Commercial, Distributed Energy Resources, Energy Efficiency, Energy Storage, GHG Emissions, Industrial, Sourcing Renewables - March 25, 2019
Innovation Summit Wrap-up: The Future of Energy Management
Now in its third year, Smart Energy Decisions’ Innovation Summit continues its focus on strategies related to energy life-cycle management in order to showcase exclusive customer presentations and forward-looking work being done by leading industry suppliers in both supply and demand management. SED Founder & Editorial Director, John Failla said “The customer presentations at our events are unique. We’re extremely proud of the exclusive presentations from energy and sustainability executives that have become a hallmark of our events.”
The 2019 Innovation Summit, which took place March 11-13 at the Houstonian in Houston, hosted energy and sustainability executives from more than 70 companies and organizations, as well as representatives from more than 35 suppliers. Topics were addressed from all aspects of corporate energy management under the theme, "The Future of Energy Management."
“We’re big believers that the energy transformation is going to be fueled by collaboration, and that collaboration has to take place between customers, suppliers, and utilities. Everything that we do is in service to facilitate that collaboration” Failla said.
Here are brief highlights from the 2019 Innovation Summit. More extensive coverage will follow in our Innovation Summit Insights report, scheduled for later this year.
“Collaboration Enables Merck to Take a Huge, Sustainable Leap Forward”
Noting that “three or four years ago you wouldn’t have seen all three of us on stage together,” Michael Waslin, senior engineer, environmental sustainability joined Douglas Yunaska, associate director, global energy, and Chris Broome, associate director, global energy and sustainability center of excellence for the opening keynote. The team discussed how Merck, a conservative company with silos, set a strategy and environmental sustainability goals—including a 40% reduction in GHG emissions by 2025 as well as a renewable energy goal—and how they plan to reach these targets.
The process started about four years ago with the question, “What is the value of energy to us? "For me, as a sustainability guy, it was greenhouse gas emissions," said Waslin. "For Chris, it was the cost and reliability of supply. For Doug, on the procurement side, it was the budget certainty and diversifying our supply.” Eventually, he said, “We had an a-ha moment all together and we said, okay, we’re never going to speak about just energy or just greenhouse gas emissions. It’s going to be the value of energy, the value of this commodity to Merck.” Adding that their goals are “pretty aggressive,” Waslin said, “We never would’ve gotten there if it wasn’t for this collaborative effort.”
“Approaches to Employee Engagement in Energy Management”
Ali Ahmed, principal, Green Strategies LLC opened this panel discussion by asking what has changed in the past few years to prompt energy executives to pursue employee engagement. David Reid, global energy and productivity leader at Celanese Corp., said that after spending a lot of time talking about how to achieve goals from a technical side of energy reduction, “we came to the realization that we weren’t going hit our goals without getting a lot more people involved in the program. In order to get the momentum and keep it, to have a strong and sustainable program, we needed to get many, many more people involved ."
At CBS, explained David Templeman, director – environmental, health & safety at CBS Corp., “We had some investors who put some pressure on us to do better in terms of energy reporting." He added that another driver is the recognition that “there are trillions of dollars in investment money out there that we were probably not going to have access to if we didn’t do a better job in the whole area of sustainability.”
Wolfgang Bauer, distinguished professor and associate vice president for administration, Michigan State University, said, “What’s special about our employees is some of them are also our students and the main engagement comes through the students.” Noting that the University is among the top 100 in the world, “We need to lead on important societal issues. Our students and alumni demand that of us. We think there is no issue more important than global warming so it’s a perfect area to attack for a University and to show that green energy is not just the right thing to do, but also the fiscally prudent thing to do.”
“Strategies for Managing Risk in Energy Operations”
To begin the session, Ken Cowan, vice president, solutions sales and marketing at ENGIE, asked the panelists to discuss how organizations of various types are approaching risk management in their energy operations.
A big focus at IBM, with the addition of renewables, is reliable supply. Jay Dietrich, distinguished engineer; energy and climate stewardship at the company, explained, “You can’t have a data center go down. Renewables can actually destabilize, depending on what the capacity loads are in a given area, so we’re looking at what we can to physically integrate our renewable purchases into our supply. Within that is managing the risk on renewables from the standpoint of pricing and terms.”
Noting that from a university perspective, resiliency is critical, Mary “Lynn” Readey, AVP facilities ops dev, The Ohio State University (retired), added, “Historically, for us, energy management has been, number one, about reliability and number two, about budget certainty. If you look back 20 years, that’s exactly how we moved forward in terms of our energy management and our energy purchasing. The twist now is that the energy markets are so different and have changed so dramatically. It’s not just buying your electricity from your state-regulated electric provider, so we have to manage the risk of a changing marketplace and the changing technology in the marketplace.
