Archive for December, 2008

Following up on the Hydrogen Fund

December 31st, 2008
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hydrogenstorage.jpgThere’s been some movement on the Hydrogen Fund. DBEDT Director Ted Liu set up a selection committee to select counsel to represent DBEDT in the negotiation of the Limited Partnership Agreement required by the Managment Contract executed by DBEDT and Kolohala Ventures last September.  Gerry Sumida of Carlsmith Ball was then selected and engaged in that capacity.

As a result, the paperwork, including the Limited Partnership Agreement, was completed on December 12th. A few days later, DBEDT presented Kolohala with the first check for the initiation of the fund – a check for $2.8 million. So things are actually happening.

The architecture of the 10-year Limited Partnership Agreement is that it outlives the Management Contract. The Limited Partnership Agreement has cognizance over the equity portion of the contract, and in that regard DBEDT and Kolohala are partners.

Under the enabling statute, the state is responsible for the fund, but has now outsourced making the investments to Kolohala. A DBEDT Advisory Committee sets the strategic policy guidelines for those investments, but a Kolohala Investment Committee makes the investments pursuant to those guidelines. DBEDT is not on the Investment Committee.

Kolohala’s principal service to the state is to vet and find worthy hydrogen companies for these investments. While most private investors invest money to make a return, that’s not necessarily the case with the Hydrogen Fund – the primary interest of the state here is to grow the economy and develop a more secure energy future.

Kolohala usually handles private rather than public investments, so this is presumably new for it. Even in a noncontroversial relationship, that would have been challenging. What makes things even more interesting is whether Kolohala can attract additional investment for the fund. The state’s money is the honey pot, expressing the state’s policy that hydrogen is a good investment, and encouraging private investors to invest in it too.

In this recession, new investments don’t seem all that likely, particularly in view of the pressure that the Lingle administration has been putting on Act 221 tax credits. Likewise, it is unlikely that the 2009 legislature will add any money to the Hydrogen Fund or create any other energy investment fund.

There are two original initiatives for the fund.  One is a $385,000 hydrogen management plan, which is to be prepared by HNEI as a subcontractor to Kolohala and then presented to DBEDT for its approval. The other is the deployment of hydrogen buses at Volcanoes National Park. The federal government will put $1.2 million into that, matched by $1.2 million of fund money.

For accounting, there are two kinds of distributions from the fund – cost sharing, like the Volcanoes National Park project, and equity, like investments in hydrogen companies. Kolohala’s check for $2.8 million represents $1.2 million for the cost sharing, and $1.6 million on the equity side. The balancing of these distributions can be adjusted in later years.

The entire fund is $8.7 million. After the $385,000 for the plan, the balance is divided in half with $4.2 million to cost sharing and $4.2 million to equity investments. Under the contract, Kolohala will receive a 1-3% management fee on funds under management.

Who will get the equity investments is confidential. Kolohala’s investment committee has already vetted and approved some equity investments, but that will not be public information.

Ted Peck feels that this architecture should function well and is consonant with the original RFP and the Kolohala proposal, and that’s important given all the difficulties Ted Liu and DBEDT have had as a result of the recent Senate investigation. Peck hopes DBEDT can go forward on this and other energy funds in a less stressful environment.

Will DBEDT seek other energy funds? Perhaps when the heat dies down and after they get some “run time” with the Hydrogen Fund, says Peck. But given what happened and considering that Peter Carlisle is still investigating Ted Liu, that is not likely to be in the 2009 session either.

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What Hawaii can do for a better tech industry

December 28th, 2008
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newyear.jpgA few days ago, I asked some people what Hawaii can do for a better tech industry next year, and here are their answers.

ENERGIZE ENERGY

First, recognize Hawaii is already a contender, if not THE leader, in some technologies. What’s happening or in the works for energy here attracts envy and even awe around the nation and world. This ranges from algae-for-biofuel to wave energy to increasing the wind power useable on our small island grids to electrifying ground transportation with electric vehicles. Second, energize (forgive the pun) scientists and entrepreneurs who wish a role in this transformation and lure companies that prefer to operate in the clean, renewable, efficient-energy world of the future – sooner here than many other places.  Karl Stahlkopf – Senior Vice President for Energy Solutions and Chief Technology Officer, HECO.

