Solar, wind power, smart grid, green building -- French energy management corporation Schneider Electric has a hand in it all, all across the globe.
In July, the company landed a $23 million, 15-year contract with the city of Houston -- the fourth largest city in the U.S. by population -- to retrofit 19 city buildings for energy efficiency. The deal moves Houston to the forefront of the movement among major American cities to reduce greenhouse gas emissions -- and positions it to be the recipient of a cool $1.8 million in annual savings that Schneider guarantees.
I called up Chris Curtis, CEO of Schneider's North American operations, to ask about the company's $25 billion global business, the Houston project and the state of the cleantech industry.
According to Curtis, Schneider neither generates power nor makes consumer products, but covers a lot of things in between. Add in the company's global scale, and it's no surprise that the company has a huge impact on energy.
SmartPlanet: Succinctly, SmartPlanet covers cleantech, smart systems and innovation. Which of these drives Schneider Electric?
CC: I wouldn't confine us to a cleantech discussion. We believe smart systems sometimes gets you cleantech, and in order to have smart systems, you need the discovery to get you there.
It is my job to save energy. Ten years ago, it wasn't top-of-mind consciousness. Now those issues are a great deal more prevalent.
When you look at our company -- we're a global enterprise of just over 16 billion Euro doing business in 130 countries with over 100,000 employees -- the thing that binds our businesses together is, how do we bring energy management solutions to each market we're in? It's a combination of people, technology and our local market presence.
We're organized around end markets as far as businesses go: buildings, the utility and public infrastructure, manufacturing, IT.
The first big opportunity we see is to help people conserve energy or avoid using it. So savings and demand management is definitely at the top of the list in terms of a strategy. Getting there, there are different ways to do it. In order to fully realize the savings opportunity that comes with conservation is that it's not one size fits all. Most businesses really know their IT spend. It's usually right off the top of their head. That's not the case with energy. It's becoming that.
The first thing we do is make it visible.
The second thing we do is develop a strategy to save without adversely affecting the enterprise.
The third thing is ensuring that a deployed solution is maintained and improved. Hopefully, we're looking at a life-cycle relationship, 20 to 25 years more.
There's so much energy around how a building is built and constructed and not enough in how it's maintained over 20 to 25 years. Ninety percent of the building stock in the U.S. was built before 1990. Efficiency was not top of mind.
SmartPlanet: You're doing business all over the world. What poses a greater opportunity: ramping up in mature markets or getting started in emerging markets?
CC: China is the second-largest country in our organization. We've been there for 22 years. By and large, China has been chasing capex [capital expenditures] -- so it's about how fast can we grow build capacity, being able to support what our dynamic economy is driving. Consuming as much stuff as you can pull out of the ground in Australia, Canada, Africa.
Energy consciousness in China is relatively recent. It's been more about, how do I get capacity in place to suppoy this massive growth expectation? The consciousness around energy [in China] is driven not by some societal motivation to improve the planet but by pragmatic [means]: their employment is affected by poor air quality and they're affected by that. It's slowing their economic down.
We are an opex [operational expenditure] world. What we look at is to say, OK, make energy visible. Fix the basics -- which doesn't sound rather exciting but quite frankly it's interesting to see how much low-hanging fruit is out there -- and develop a long-term strategy for maintaining efficiency down the road.
I'd approach that in the same way in a developing economy as in a developed economy. The difference is [that] the awareness is much higher in a mature economy.
SmartPlanet: What about the rest of the BRIC [Brazil, Russia, India, China] countries?
CC: India's a little ahead. It's not even on the radar in Russia.
Their motivation is handling the sheer capacity they need. How do I extend the capacity I've got while I'm trying to build more?
The thing that's behind this is, there are so many places, country to country, business to business, that don't really know how to solve the problem.
There's a tremendous amount of noise in the energy space. A lot of the noise stems from the IT side -- the IT business would like to turn this into a purely technology problem: so as long as we've got software and a dashboard and screen, we're good. Unfortunately, all the problems in energy are sitting in the mechanical room. That's a real skill business. The companies that have been in cleantech in a material way have been crawling around these buildings for many years. IT companies are still trying to find where the door is.
They're sitting in all the energy-consuming systems that run the building: heating and air conditioning, electrical system, elevators and datacenters.
I use information technology to make the systems that control buildings to make them work more effectively. I would say IT companies do the same for the information infrastructure.
We compete with IT companies some days, and we cooperate with IT companies some days. I see that IBM advertises on SmartPlanet -- I work with IBM Corporation quite a bit. What's motivating them is that the cost of computing is so commoditized that they're trying to look outside their business.
We work both with private and public concerns. We do a lot of government work at the federal, state and municipal level. It's interesting to connect the energy opportunity with the problems at the city and state level is that those municipal governments have huge budget problems.
If you can covert that asset to savings, you can eventually give them a way to improve their facilities and service to constituents.
