Session No. 1 – June 18, 2013 – Hartford Campus

Summary Report of Discussion Group Presentations

Introduction

The participants engaged in discussion groups to contemplate options and new possibilities for increasing energy efficiency and for providing new solutions and systems. Four groups addressed the salient aspects of production, consumption, market solutions, and economic implications. Each group reported its findings and recommendations. The group presentations at the end of the session provided broad-based insights and creative approaches for improving the energy opportunities and challenges in the U.S. and elsewhere. Many of the ideas focused on efficiency, effectiveness, and conservation. Moreover, the discussions focused on what users can do to contribute to the energy picture. For instance, avoiding using energy through conservation, changing one's consumption habits, and altering behavior patterns are among the best approaches for ensuring the availability of energy and resources in the future. Increasing energy efficiency, effectiveness, performance, and benefits and decreasing wastes, defects, and burdens are the critical factors in sustaining growth and value creation. It is imperative that producers and users delve deeply into all of the critical elements of the existing and potential solutions and systems.

The energy sector of the global economy is one of the largest and most complex. Long-term solutions have to be framed in the context of energy availability and needs, the environmental and social issues and concerns, the economic impacts of rising fuel prices and the associated influences on inflation and economic instability, and the development of new technologies.

Overview

Production Aspects

The production of the energy is a well-established field that includes a myriad of contributors. The traditional energy companies include the large global petroleum companies, natural gas providers, coal companies, nuclear power generators, electric utilities, and hydropower generators, among others. There are also a wide range of related service providers that provide geological research, exploration services, logistics, storage, containment, and regulatory compliance services among numerous others. Many of the companies are large global enterprises that operate in all of the regions of the world. Companies like Royal Dutch Shell (Shell), BP, ExxonMobil, and Chevron are some of the largest corporations in the world. They provide energy solutions and say that they are promoting sustainable development. For example, Shell is a global petroleum company that is trying to position itself as a diversified energy company that engages its management acumen and technological innovation to meet global energy needs. Shell developed what it calls "Scenarios to 2050" to reflect on the energy needs over the first half of the twenty-first century. In the company's "Energy Needs, Choices and Possibilities," Philip Watts, Chairman of the Committee of Managing Directors, made the following comments: (1)

"The ways in which we produce and use the energy the world depends on are bound to change greatly over the next fifty years, in response to three fundamental challenges:

  • giving all people access to the benefits of efficient, commercial energy from which nearly a fifth of us are still excluded;
  • meeting the expanding and shifting energy needs of an urbanizing world as economic development raises the living standards of billions of people; and,
  • preventing the pollution that damages health, blights environments, and threatens vital natural systems."

Note
(1) Exploring the Future: Energy Needs, Choices, and Possibilities-Scenarios to 2050", Global Business Environment, Shell International 2001, p2.

While Shell may have made significant investments into future technologies, there are still tensions between providing customers with the products and services of the present (oil, gas, and petroleum products) and shaping a future business landscape with new solutions that ultimately may impact the value of those products and the related assets. It is a delicate balancing act that requires insights and contributions from customers, users, stakeholders, communities, governments, and other constituents.

Traditional energy companies face the challenge of transitioning their businesses from meeting customers' demands in the short term with fossil fuel, nuclear, or other finite products to providing energy services in the long term using more sustainable sources and resources. The scope of the challenge is overwhelming. Each day humankind consumes approximately 85 million barrels of crude oil and millions standard cubic feet of natural gas. The amount of mass that is processed, stored, shipped, and used is staggering. The transformation of a system based on physical assets like oil platforms and rigs, refineries, and supertankers to a system based on renewable resources and sustainable development involves enormous investments in technology, plant and equipment, and people.

The production shift requires producing more low-carbon and low-emission energy in the short term and switching to alternatives like renewable energy applications in the long term. Economics plays a significant role. There are many options to fossil fuels, but most are generally more expensive than the current cost of crude oil and natural gas.

Sustainable and/or renewable energy deals with energy technologies, engineering design, new-to-the-world solutions, and state-of-the-art systems. It involves the development of energy technologies, energy resources, and engineering methods for producing sustainable solutions that meet the world energy needs without accumulating wastes and exhausting resources.

Economic growth and the well-being of people depend on having the sustainable energy resources necessary to support the production and delivery of products and services for the benefits of people and society. Sustainable energy involves meeting the needs of today without disrupting or depleting the resources for tomorrow. It involves a complex array of technologies, technological innovations, and technology developments that enrich people's lives, support our social and economic systems, and create better solutions for people and the natural environment. Clean energy technologies include art, science, and engineering, as well as the devices, methods, and know-how that can be applied in a beneficial manner.