We should stay the course. With the volatility in crude prices, especially the decline to $40, it would be easy for us to lose the sense of urgency we had when crude was $147. We’ve had a small reprieve from a crisis situation, but will we use it wisely? Crude supplies are not growing, world demand is not slowing, if we don’t face this fact, our children will be faced with it in much harsher terms.  Mike Gresham – Vice President, First Wind.

In the midst of the collective efforts in transportation and renewable generation, every business and household needs to get serious about energy efficiency. Thirty percent of the 70% of the Hawaii Clean Energy Initiative is in not using energy we would have used otherwise. This means compact fluorescent lights, Energy Star appliances, and solar water heaters. We all need to pay attention to our energy consumption to make Hawaii the Greenest Place on Earth!  Ted Peck – Energy Administrator, DBEDT.

EXTEND ACT 221

To get investment into the tech industry next year, the State needs to honor its policies. The Administration’s program on Act 221 is shameful. A tax credit has been passed, yet the Administration is trying not to allow anyone to take the credit. The investors are quite confused. In today's market, confusion means no investment. The industry will stall next year in Hawaii as investment and jobs move to states that are more transparent in their rulemaking.  Bob King – President, Pacific Biodiesel.

Tech is growing faster than any other sector of the Hawaii economy. If you compare tech direct spending, of $3 billion or 5% of the economy to construction direct spending of $3.5 billion or 5.5% of the economy the two sectors are somewhat equal. Why then would the governor choose to borrow $1.86 billion for construction spending while killing Act 221? The tax credits needed to stimulate this type of economic activity was $657 million from 2001-2007 including a projection for future unclaimed tax credits. This doesn’t even count salaries for tech workers, $63.6K for tech workers versus $46K for non-tech. So what Hawaii can do better for tech in 2009 is to get real and stop the Governor and the legislature from killing Act 221, a proven stimulus that is working.  Bill Spencer – President, HVCA

We need to unequivocally commit to tech by extending Act 221, and send a signal to the Mainland and the world that Hawaii is serious about tech and renewable energy. It is an absolute bargain for the state and is the ONLY proven tool for creating capital for tech companies here. Continued politically-motivated attacks on this key piece of legislation threaten not only future investment, but the entire emerging tech sector and all the jobs it has created. Further, it is the only way that Hawaii can finance its independence from imported oil.   Rob Robinson – Co-founder, Kolohala Ventures.

BE FRIENDLY TO SCIENCE

Hawaii’s elected officials should enact policies that encourage the growth of science and technology businesses rather than the negative message that Hawaii is unfriendly to technology sector businesses. In 2008 we saw state and county legislative initiatives that would ban certain types of agriculture biotech research and a county ban passed this fall on some types of biotechnology research. Legislative proposals banning research set a negative precedence and make technology businesses think twice about making new investments in Hawaii.   Cindy Goldstein – Outreach Manager, Pioneer Hi-Bred International.

LEVEL THE FIELD

Because Hawaii’s sales and use tax scheme is unique among the 50 states, it unfairly burdens local entrepreneurs who are marketing intellectual property for use outside of Hawaii. We should provide that the sale of IP developed in Hawaii is not subject to Hawaii excise or use tax. Amending or clarifying the law to remove this burden would level the playing field by allowing local businesses that develop, license and sell IP from Hawaii with a reasonable prospect of competing with their mainland counterparts.   Seth Reiss – Patent Attorney.

DIVERSIFY ALREADY

“E Pluribus Unum”, one out of many, is an apt motto to today’s economic situation. We must fund the development of many technology oriented industries, relying on brains not brawn, to render our future state economy strong.  Ron Baird – CEO, NELHA.

On Santa's wishlist for the tech industry, you'll find more investment capital, better technology infrastructure, and more students studying science and math. What we really need is a state-wide understanding that support of the tech industry doesn't come at the expense of tourism or agriculture. Tech can provide the infusion of innovation, a means to the goal of more effectively generating revenues from tourism without compromising our culture, and more sustainable ways to grow our food. We must set aside artificial boundaries, and work together to reach a more prosperous Hawaii.  Yuka Nagashima – CEO, HTDC.

An obvious specific is to continue Act 221/215. An obvious generality is to lower the tax and regulatory burden of these mostly small-midsized businesses. Beyond that, we must move our public policy away from our plantation era remnant overfocus on large historical industries. After all, a failure to diversify economic public policy will inevitably hinder our longstanding goal of economic diversification itself. As well, we must ask what our tech industry will do for itself in 2009 because, while it has a compelling story of success especially over the last decade fully justifying continued public policy investment, that story needs to be told much louder and clearer.  Ed Case – former Congressman.