SmartPlanet: We cover smart cities quite a bit. Are you doing any work in urban areas at the local level?
CC: Take Houston, for example. We've been working on a project that touches 100 buildings in the city. We basically take their [city government's] existing energy spend, try to drive savings out of that -- we guarantee it, actually -- free up that capital for them to use so they can modernize a wastewater treatment plant or something that they normally couldn't get the tax money for.
There are some clients that are conservation-driven -- industrial clients quite often think that way -- and some that are [budgetary-driven].
We are an energy services company. You really have nothing to offer until you understand the baseline. Once you understand that and the client's objectives, you need to ask what their perspective is: three years, five years, 10 years.
A city like Chicago says, I'm in a bind. I'm getting less money from the state and have regulatory issues.
Some of these vehicles are not accepted in every state. The industry term would be "energy procurement contract," or EPC. I would expect the usage of them to grow, given the budget constraints [felt by cities].
You run into examples where they've never even had a program. It's very realistic to expect savings in the first year from anywhere from 10 to 20 percent. If somebody's had a program for awhile and they want to take it to the next level, you may not have as dramatic year-over-year savings. But you're going to have savings.
I look at our own company, and we've got a cumulative effect of $12 million in energy savings.
SmartPlanet: And LEED? Is it enough?
CC: How should a building function in the future versus what's expected today? We need the Energy Star for appliances equivalent for buildings.
The problem is that the appliances themselves weren't the biggest consuming part [of a building]. I think we should have a higher expectation for something as simple and straightforward about that.
LEED is a good first step. [The U.S. Green Building Council] should be proud that they accomplished that. Given the magnitude of the challenge, I'm sure that's not enough.
LEED only covers a point in time: when a building is constructed. It doesn't continue once the building is in operation.
There are some places in New York that, by code, forces you to recommission a building. How do you ensure that a building is maintaining its LEED certification? You have to think in terms differently than LEED did -- not just in terms of construction but maintenance. I don't think it's historically been visible enough.
Now, because of efficiency or even just cost, it's become much more relevant. Non-owner occupied, owner-occupied -- the need to secure the provision of energy. How do you make sure you've got a space that's competitive going forward?
SmartPlanet: Let's talk renewables. What's Schneider's energy mix? And what's its approach to clean energy?
CC: We're predominately solar, both at the residential level or a commercial roof- or land-mounted level, and utility scale solar farms. We act as a prime contractor or a first-tier sub. We don't make the panels, but we make all the controls that basically collect and distribute the power generated by the panels.
We've done a multimegawatt project in Canada. A solar farm.
As for the wind business, we don't make turbines, but we do make a lot of components that support them. We think the outlook for solar is generally positive, slow in coming, but pretty positive.
We're on both ends. If there's a generating source, we're trying to control it and get it to the grid. And once it comes off the grid, what happens in a building, or a home, or a business.
We're in the middle of finalizing an acquisition that does a lot of the automation around distribution. And we're certainly willing to play an active role in the development of the smart grid. We consider it to be a very exciting opportunity.
It's not exactly clear what the smart grid will mean in 10 years. Its potential as part of the overall [clean energy] solution is certainly big, and if your eye is on the prize of energy and security, then you need to be open to all options.
Wind or solar? I'm somewhat agnostic to that. There is no one solution that is big enough to make an impact to solve the problem. You've got to be pretty open-minded about piecing together multiple solutions. The biggest paean is energy efficiency, and I think it's not even politically disputable.
Getting there is going to be a pretty complex journey.
SmartPlanet: Where do you begin?
CC: None of the homes right now are set up to put power on the grid. We're working with utilities to go to their client base to set up programs where you can systematically curtail peaks out of the system and ultimately save the utility from having to place more storage.
We have a society that just thinks there's nothing but on-demand energy. Today, we produce a ton of energy that we never even use. It just has to be available. We have no storage capacity. It's incredibly inefficient. It's like leaving your faucet on to run.
Now you think of what a smart grid can be. You add the technology of storage. What's going to make wind and solar a great deal more relevant in the future is when the storage aspect comes more quickly. You'll get grid parity much more quickly. Right now you're dependent upon incentives, which makes it somewhat risky for people.
It's one of the better usages of the stimulus money. It's not a near-term solution. It's several years away from commercial viability. The future is going to have to be multifaceted.
We see in many instances that a lot of the projects that we were going to do were going to happen anyhow, and the stimulus just become a partial source of funding. It made it pause for a minute, then perhaps made it accelerate a little more in the back-end.
I wouldn't say that we need to wholesale stop stimulus [funds], but for me, you can fund and justify the demand-saving projects on the basis of whether you've got stimulus or not. It's important to think of stimulus in a continued basis around technology and the breakthrough side -- that's going to help innovation emerge and continue. And the U.S. needs that.