Good morning. Hello. Welcome everyone to Climate Week NYC. My name is Adam Lake. I lead our engagement for Climate Group in North America, and I've had the good fortune of leading Climate Week NYC for the past five years. So welcome. Lovely weather today. So thank you for making it across town. As a reminder for everyone, these flagship sessions will be streamed online. So a massive thank you to everyone watching at home, and for you in the audience, you get a chance to watch this again, and I'm sure you will want to. So thank you for that. You can tweet about us and talk about the things being discussed today, #ClimateWeekNYC. Another thing that we're doing, it's a new thing this year, you can ask questions from the panel.
So if you look on your badge, there's a QR code. If you log into that, you can pose a question, which our chair will be able to put to the group. So without further ado, we have a session now focused on what it takes to accelerate the energy transition across the whole ecosystem, and it's proudly hosted by our good friends at Boston Consulting Group. So without further ado, I'd like to welcome the panel's moderator and the panel, Thomas Baker, Managing Director and Partner at the Boston Consulting Group, to the stage. Thank you.
Well, good morning, everyone. It's a pleasure to join you all today and talk about energy transition. My name is Tom Baker. I'm a Managing Director and Partner at BCG. I lead globally our low carbon energy and infrastructure sector, and I'm incredibly honored to be with very distinguished guests here to talk through challenges with the energy transition. Let me first intro the panelists. I have a couple quick opening remarks, and then we'll dive right in. We've got about the next 55-50 minutes. As you heard, I will be your MC and make sure we leave time at the end, about 15 minutes for questions. So please, please do use the app to submit questions.
I think that's when the session gets especially fun. But real quick, in terms of introductions, I'm joined here by Neil. Neil's the Chief Administrative Officer at Sysco and leads all the sustainability related activities at Sysco. To him is Richard Manley. He's the Chief Sustainability Officer of CPP Investments. Next to him is Edward Stones. He's the VP of Energy and Climate at Dow. And then finally, Renae Kezar, who is the VP of Global Sustainability and Regulatory Affairs at Johnson Controls. So why are we here today? Why are we talking about the energy transition?
Well, when we look at all the contributors to climate change, including everything, including implications of land use, methane emissions from agriculture, when we do the math, energy makes up approximately 80% of all the total greenhouse gas emission impacts, on our climate. So we can't talk about climate change without talking about energy. But I think one of the exciting things, and, you know, the theme of this week's Climate Week is we can, we will. And as we think about energy, we absolutely can. We have all the technology, all the levers at our disposal. You look at technologies like renewables, which are unsubsidized in many parts of the world, competing with fossil fuels. We have battery storage that can help firm up that renewables, that has significantly decreased in cost.
And then, while we still have technologies like hydrogen, clean hydrogen and carbon capture, that needs to scale, and we absolutely need to lower those costs, we see a path, and the technology exists to the majority of our energy emissions. But it's not easy. The theme, and we heard often in yesterday's opening ceremony, that we're entering this messy middle. We're entering a stage where, yes, we may have the technology, we may have a path, but real life gets in the way. We see issues, for example, in energy transition around permitting, challenges with supply chain, challenges with the grid and interconnecting renewables, challenges with land, challenges with water for clean hydrogen, and variety of other real-world challenges that are going to constrict our ability to drive the energy transition.
I'm excited today to talk to this panel that's on the ground, in the field, talk a bit about some of the challenges that they're seeing. So I'm going to start there. I'm going to start with the question of: What are these real-world constraints that each of you are seeing in your daily work? And Renee, I'll start with you.
Sure. So Johnson Controls, we have, of course, the big ambitious target of 100% renewables by 2040. We're currently at 42%. But I like how you call it the, this messy middle, because now we're sitting... You know, we're looking at a global city, you know, we're looking at a global footprint, 1,300 facilities, everyone has electricity, and there are so many options. So it used to be pretty simple. It's just VPPA, plug it in, and there you go. Now, it's all of these options, and so you really want to understand the pros and the cons before you sign that long-term deal. You also have to know the economics. So is there financing available? Are there incentives? Yes, pros and cons there. You have legal contracts, your legal team, your procurement team, your finance team, and then lastly, the ESG accounting, right?
So will this count towards, you know, whatever new mechanism we may have, current mechanisms with Greenhouse Gas Protocol? All of these puzzle pieces have to lock together to then give confidence as you move forward. So just a little piece, although it's positive in that there's a lot of options. So at least we have some options that all the functions across the organization can start engaging on.