“Obviously in a healthcare institution reliability is everything,” said Richard Malmstrom, senior energy manager, Dana-Farber Cancer Institute. “Sure, we have enough emergency generators to keep everybody safe and keep all medical operations, but without a steady supply we’re basically out of business.” Moving forward, he said, “Budget stability is important but so are our goals. Therefore, we’re walking slowly into the renewable arena.” The plan, said Malmstrom, is to “attack our sustainability goals and yet keep it financially stable and predictable.”
“Lockheed Martin 2025: The Future of Energy Management”
Devan Tracy, senior energy engineer at Lockheed Martin, opened with a question: “As we provide more efficient and cleaner access to power, if our machines and our processes are using less power, are we just going to use more of them? This is a concept called Jevons paradox.” How do we ensure that this doesn’t happen, that we don’t unintentionally see this rebound effect in our industry, Tracey asked? “One such strategy, from my point of view, is to be more conscious with the data that you have access to in your facilities today.
"Lockheed Martin, like many other companies these days, is in the middle of a digital transformation that’s changing the way we work and making us a more efficient and productive company, said Tracy. “As we optimize our manufacturing operations with all this technology of the fourth industrial revolution, energy is such a natural part of that process, which creates a perfect opportunity for change.” Interestingly, said Tracy, facilities was not part of that original conversation. “We had to make ourselves known and break the stigma that facilities is not just about rearranging conference rooms and mopping up spills. Once they get that, they say, oh, my gosh, facilities IS core to our digital transformation strategy.
“Unlocking the Value of Connected Buildings”
Discussing the idea behind connected buildings and his company’s Building OS platform, Will Coleman, CEO of Lucid, said, “we are effectively applying modern data analytics software technologies to an asset that has been largely disconnected for decades, despite the fact that there are a lot of digital systems inside of those buildings.” The goal is to create “smart buildings that can learn from how those systems are behaving and react to different contexts, different cues inside of those buildings.” This evolution, he said, has been a long time in the making. “We spend about $1.2 trillion on buildings every year in the United States—that’s 5% of GDP, and that doesn't include the businesses that rely on these buildings. The businesses that are housed inside these buildings are dramatically impacted by them and yet we don’t connect those dots as much as we should.”
“Decentralized Energy Management Strategies at McDonald’s”
McDonald’s has announced a goal to reduce overall GHG emissions by 36% by 2030. “When you think about our scale and our size, that’s a big commitment,” said Emma Cox, sustainability manager for McDonald’s Corporation. Compounding the challenge is the fact that the company has 15,000 restaurants in the U.S. run by 1,800 operators. "95% of our restaurants in the U.S. are franchised. We don’t have visibility over that data. Each individual operator controls their consumption and their spend.” Another challenge: “With 15,000 restaurants, there are varying levels of interest and levels of expert ease. When we talk to a particular operator, he or she may have an interest in energy efficiency or renewable energy. On the other side, there are those that just don’t care at all.” Cox noted that the position of corporate “is not to be a dictator. We don’t tell the operators this is the program and you’re doing it. Our job is to do the due diligence, make the recommendation and business case, and then it’s their decision to make.”
"Delta Force - Driving Energy Efficiency at UVA
Jesse Warren, sustainability program manager for buildings and operations at the University of Virginia, offered this explanation of their Delta Force program: “In short, we’re investing in existing buildings on our grounds and reducing their energy consumption. When we reduce their energy consumption we’re capturing 125% of that savings to repay our investment. Once we’ve repaid 125% of that savings, the control falls off and the savings go back to the building customer. So, in essence, they have done very little to initiate the program other than let us in the door. We retro-commission their systems, we identify a timeframe for savings, we all agree on that up front, and then we go into a project where we’re looking to implement as many energy conservation measures as we can under the agreed upon, three, four, five, six, seven-year window." Warren called the Clark Hall project, an Innovation Award-winning program, one of Delta Force's biggest successes.
"Energy Portfolio Financial Management"
Brad Christensen, managing director of risk management products, Calpine Energy Solutions, described a recent transformation as customers realize that “energy is not just an expense line item like durable goods. It’s really a portfolio financial exposure that has to be thought about in the way that you would manage any other financial exposure in your company, be it interest rates or currencies or other raw materials that are thought about in terms of their impact to the bottom line. Energy is that same type of animal.”
Denis George, senior leader – enterprise sourcing, The Kroger Co., said his company has an energy committee with finance, accounting, manufacturing, logistics, grocery store, and risk management functions. “We manage over 300 commodities on the manufacturing side, so our company understands risk. And they’re willing to take risks when they understand the risk.” Connecting with management, he says "helps drive not only what you can do in terms of some non-traditional alternatives, but also drives term length. We’re driving three, four, five years and beyond because now we’ve got a plan and they understand the risk associated with that. It’s opened up great opportunities for us.
“It’s really important to be transparent,” said Michal Shepard, director of maintenance, energy, and engineering, Harris Teeter, LLC. “It’s important to engage the financial people, the risk management people, the operators. If not, you get zero buy-in and you get zero leverage. You need to get to a point where you can say, this is where we really need to go. If you have their trust, they will say, let’s go."
