was a regulated monopoly utility. And it's a structure that we still have today.
CHARLES: Sounds sensible on the face of it. What is the problem with that system when it comes to, like, making this switch to get off fossil fuels?
SIMON: Well, I guess the problem comes down to the way that these utility regulars regulate, right? So part of their job is to set rates - how much we customers pay for electricity. But the other part of their job is to figure out the profit structure for these utilities. And back at that time, they came up with this profit structure that was basically incentivizing the utilities to build lots of infrastructure - lots of power stations, lots of electricity lines.
CHARLES: Right. Regulators usually allow these utilities to charge consumers enough to cover the costs of building new power plants or whatever and make a profit. But what that means is the more they build, the more money they make. There's no incentive, really, to shut down a coal plant or get consumers to use less electricity or install solar panels.
SIMON: Exactly. Not at all, not really.
CHARLES: What is it about Hawaii that, you know, made them push this faster than any other state?
SIMON: Well, Hawaii's state Senate and Hawaii's governor, they all were really on board with this goal of getting to 100% renewables. Hawaii is actually the first state to set that goal. And they want to get to 100% renewables by 2045. The issue is today they are still at 77% of their electricity comes from oil, some coal. But the question is, how do we motivate the utility to get there?
CHARLES: So they have this really ambitious goal. And I guess this is the question - how do you get to it?
SIMON: I went with Commissioner Potter - she's one of Hawaii's utility regulators - to this gorgeous solar farm. It's up on a hill. It has a view of the Pacific. It's just up from these gorgeous mango trees. And, essentially, this solar farm was built by a solar company, not the utility, right? The problem was that it took about a decade to get the solar farm connected to the grid to get it up and running.
CHARLES: So the utility was kind of dragging its feet on this.
SIMON: Exactly. That's what the solar company told me. The issue is that there was no real incentive for the utility to get solar like this - solar that the utility didn't actually build - onto the grid very quickly. So what Jennifer Potter was saying is we need something new. We needed to do utility reform to basically upend years of precedent and give the utility a new model to meet these climate change goals.
CHARLES: So you're saying they wanted to come up with a system that would allow the utility to make more money by making this switch by bringing more and more solar or doing all kinds of other things that might help reduce greenhouse emissions. That is what they're doing?
SIMON: Yeah. They're basically making a model that will motivate the utilities to achieve these climate change-related goals, right? We all need incentives, and that's what the regulators are doing.
CHARLES: Give me some examples. What can they do now to earn money that they couldn't do in the past?
SIMON: Well, essentially what the regulators put in place was this carrot-and-stick structure. So they came up with these goals - the regulators - and they got these community stakeholders. They all drafted this vision, essentially, of more renewables on the grid, faster hookup times for solar, more electric vehicle infrastructure. And they said, OK, utility, if you meet this goal, you get a carrot; and if you don't, sometimes you get a stick. So essentially, we're talking about big bonuses. So if the utility, for example, gets lots more renewables online, they could potentially get a $15 billion bonus...
SIMON: ...By 2023.
CHARLES: That's significant money.
SIMON: That's a lot of money. Yeah.
CHARLES: Tell me, what does the utility think of this? Is it possible for them to earn more money going green?
SIMON: They think they can make money this way, but importantly, their investors do, too. The utility got an upgrade from Moody's, from S&P and from Fitch as soon as these reforms went into place, and even right before these reforms went into place, because...
SIMON: Yeah. These investors - they told me, you know, ultimately, the old model takes utilities down the wrong path when it comes to climate change and the green transition. And they say that ultimately this new model can set the utilities up better for better profits and income.
CHARLES: Yeah. It almost sounds too good to be true. I mean, you know, you're saying that the utility can go green, can spend the money it takes to make this transition away from fossil fuels, and it won't cost the consumers any more money, either?
SIMON: Yes. I mean, so far, it's looking pretty good in Hawaii. The utility is achieving their goals. There's still questions on the horizon. You know, they have to shut down coal plants. There's worries about, will they be able to use renewables and storage to make up that. But the utility says that they have plenty of extra capacity for that. And so far, everybody I talked to was very optimistic about the direction that Hawaii is going.
CHARLES: You know, across the U.S., there's - you know, much of the South - there's a big chunk of the United States that has a similar structure - a regulated electric monopoly. Are other states thinking of doing things that are similar to Hawaii?
SIMON: Oh, yes. The utility regulators in Hawaii - their phone is ringing off the hook. A lot of states are looking at Hawaii, at this, what is called, performance-based regulation model. And they're saying, we want to do this; we want to do this top-to-bottom restructuring. And I should say, for decades, states have done, like, little piecemeal bits. New York has done parts - Rhode Island. But what Hawaii is doing is really taking it soup to nuts. And so, yeah, a lot of states are looking at this and thinking, we are interested.
CHARLES: You know, as you got on the plane (laughter), flew back to California, did you leave Hawaii feeling more optimistic about what's possible - skeptical? What was your reaction?
SIMON: I think for Hawaii, I'm definitely optimistic. But the question is, how will the lessons of Hawaii apply to other states? And ultimately, I think the important part of the equation in Hawaii is the fact that the commissioners are really independent from the utility, right? And the issue is that, across the U.S., you have a lot of utilities using fossil fuels. But whether or not those regulators will get their utilities off of fossil fuels really comes down to whether those regulators are independent or not. You know, you have a lot of regulatory capture, which is pretty much another word for corruption. And so I think that, ultimately, if we're going to get utilities off of fossil fuels, these regulators that are supposed to keep the utilities in line - they got to be doing that.
CHARLES: So pay more attention to the public utility commission in your state, I guess.
SIMON: Pay attention to these people who most don't know about, who, I would argue, are very, very important for the green transition.
CHARLES: OK - public service announcement. Get to know your public utility commission.
SIMON: Yes. Yes.
CHARLES: Thank you so much, Julia, for bringing us this story.
SIMON: Thanks, Dan. It was so fun.
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CHARLES: This episode was produced by Thomas Lu, edited by Gisele Grayson and Stephanie O'Neill and fact-checked by Indi Khera. The audio engineer for this episode was Gilly Moon. I'm Dan Charles, and you've been listening to SHORT WAVE, the daily science podcast from NPR.
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