... Great. Edward, same question to you. What are some of the real world constraints, challenges you're seeing in the energy transition?
Well, so I think what we at Dow have called our transition approach, and we have a decarbonize and growth story, and the whole story is about putting the and in that. You can't just decarbonize, because then you'll be out of business if you don't grow and you don't add value. And you can't just grow because you have to decarbonize. So it's the and together. And putting that together, it's really important to define the path. And so for us, it's actually relatively simple. We have roughly 30 years to do this, and we've committed to spend about $1 billion a year on decarbonizing and growing. And the question is choosing what goes first.
And so for us, you know, where we have infrastructure available, like we do in Canada, we will move towards our decarbonized project there, where we, we've said we'll build the first carbon neutral Scope 1 and 2 ethylene cracker in the world. We're also looking at deploying new technologies like nuclear in our project in Seadrift, Texas. And, you know, we'll do other things like using blue and circular hydrogen throughout the world. So for us, it's aligning the investment, capturing the value, and, you know, some of that value can also be from subsidies, but value subsidies, technology, and infrastructure on a long-term path.
Great. Richard, over to you. Constraints you see from your world.
Okay. I think we're at the point, now, you call it the messy middle, but I'd say we're at the point now where we really are seeing the technology becoming from their own success. And that is, as you alluded to, the levelized cost of energy using many of these renewable technologies are now very competitive. When we were integrating it into the grid at 2, 3, 4, and 5% share of the grid, the challenges of integrating that were relatively limited. The scale of what was being added was marginal in nature. The implications of intermittency, base load reconciliation was smaller than it is today. And we now have a situation where we've inspired demand. The demand to green the electricity system is clear.
We've seen multiple business cases of, you know, being able to transition from conventional gray sources of generation to green. The challenge we now have is eliciting the supply response we need. This isn't just the supply response in terms of the OEMs delivering wind and solar modules. This is the entire supply chain for a replumbing of the energy system. This is mines, this is smelters, this is fabrication facilities to build the technology at the scale we need to deploy to meet the growing demand expectations, but also then getting the permitting in place. There are multiple examples around the world today of very strong competition to gain access to renewable energy projects. Once these projects are then moving forward, bottlenecks are appearing not only in raw materials, copper cable, for example, but also in permitting.
It's difficult to get local communities to embrace another new pylon system. They'd prefer to see it done underground. It's also difficult to access grids at the scale that's required in different parts of the world. So you call it the messy middle. I think we are in this point, this potential hiatus, where we need to see some structural debottlenecking of the supply chain, and the deployment levers need to be facilitated in order to meet that demand that is now clearly inspired.
Agreed. Agreed. Dave, over to you.
I'll talk broadly about corporations and maybe what we all may be facing at this point in the messy middle to build off my colleagues here. No doubt there's the cost-benefit analysis a company, particularly public companies, will have to do as they go through the process, and I think the challenge companies face is, will they indeed be able to stick with it and invest for the long-term? Inevitably, a company is going to face a short-term budgetary concern, question, challenge, whatever it may be. There's an eventual long-term intersection of the positivity of that cost-benefit analysis. Will a corporation have the patience to stay with it and reach that intersection in the future and not be too short-term in their thinking?
I think that's a barrier and a challenge that corporations need to think through and understand that the investment today is indeed for that long-term benefit, and to have the discipline and patience to stay with it.
Great. Renee, I want to go back to you. I think, Richard, you mentioned, several of you mentioned, challenges with supply chains. Especially as all of you and this entire group thinks about Scope 3 emissions and addressing decarbonization in your supply chain, it's... I think we would all agree it's a hard lever to pull. Now, I think, you know, interesting, JCI is in a really unique position in this, in the fact that you all actually produce solutions that could, could help address decarbonization in yours and many of our supply chains. But I'd, Renee, I would love you to talk a little bit about one, the challenges you see in decarbonization in the supply chain, and then where, where do JCI solutions help, help address those?