PLAN AND EXECUTE

Our leaders should finally get around to mapping out a long-range plan for the development of a tech industry. By long-range, I mean math and science at all levels of education, steps to make people appreciate the importance of hi-tech for Hawaii's prosperity, and creation of a friendly environment to encourage tech talent to come here.   Larry Fung – former Hong Kong Councilmember.

We should begin developing a long term vision derived from serious study of other successful "island" economies such as Singapore and Israel and adapted to Hawaii. This would include a focus on three to five industries at most and begin with creating clean manufacturing opportunities around these industries. Then develop an investment plan in the corresponding knowledge and technical communities focused on these industries through the University of Hawaii Community Colleges and the UH Manoa College of Engineering to complement what is being done in K-12 STEM. These industries should include focus on renewable energy, recycling and re-manufacturing and coastal infrastructure to help build an economy around sustainability.  Peter Crouch – Dean, College of Engineering.

Adopt Hawaii Broadband Task Force recommendations to drive broadband deployment, maximize Hawaii’s connectivity to the world and stimulate broadband adoption and use. The value of such infrastructure for Hawaii’s 21st century advancement in education, health, public safety, research and innovation, economic diversification and public services is estimated at $578 million annually in economic benefits. Leverage federal funding for green technology to expand job creation/growth in Hawaii. Continue expanding innovation sectors like dual-use, aerospace industry R&D, creative media, life sciences, aquaculture and sustainable agriculture with Act 221/215 tax credits.  Carol Fukunaga – State Senate.

A TIME OF OPPORTUNITY

Hawaii has produced a Barack, a Brian, a Michelle and a Tad. But do you know Kawai, one of the many talented young women engineers changing Hawaii? Have you heard of companies like Oceanit, Hoana Medical and Nanopoint? Hawaii's emerging tech industry helps all of us; by diversifying our economy against new global forces we are only beginning to understand, by creating science and engineering companies so Hawaii kids can compete in a future we cannot yet imagine, and by proving that innovation is abundant at 78 degrees (average winter temperature in Hawaii). As the global economy worsens, Hawaii is poised to capitalize on the coming chaos, to become an innovation center - driven by vision, brains, and capital. The future is ours if we're willing to reach for it.   Ian Kitajima – Oceanit.

The Chinese believe where there is great risk, there is great opportunity. Hawaii’s major industries, tourism and construction, are again threatened. We have an opportunity to bolster our tech industry. Barack Obama is planning to invest in infrastructure; Hawaii is pioneering energy solutions; telehealth will make great strides in 2009; Hawaii still has Act 221; Hawaii is well-positioned to support broadband development; our tech companies are just as innovative as Mainland counterparts. We need to work together to establish technology as a viable, sustainable economic engine.   Burt Lum – Founder, Bytemarks.

“Success is the child of audacity.” Benjamin Disraeli, 1804-1881. 2009 will be a year of choices. I vote that the tech industry choose innovation over despair and clapping our hands over wringing them. Yes, it will be challenging, but we need to practice what Disraeli said and be a little audacious in our search for solutions and understand that adversity will make us smarter. Mary Fastenau – President, StarrTech Interactive.

ELEPHANT IN THE ROOM

These contributions have been edited for the ThinkTech column on December 28, 2008. More complete versions are here on the ThinkTech blog.  Thanks to all the contributors.

In any event, tech is certainly the elephant in the room. So let’s all wish and hope for success and prosperity for Hawaii’s tech industry next year.

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A New World for Tech and Medicine

December 16th, 2008
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telemedicine.jpgHMSA is rolling out its new online doctor service on January 15th and that's very exciting. It's a great idea and a great step for HMSA - kudos to them. It's a real blessing, and kudos to the guys who thought it up - it was a long time coming, but now we'll be way ahead. If doctors can have the benefits of telemedicine, then why can’t patients too?

This service will be groundbreaking - the first of its kind in the country. The web was made for this.  If it succeeds, Hawaii will be known for it in the nation’s healthcare industry. The company that’s doing this for HMSA is American Well out of Boston. It is inaugurating this service here in Hawaii.