Consumption

Consumption has significant social and economic factors that have both positive and negative implications. It drives the economies of the developed countries and enhances the quality of life for producers, consumers, and workers. The level of consumption has increased dramatically over the last half-century as many innovative technologies and new products have flooded the markets with exciting opportunities to provide the basic necessities of life along with enhanced leisure and luxury. Increased energy usage and waste generation through production, packaging, transportation, applications, and product retirement accompany such unprecedented consumption. Concerns are mounting about the long-term implications of societies that focus on throw-away products and increased energy demand.

Market Solutions

Today, producers and users alike spend most of their efforts trying to dig deeper and deeper into what they perceive to be known opportunities. While it may be sensible for producers and the average user to explore, evaluate, and exploit known solutions, producers and users have to expand their thinking beyond the known or conventional perspectives and examine other possibilities for discovering new opportunities. They should think about markets and potential customers that are untouched or where they lack specific details. Moving outside of the known market spaces requires analysis to understand the possibilities and to bring them to fruition. Some of the methods that could be used to discover new business opportunities include the following:

  • Alternatives within the markets - undertake a detailed examination of the market conditions and trends to identify what may be less than desirable and determine what options are available to rectify the difficulties or undesirable aspects. For instance, petroleum prices have skyrocketed; how can energy consumption be reduced; how can energy be made more affordable; what can be done to make alternate energy sources and technologies more viable?
  • Possibilities outside the existing markets - explore the untapped reaches of the markets and determine the reasons why they are not served. The starting point may be at the edges of the existing market spaces. Often the constraints of the real world limit the opportunities. Determine the constraints that limit the potential for people to enjoy new solutions. For instance, there may not be any financial incentives for people to use electricity during off peak hours during which it is usually less expensive to generate the electricity.
  • Alternatives via technological change - invest into or invent new technologies that are radical departures from the prevailing approaches. Such approaches examine the worlds of science and engineering to discover new opportunities for technological innovations that can be developed from the edges of science. For instance, nanotechnologies for filtering water may have the potential to produce large quantities of clean water without using significant amounts of energy.
  • Possibilities from externally developed technological solutions - examine the world of technology development and keep ahead of the introduction of new technologies. Externally developed technologies represent new possibilities that may change or even replace current approaches. For instance, microprocessor technologies have spawned the developed of LED lighting that is much more efficient than traditional lighting.
  • Possibilities through new knowledge and understanding - search the underlying driving forces or think about what is missing or what could be a roadblock in the future. Wealth is being created not just in the domains of knowledge but within the multiple intersections of knowledge.

The intention of this discussion is not to outline a comprehensive list of what strategic leaders, practitioners, and users should be looking for or what they should seek to find but to suggest broader perspectives for thinking about opportunities that are beyond the normal scope of traditional strategic thinking. While leaders engage in discovering new-to-the-world opportunities, they must also engage others to participate in the discovery process.

Economic Implications

Economic growth depends on having sufficient resources and energy to provide the basic requirements of life and improving human development. Ending hunger and poverty, building adequate housing, providing proper health care, preventing and curing diseases, providing good public transportation, and creating political stability depend on the underlying economic systems and the properly functioning energy systems. For instance, it is difficult for people in developing countries to have a stable economic system given the significant number of social, political, economic, and energy-related barriers they face. They need support from the global corporations, non-governmental organizations, and others to provide the requisite energy solutions, if they are to participate effectively in the global economy.

The economic system links producers and consumers and provides a sense of equilibrium as production of goods and energy provides more opportunities for people. While this view is a basic perspective, it does indicate that successful economic systems generally work to benefit producers, consumers, and workers alike. However, a perfect balance is rarely achieved. While distortions like subsidies and protectionism muddle the picture, economic growth and the energy picture over the last fifty years in the developed countries have been based (in both theory and practice) on having the means (resources and energy) and mechanisms (systems) for people to be successful. Producers need adequate numbers of customers to buy their products and services that allow for the recovery of their invested capital with a reasonable return. This kind of stability is critical for the proper functioning of the economic system and for economic growth.


Discussion Group Insights and Comments

Production Aspects

The group discussed many initiatives to improve energy efficiency from the perspectives of producers. The group thought that having the right information about existing energy systems and doing detailed assessments about the advantages, disadvantages, and limitations of the current technologies and systems were important starting points. Every technology and system has risks that can be mitigated to some extent. Using information about costs, performance, benefits, and barriers can lead to opportunities for improvements. Producers should develop a matrix of their technologies and systems pertaining to how well they conform to the social, economic, ethical, technological, and environmental requirements.

Producers have to engage in innovation to make the improvements. While it is difficult to generalize, the initial focus should be on incremental innovations to eliminate the obvious problems and defects. Slow and steady progress can be made at relatively low costs to overcome some of the disadvantages and limitations.