So I think in addressing decarbonization in the supply chain, it's typically unique, right? If you look at the carbon landscape of each individual organization, it'll be unique to either their industry or to themselves. So, but you're right in that Johnson Controls, I mean, specific to building products and technologies, we deliver those solutions for over 100 years, energy efficiency for customers. Before it was decarbonization, it was always energy efficiency. So we really start from a good position of helping, I'll say, our customers, but a lot of times our customers can also be our suppliers when we look at reducing energy and decarb.... I'll give you guys an example, what we developed over the last about a year and a half, we call it the Customer Zero program.
So me being in charge of global sustainability, I also have 50% of our emissions, Scope one and two, come from our buildings footprint. So I was like, okay, hey, guys and gals, what you're selling out there to customers, can we then do that to ourselves across a pretty vast network of manufacturing, branch locations, R&D facilities, headquarters, and in a programmatic way, what's the most efficient way to decarbonizing, reducing energy? Again, the model can work for our suppliers, the model can work for our customers. Three main levers. So we're really focused on, again, energy efficiency, bringing down the loads that we have. So first is energy efficiency with, you know, the, the latest and greatest of our products and solutions, transitioning oil and gas to electrification.
That's huge when we talk about the energy efficiency, and then the last one is around digital optimization. So we have our own, it's we have our own digital technology called Open Blue, but it actually runs anyone's software technology that can get the most optimal results and that multiplier effect on energy, emissions and costs. So we really put together this model, again, built off what we've been doing for customers and industries of how can you get the energy cost savings. It also translates itself to decarbonization. It's working for ourselves. Actually, just this last year, we're finishing up our first, we call it a showcase site, where we put everything into our, one of our largest emitting sites in Norman, Oklahoma. Also included some on-site solar. We put an electrification for our fleet, our in-service fleet vehicles.
So that way, we truly have a model that we also we can work with, especially when we think about the integration of the energy systems. But building on that, when we think about our supply chain, embodied carbon is a big deal for us, in particular in the metals category. So we are heavily engaged with our suppliers in each of those categories, and we give them the options that we've used ourselves. We give them the options we do for our customers, 'cause if you have buildings and manufacturing plants, the playbook is likely the same. We have these eight steps, and it's like a menu option you can choose from because it is unique, but at least we try to apply that across the value chain. That way, what we're delivering to our customers is that full system solution.
Renee, you mentioned energy efficiency, and I'm glad you did, because, you know, we all know it's a lever that when we draw our carbon abatement curve, is usually all the way on the left. It produces energy savings, you know, it can be NPV positive, but it doesn't get done. What is the constraint to getting, you know, your customers and all of us to deploy energy efficiency? How do we address that?
Well, it's interesting you say it doesn't get done. I see it get done all the time.
Okay, all right. Fair enough.
But again, this goes back to energy efficiency contracts and what our customers know us for, which is the optimal management of their building under the eyes of energy efficiency for cost savings. So we're always building that in together. What we've started to do is link that to carbon, where we get into more of the challenging discussions as capital equipment. So, but then when you're talking significant, and you're starting to move a little bit further, you know, in the other direction on the abatement curve. And then what we've done on that side is looking to remove those upfront costs, those upfront capital costs, and helping customers finance it over the long term. So transitioning to an OpEx, that's a bit more palatable in the short term in order to start getting those savings coming.
There's also an element where you just got to get started. Even if you get started on the far left-hand side of the curve, fine, and then you start to, you can start to build in more of the capital improvements, the digital improvements, and on it goes. But I do find that you just, even ourselves, we've just had to get started, and then all of a sudden you get believers.
Yeah. Yeah, please.
Yeah, if I, if I may just add to that. So you, you're right, efficiency is typically on the left. There's no capital outlay, there's no increase in OPEX. The, the challenge of efficiency is you're not gonna find it knowing the kit you have installed. You're gonna find it knowing how the, the kit is used. And unfortunately, that's not easy to do outside in. That does require you also to, to go to the people using it. And I think we see a lot of companies, as they think about developing their, their transition plans, thinking this is something you can do at the top of the house. It's not. You actually need to take the whole organization with you. And, and actually, I'd say efficiency is the underutilized lever to actually engage the entire employee base because everybody can contribute to it.
It's the highest IRR opportunity, because of my earlier point, there's rarely capital outlay or OPEX. But just remember, the other thing is every 7% you find is a year of Paris alignment that buys you headroom to work out how to actually then prioritize the bigger ticket CapEx outlays. So one thing I think we would ask, and we've seen as we've applied what we call our abatement capacity assessment to our portfolio companies, is, it's not the most exciting bit, but it's definitely the highest payoff bit. And everything you can do to incentivize people to pursue that, I think is an important lever for us to prioritize what I call the optimal transition, get the most molecules out of the business with the least impact to the business.