"The Evolution of Sustainable Operations at Bloomberg"
Introducing his keynote on Bloomberg’s efforts around sustainability and energy efficiency, Michael Barry, head of sustainable business operations, said, “First off, collaboration with internal and external stakeholders, NGOs and other corporates has really been key to driving our efforts.” Bloomberg’s sustainability programs focus not just on reducing carbon but on proving a business case. “Being a very numbers’ driven company, we’ve had to show the value. Even though our owner is obviously a big supporter of sustainable business, it still has to make business sense. We’ve worked very hard to not only quantify the carbon we save, but also the dollars that we save.”
“Aside from proving the value internally, we think it’s great externally,” said Barry, noting that the company has publicly reported its sustainability efforts since 2009. “We’ve been very transparent about how we’ve gone about our reductions. We hope that serves as an example for other corporates because we know we’ve also relied on looking at other corporate reports, talking to other people. There’s a lot of collaboration in this space and we hope that we’re able to lend some more knowledge out there that other people could potentially utilize to help build their business case internally.”
"Trends in Renewable Energy Procurement"
Discussing the influence that emissions commitments are having on the marketplace, Lynda Clemmons, vice president, NRG Sustainable Solutions Group noted that while the SASB (Sustainable Accounting Standards Board) is playing a role, TCFD (Taskforce for Climate-Related Financial Disclosure) is more likely to be adopted. While SASB looks at how to measure a company’s impact on the environment, “TCFD turns it around and asks, what happens to your company when the environment changes? What happens when climate changes impact your business going forward?”
TCFD is not a single framework, explained Clemmons. “It’s more about scenario planning. Put forward four different scenarios about what might happen in the world, whether it’s a world of 100% renewables or a world where renewables stop being developed; whether it’s a world of total command and control or a world where it’s a total free-for-all and everybody’s doing the greenest thing possible. When you look at scenarios for your company, look at the exposure you might have to a carbon price, for instance, or to a carbon tax or deregulation of markets in your location. What is that going to do to your business?” These impacts, which are unique for every company, “are starting to have the biggest driving effects on what companies are doing to reduce their greenhouse gas profiles and to reduce their ultimate risk exposure to the changing environment."
"Breaking the Mold – A New Business Model for Power Reliability"
“I think that there is a lack of knowledge inside most enterprises around what happens when the power goes out,” said Allan Schurr, chief commercial officer of Enchanted Rock LLC. “Sometimes it’s the local folks that have to put up with the problems and it’s not something that gets addressed holistically. In our experience, most organizations don’t have a good handle on the direct and indirect costs.” Direct costs might include product loss, while indirect impact range from penalties for missing contracted deliverables or increased emissions to customer inconvenience and dissatisfaction.
“When we talk to customers, we ask about a variety of things that could go wrong. The ones that are really interested are always surprised by how much it costs. We have some industrial customers that have multi-million dollar costs when there’s a single outage that lasts more than 30 minutes. It can be a few hundred thousand dollars for a healthcare organization that has to cancel procedures. There are real costs so they are very open to trying to find these kinds of facts to make a business case for doing something about it."
"Innovative Approaches to Pursuing Sustainability Goals"
"It’s a little bit sad to me because I come from facilities background that energy efficiency always gets short shrift,” said Erin Craig, VP of energy and climate practice at 3Degrees. “Everybody says, okay, first you do energy efficiency, then you do supply, but nobody ever really talks about energy efficiency. But it’s crucially important to meeting the carbon goals and the aggressive energy goals that address climate change."
Sam Castor, EVP of policy, deputy general counsel at Switch shared the following statistics: in the year 2000, 1.28% of the world had Internet. In 2015 it was only 51%. “When you recognize how far we’ve come and how much further we have to go, you realize that the infrastructure that powers the Internet, that mission-critical environment, is central to everything everyone does. There’s no such thing as a technology company anymore, in my opinion. Everyone is a technology company if you’re engaged in business. The reality is that the Internet is the supporting infrastructure for modern day commerce. It’s the real market.”
Ramé Hemstreet, VP of operations, national facilities services and chief energy officer, Kaiser Permanente, cited his company’s environmental stewardship goals, which include a commitment to be carbon neutral by next year—a goal he expects the company to meet. “The biggest issue in healthcare is affordability, so we had to achieve those environmental stewardship goals in a way that didn’t increase cost to our members. Kaiser Permanente is a not-for-profit, so we’re not beholden to shareholders but we are beholden to the members who we try to keep healthy and, when they need it, to provide great healthcare.” He calls energy efficiency “the foundational element.”
The next Smart Energy Decisions event is the Distributed Energy Forum taking place June 24-26 in Denver which will focus on deployment of distributed energy resources by large electric power users. The DE Forum will feature keynote presentations on work being done with distributed energy resources at Walmart, Tyson Foods, Cinemark and General Mills. Information on the event and applications to attend are available on the event website at this link.