Producers should use educational mechanisms to assure that people know how to use the technologies and systems properly. The lack of knowledge is often the precursor to problems and inefficiencies. Practitioners have to be competent in using energy and avoid creating difficulties through misapplications.

Producers can use federal, state, and local regulations and rules as the way to find new solutions. Regulations usually address areas of concerns and difficulties. By addressing the regulations and trying to eliminate the underlying causes, producers can create better solutions that provide the means and mechanisms for compliance.

Producers should create neutral networks that provide real-world feedback on how the technologies and systems are functioning. Many systems are designed properly and efficiently but they are allowed to deviate from the specifications and operate outside of acceptable parameters. Producers need to review their systems to assess and improve outcomes and eliminate obstacles. Producers need to think about developing as many options as possible so they can make good decisions.

Producers from electric utilities to manufacturers should develop SMART systems that function efficiently without direct interactions. Producers should work with financial institutions to help secure funds for energy solutions and systems.

Consumption Aspects

The complexities of life and the demands on an individual's time in the developed countries translate into pressures to save time and effort through more convenient products and energy-intensive outcomes. Increased mobility allows individuals to expand their opportunities for social aspects, economic advantages, and improved lifestyles. These benefits have also brought urban and suburban sprawl, high population densities, greater energy consumption, and vehicular pollution. Consumers need better training and education about the solutions and systems so that they can make better choices. They need more information about the solutions and systems and have better ways to assess the pros and cons of the options that they have. Government can provide the information but it has to be in forms that most people can understand and use.

Transparency is an important factor. Transparency implies shining light through everything that is germane to external observers and internal participants. Transparency should be coupled with assurances that such scrutiny results in positive perceptions and realities. Information about the strengths and weaknesses of energy solutions and systems should be readily available to consumers. They should not have to use extraordinary means to get the proper information or acquire the information only after problems and difficulties have occurred.

Public policy has to play a key role in promoting the best energy solutions and systems. The lack of attention to many of the social, economic, and environmental problems requires government actions. Regulations and regulatory changes typically force producers and consumers to take actions and to make improvements. People expect that public policy focuses on the common good and not on politics. Regulations are usually written in the language of regulators, enforcement officers, and lawyers, making it difficult for the untrained practitioner to understand and follow the mandates. Uncertainty about the precise meaning of provisions is a concern for many producers and users.

Education at various stages and ages plays a very large role in the energy consumption aspects. Some of the specific concerns, comments, and/or recommendations are:

  • Better knowledge of available new technologies and developing technologies to decrease energy consumption demands
  • What are the available subsidies of incentives energy users can utilize when becoming more sustainable (i.e., utility subsidies, state incentives, federal incentives, payback periods)?
  • Better education of commercial and residential consumers of benefits and payoffs
  • Increase transparency of benefits of energy consumption decrease and real cost of electricity

Economics plays a major role in energy consumption. Market-driven solutions are great as long as energy is priced correctly. Energy prices should reflect true cost of delivery including externalities. Policy issues are important. Economic issues include:

  • Lack of enforced building codes to support energy-efficient buildings
  • Lack of appropriate energy pricing (drives market solutions and brings policy back into picture)
  • Lack of market that supports sustainable electricity changes

Cost of energy is artificially low [in the U.S.] due to a number of incentives and subsidies to the states, utilities, and customers. We have an overly complicated pricing structure that does not accurately reflect real cost of energy (examples include incentives to oil companies, electric pricing structure associated with regional ISOs, rate structure design for gas and electric). Areas of concerns are:

  • Utilities have been able to justify the subsidies to their state's Public Service Commission
  • Currently, supply-side issues are the main concentration….How about consumption?

Purpose Power Agreements (PPA) between towns and power generators may be an option to help supply affordable power to customers; some towns in the Midwest are beginning to remove dams.

Demand response requirements (Market and FERC demands) should require energy efficiency and resource optimization. Governments should reconsider their programs that provide subsidies and tax dollars to build roads and consider providing those funds to infrastructure for public transportation (i.e., rail and buses). This could also lead to a change in the mindset about kids driving; cultural and societal issues that make it necessary and acceptable for every family to have two, three, or even four cars. Suburban sprawl and lack of public transportation are key issues. Europe currently has programs regarding tax collected and redistribution for public transportation infrastructure development. Self-driving vehicles versus human-operated vehicles may be more efficient and safer. Push car manufacturers to develop hybrid vehicles with diesel capabilities.