I want to make a point here, though. You know, Dow's been doing energy efficiency since, you know, day one, and so we are a large manufacturer of, of chemicals and industrial type products. We absolutely believe in efficiency, but our view is that this is not how you get to carbon. You are not going to get to carbon neutral with efficiency. You have to, you have to think about the technological change that's required to change the, the work processes and the approach you have. You know, we've, we reduced our emissions 15% from 2005- 2020, and we'll do another 15% by 2030. But... And, and some of that was efficiency.
To your point, we've got all of our top 25 sites, we have teams focused on developing an abatement curve for all of them, and then we execute over time. At the corporate level, we pick out what's best. Efficiency always gets done, but for us, it's not enough. We now need to do new technologies, new approaches, and investments, and that's where it gets more difficult because it's not value neutral. You have to have a source of value for growth to deliver that reduction in our system, because our system is that efficient already.
Yeah, makes sense. Edward, we'll stick with you and switch gears a little bit. This group, I'm sure, is aware of the concept energy trilemma. And that is, we need our energy to be, of course, clean, but also reliable and affordable. We need the lights to go on. We need those fuels that we use in our modern society. We know how closely affordability is tied to, you know, people's well-being. Can you talk, Edward, a little bit about how, you know, how do you see the energy trilemma? How does Dow see it? How do you think about addressing it?
So, you know, for us, so I first heard of the energy trilemma when I was dealing with Australian energy balances after they'd basically shut down the country because of some very poor energy policy that basically led to Australian gas being cheaper in Tokyo Harbor than it was in Sydney Harbor, which was fascinating. My view is that the trilemma is a unnecessary but insufficient condition for success. You also need political will to do things, and you need physics. And the problem is, you know, government authorities are very good at thinking about political will and sustainability. They're less good about affordability and reliability, and they really don't understand physics. A lot of business people are great on physics and affordability and even reliability, and less worried about politics and, you know, sustainability.
You have to have it all, and if you don't have it all, the system you're designing will eventually break, and when it breaks, it breaks badly. And so for us, it's the five things. It's affordability, reliability, sustainability, politics, physics.
Great. Richard, over to you. You provide, I think, a really unique perspective on this panel from a financing perspective. And, I think we hear time and time again how financing is a constraint to the energy transition. And, you know, I see in my work, yes, you know, project finance on utility scale, solar and wind, can come in at very low cost of capital, and that certainly in the last decade, has helped enable the growth of renewables. But especially as we look at other decarbonization tech, like clean green hydrogen, carbon capture, I see there's still a you know, rightfully perceived or real technology risk. You know, investors are being a little bit more skittish early on at going after those technologies. Welcome your thoughts. Is that what you see?
You know, where does financing in general play a role? What constraints do you see?
I think part of the challenge is we've just had 35 years' worth of capacity expansion across the globe, leveraging one of two different dimensions, either exporting of manufacturing into emerging markets or building capacity in the cloud. And I talked earlier on about the capacity that we need to build, the supply side response we need to provide the capacity we need to meet demand. The only mine you can build in the cloud is a Bitcoin mine. You can't build a copper mine or a cobalt mine.
So we, I think, are all need to embrace the potential for a bit of a reset, and that is that most capital invested in the last three decades has been pursuing capital light, IP-heavy investment opportunities, where capacity could be expanded, returns were very, very high, and the certain parts of the investment market were accustomed to generating 25% returns after tax and after fees. Now, where we are now, I think we need to be a little more pragmatic, is not a second digital revolution, but a second industrial revolution. We need to replumb the economy, and that is really getting down now to technologies that could commoditize quite quickly, that are likely very capital intense. When I was born, they used to be called public utilities.
They generated regulated returns, and moving from, I think an investment precedent that we acclimated to, into the double digits, to potentially a large part of the capital investment that needs to be made to deliver the transition of the economy, generating returns at a high single digit, low double digits, is something that we need to appreciate. But also, that then changes the dimension around technological risk, commercialization risk, and regulatory risk. Most of the technological risk, I think, is diminished, but I think in terms of regulation, the risk of seeing a project delayed, if it's only just generating double-digit returns, is considerable. And the process seeing delayed, whether that's regulation or deficiencies in the supply chain, is something that people are having to underwrite. So the finance is there.