The idea is that if you're not feeling well or you have a medical question, yes, you can go online or call a doctor yourself. Anyone, HMSA member or not, can log in or dial the service 24 by 7. You can also use a webcam for the conversation and see each other. Some 50 doctors locally have signed up to participate and more are expected. This is going to be great.

HMSA members will have a $10 co-pay for a 10-minute visit. Non-members $45. Payment will be by credit card. Doctors will get $25 for a visit, $40 for after hours. Members will pay $5 for each additional 5 minutes, nonmembers $15.  Considering the stakes and alternatives, that's not bad at all.

You can be home in the middle of the night and prefer not to go to the emergency room. Just go online or give them a call. You can be away, anywhere in the world, and get advice from a doctor or a specialist here at home. Sometimes you do need to physically go to see the doctor, but I'll bet an awful law of doctor visits can be better resolved, and quickly, online.

And it's not limited to a general practitioner. Just as easily it can be a specialist. You just go online or call someone from the list of participating doctors. Then they write up a narrative summary of what you presented and their advice to you and then they send it to you so you can give it to another doctor.

Think about it - this automatically does the record keeping. It gives you continuity of service, so the next doctor you talk with can look at your medical records and see what was said before. Patients can allow doctors access to their HMSA health records or their Microsoft Health Vault account.

This will save you the time and effort of making an appointment, waiting for the appointment, schlepping across town for the appointment and then waiting in a waiting room, when all you really needed to do was talk to the doctor for a few minutes. This should make you very happy. You have the chance at being healthier because you will have greater access and won't be deterred by the burden of going to your doctor when you don't think you really have to.

The doctor is happy not seeing you in person because he can be much more efficient and spend a lot less time with a lot more patients and help more of them and sooner. He's also happy because he's getting paid for the calls.

HMSA saves money since you don't have to go for an office visit every time. What HMSA will pay for the online visit is a lot less than what it pays out for the office visit. And if HMSA is happy about that, you'll be happy too since hopefully this savings will ultimately be reflected in your premiums. Perhaps best of all – the program will provide care to people who don’t have healthcare insurance but can afford the $45 charge.

This program certainly seems perfect for Hawaii, an island state. People on the other islands, who we know are at an increasing medical disadvantage these days, are going to love this - it uses tech to guarantee them an even playing field. It addresses the doctor shortage directly - if patients can get care online or on the phone, we won't need as many doctors to handle the patient load.

Downside? I had to think about this. First, the logical possibility that a doctor will miss something by not seeing you personally. The answer, of course, is that the participating doctor will hopefully be smart enough to figure out when he has to get you to come in. Second, the possibility that people will abuse the service and waste the doctor's time with stupid questions. The answer again is that the participating doctor will hopefully be trained to cut those calls short.

Of course, self-examination by a layman is not as reliable as a physical examination at an office visit, but in the pinch or from Timbuktu, it’s certainly worth trying to take a look at yourself and tell the doctor what you found. The webcam will help. The doctor can always tell you to come in for an office examination. When it comes to their health, people can be trusted, at least a little.

And they will have to come in for complex diagnoses, as in my favorite medical show, "House", on cable. But for routine visits and follow ups, electronic visits seem quite sensible and so much more efficient.

For my money, this is a great program and a great new era in medicine and public health. Let’s all try it out and make it work. I'm so excited about this that I'm doing a video interview of Roy Schoenberg, CEO of American Well, on the subject tomorrow. I'll post it on the Advertiser's video page to let you know what he says.

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An Apple in your future

December 5th, 2008
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apple.jpegMy friends have told me for years that I should move to Apple. I resist that and say no, that I’m a Microsoft to Windows person. I've trained myself in ASP.net and I wouldn't want to give up those skills.

At the same time I realize that I’m moving inexorably away from Microsoft anyway, little by little. After multiple tries, I stopped using the Visual Studio program environment for my websites . After multiple tries, I topped using SharePoint. I moved to Dreamweaver and Google documents, which both work great. I got off Explorer because it kept crashing, and I've since been delighted with Firefox.

Most recently I took a flyer on Microsoft OneNote, for the second time. I had tried it before and it didn’t work for me. But they came out with a new version and emailed me a trial promotion so I signed up for that. But that didn’t work for me either - it's not intuitive and it's not powerful. I stopped using it and it just sat on my machine for the trial period.