Due to the close proximity of the population in the Northeast U.S. mixed in with heavily populated cities (Mega cities), we would be an excellent test area to try out an efficient transportation program. Consider the following:

  • Most people live in a heavily and condensed area
  • Development of Smart Travel Programs?
  • Bicycle safe roads
  • More availability for telecommuting

Areas of federal, state, and local policies affected by the change in cost of electricity include:

  • Availability of subsidies to states and customers to make sustainable living feasible
  • Regional Greenhouse Gas Initiative program is located in the Northeast United States but has gained no traction. The reason is that there is no definition of the total resource cost.
  • Regional issues exist. One region's problem may not be the same in others (i.e., Northeast versus Southwest).

Connecticut policies currently do not allow for larger companies to share generation assets via virtual metering. Only municipalities are approved to participate in virtual shared metering practices. If a company operates multiple facilities throughout a town, why can't it participate in a virtual shared metering program? This would maximize the efficiency of distributed generation assets and allow for real-time pricing schemes.

There is a lack in available financing for renewable and sustainable energy solutions and projects over multiple years. Think about the following:

  • Allow for larger projects to take place
  • Timeframe of 10-15 years
  • Private sector is dominated by triple-net leases. A triple-net lease is a lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three "nets") on the property in addition to any normal fees that are expected under the agreement (rent, utilities, etc.). In such a lease, the tenant or lessee is responsible for all costs associated with the repair and maintenance of any common area. This form of lease is most frequently used for commercial freestanding buildings. However, it has also been used in single-family residential rental real estate properties.
  • Whole sector is separated because lessees are not aware of the full costs to run a building or if there are available upgrades to increase the efficiency. Even if items are low-hanging fruit.
  • Can we use programs implemented at larger companies or larger groups as models for driving regulations for residential or smaller programs?

There is a need for a commercial building rating system like the Energy Efficiency rating system on appliances. Specifically:

  • Allows for buyers to see the costs to run a building (appliances) - addresses split incentives
  • Transparency (commercial market program outcomes may provide incentives for residential programs)
  • Are utilities willing to share the information they have collected from their customers paying their bills on usage? Will customers allow the information to be shared?
  • Rating systems have a number of aspects
  • Technical aspects (natural gas versus oil)
  • BTU versus price (Home Energy Rating System)
  • What would be considered neutral?

Market Aspects

Market-based solutions require a complex array of possible changes to transportation systems, especially mass transportation, and energy-saving mechanisms. Producers, users, and governments have to take strategic perspectives when addressing opportunities and challenges.

More energy [electricity] could be generated using solid waste, especially from used materials with high heat values. Large companies and local governments can provide more energy using combined heat and power. For example, Shop & Shop invests in energy projects that have a four-year or less payback. LED lighting can be used to replace street lamps and interior lighting in buildings. LED lighting is more efficient and requires significantly less time and money to replace burned out lamps.

Companies should optimize their wastes: reduce it, have others use it, or produce something useful from it. They should also develop multiple uses for their products and byproducts, thus having more options for beneficial outcomes. Companies should enhance the recyclability of the products so that materials and energy can be saved. Companies should locate their facilities near others that can benefit from their byproducts and wastes.

Households should have energy audits done to improve efficiencies and eliminate wastes. Residential and commercial buildings should be retrofitted with the latest energy-saving technologies to improve efficiencies and save money.

Local governments and energy companies should create micro grids that operate efficiently and effectively for small communities. Such solutions could be designed to exactly match the needs of consumers and avoid line losses and other inefficiencies. People should think about more small-scale solutions that are community-based. People should create options that are just the opposite of the conventional thinking, i.e., small instead of big. Producers and users should examine the solutions and systems that are available or being used in other counties around the world. They benchmark others and find best approaches wherever they may be.

New solutions and systems should be based on natural resources and solar based energy systems.

Economic Aspects

The primary question to be asked is, "How can alternative energy sources overcome the economic advantage held by traditional fossil fuels?" Some thoughts include:

  • Left to unfettered market forces, renewable or new energy sources can't hope to be economically competitive, unless a transformative technology is developed and makes fossil fuel combustion obsolete. The group doesn't think this is likely.
  • Given the group's belief that the market won't allow renewables to thrive, we believe government must act in order for renewables to be commercially viable and provide a material improvement in the U.S. energy portfolio.
  • Legislative action could include the imposition of a carbon tax on fossil fuels, cap and trade on CO2 emissions, elimination of fossil fuel subsidies, or implementation of long-term (20+ years) renewable energy investment subsidies or credits. The group is skeptical that any of these will occur at the national level, absent a complete sea change in Washington.
  • More likely is USEPA and/or Department of Energy regulations (that don't require Congressional approval) that will impose a "cost of carbon" on the regulated fossil fuel-using entity. These could serve to have the same effect as a tax or cap and trade fee, as the regulated community would have to increase their costs and prices to consumers to meet the new regulation. The renewable sources wouldn't be subject to the regulation and wouldn't have the additional cost, which would make them more competitive vs. the fossil fuel source.

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Updated: 2016-05-16, 15:31