It gets worse. Then I got an email from Microsoft telling me that my trial period was over and asking me to spend the money and buy the product. I hadn’t used it so I wasn’t going to buy it, and I figured since it took a lot of space I was going to uninstall it to free up the space.

So I went to control panel and uninstalled the program. That's where I got in trouble. The uninstall didn’t work. It also somehow uninstalled some elements required by Microsoft Office. So Word failed, and Outlook failed. Mind you, this is Microsoft acting on Microsoft on a Microsoft operating system, like you can't blame anyone else here.

I had to find my original Office disk and reinstall Office from scratch. The reinstall didn’t work the first time. It took me a couple of tries (this never happens with Adobe) and in the process the truth came through - Microsoft has lost it.

Microsoft has also gotten over caring about how I feel. They've essentially gone away, moved on to other unknowable things. Me, they've forgotten. There is no way I can vent my irritation except to make this blog.

For me, Microsoft has failed on .Net, it has failed on SharePoint and it not only failed on OneNote but it has let me down even on the uninstall of One Note, like some crappy software cell from Vladivostok that doesn’t have the skill or interest to make a program that won’t foul your system on an uninstall. Tacky. The next promotional email gets deleted.

What happened to Microsoft? Its stock was down long before the downturn, going nowhere for like 10 years. Maybe there's a message there. Its products are dead in the water. Its new operating system, Vista, is so buggy that vendors charge more, and people pay more, just to avoid it and buy the previous operating system.

More and more, Google is eating Mr. Softy's lunch. Frankly, its not just that Microsoft hasn’t done anything, it's that Microsoft has quandered its platform, even in a time when software is so increasingly important. Having dropped the ball, Microsoft doesn’t deserve to rule the world anymore.

Microsoft has lost it. Its software leadership and connection with the user community have fallen way behind, and going forward Google, Adobe and other competitors, including open source applications, are going to take more and more of Microsoft's market share.

Microsoft was such a great pioneer and friend in the 1980’s and 1990’s. It led us into and through the early days of the net, but now regrettably iit's gone stale and lost its mojo.  At this point, if someone came along with a product that could replace Outlook or Office in the office setting, (a) I wouldn't be surprised, and (b) I’d go there.

It's a shame, but sell your stock. One of these days, maybe right after the recession, I really am going to buy an Apple.   I'm ready.

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Following up on the Hydrogen Fund

December 5th, 2008
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hydrogen.jpgIn case you're wondering, there's been no progress, no forward motion at all.

Believe it or not, the Lingle administration has still not provided one dime of the Hydrogen Fund. Now, they're into putting Kolohala Ventures, the winning bidder, through grossly bureaucratic hoops. Words can hardly describe it.

It's hard to believe that after two years, they're still politicking around on this issue, even when the Governor's principal initiative these days is all about renewable energy - an extraordinary and inexplicable disconnect.

Most recently, on November 30th, Linda Smith, the Governor's Chief Policy Advisor published a piece defending their inaction in the Advertiser, responding to an Advertiser editorial which criticized the way the administration has handled the matter.

In her piece, the Governor's Chief Policy Adviser indicated that the continuing delays in completing the management contract with the winning bidder, Kolohala Ventures, are "exactly what the Advertiser had called for".

Their argument is apparently that the administration has no attorney in the office of the Attorney General (which includes nearly 200 attorneys) that can review the contract and, cute, that the administration has to go outside, and through the procurement process (which will take months), to find an attorney who can review the threshhold contract.

Like they really don't have anyone to do this. Like they couldn't have dealt with it two years ago, when the legislature created the fund.

First, the continuing scandal over the way DBEDT and Ted Liu mangled the selection process for the manager of the fund. Now, an indefinite and retributive delay, with absurd explanations to boot.

The result - no contract, no manager, no fund, no nothing. Kolohala is being punished for applying. The Senate is being punished for investigating. We, the state, are being punished in our hopes for a cohesive tech-energy policy.

A stunning irony is that the Governor is at the same time crowing about the OTEC deal she ostensibly organized for Lockheed Martin. One of the technologies used in power generation with OTEC involves hydrogen as a storage system. I discuss OTEC in my column on December 7th.

The Lockheed deal and the OTEC technology could benefit by the very same Hydrogen Fund, but no matter, politics first.

What we have is not policy but multiple fragmented sound bites, collectively neutralizing each other and signifying very little.

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