I don't view the issue here as the unavailability of finance.
Yeah.
I think the financial sector is having to recalibrate risk-reward, and I think we're also seeking for help, upstream in delivering a regulatory regime that helps on the right, and, and bringing the expansion in the supply chain that gives people conviction that these projects can be delivered on time and on budget.
Can I please?
Yeah.
Yeah, jump in. So I think I completely agree with everything you said. There is one other thing that needs to be said, which is there is a consumer, there's a consumer who desperately wants lower carbon, lower impact, more circular solutions. And there are industrial providers, utilities, infrastructure companies who are very eager to go make that connectivity work, and they have the technology. I don't think this is a technology issue. I think it's a linkage issue of how do you capture the value that is there intrinsically in the consuming class for these better solutions?
How do you share that across the value chain in a way that allows the industrial companies, the, you know, the efficiency solutions, the utilities, to deliver lower carbon power, nuclear technologies, you know, blue and green hydrogen, et cetera, clean, clean solutions?
Great. Neil, over to you. I, you know, I know that Sysco's a huge consumer of energy for your operations, and, and I know you all have taken steps to seek green energy. Maybe talk a little bit about, you know, the progress you've made and, and what are some of the challenges you've encountered as you've shifted to green energy?
Sure. So in 2021, we set our SBTI goal, which was a 27.5% reduction in our own greenhouse gas emissions by 2030. I think the first thing I'd say is, as a management team, we're very much a purpose-driven organization. It's not marketing, it's real. It's why we said 2030. We didn't say 2050, we didn't say 2040, and we did that because it's gonna be our management team. It's gonna be me, it's gonna be our CEO, our current team, that's gonna figure out how to do it. And we're very purposeful in doing that. It's not a hope and a wish, and a future generation to solve, it's ours to solve is kind of point one. And point two, so if we think about, okay, how are we gonna do that?
There's really two primary levers for us. One is electrification of our fleet. So our fleet are the traditional large diesel trucks that you could think of as an 18-wheeler, if you will. The electrification of that Class A tractor did not yet exist. So we had to go into the manufacturing community and convince them to build that vehicle for us. There's plenty of passenger vehicles we could choose from that are electrified, which is fantastic for all of us, but the manufacturers were not yet producing that truck when we set that goal. So that was a swallow hard moment for us, but we've convinced some manufacturers now to begin to produce those vehicles. Then step two, which makes it even more complex, is 100% renewable energy. So within that fleet, our trailers have three temperature zones.
Our warehouses, which are maybe 600,000 sq ft, on average, have 11 different temperature zones. We're a heavy user of energy, to your point. So to go all the way to 100% renewable while electrifying what's gonna be 35% of our fleet, is how we get, to that goal. And so perhaps to the comment on throughout the chain, there's two components to kind of force those actions, because it's, it's fine to set a goal, but then it's, you know, how are we gonna get from here to there? We are incentivizing our entire management team, not me, not our CEO, not our NEOs, but all leaders across the enterprise on these goals. And we lay out each year, what are the activities that we need to accomplish?
If you draw the slope between you are here and 2030, what do we need to do? Each year, we have a very specific set of activities we need to accomplish, whether it's procuring those trucks, getting the infrastructure in place, getting the renewable energy in place, and we are paying our short-term incentive on that. So that's kind of part one, to be sure we do it. But then there's the business value across it, to the point that Edward just made. So we are Scope three to our customers in the food service space. Our customers are also establishing goals. They will work with distributors who can responsibly get the product to them. That's an advantage for us, and we're fortunate that we have the capital to be able to make that investment.
But then hard work comes in because in the supplier community, those who are producing the food, which is a big impact on all of this, we need to teach them about this. But they will win if they follow us in this journey. So that's the connectivity across the supply chain. We've got the pull from the customer, and we are pushing our supplier, and we're proud to be that connective tissue to be able to do it. But it's hard work, it's a journey, and so we're just trying to be very specific each year on the steps and the actions we need to take, instead of having this really far away kind of objective to shoot for, try and be very specific each year.
I appreciate your response. You know, how do you address supply chain issues? You go out there and work with your supply chain.
Right.
I have to ask, I know on the EV side, you know, charging infrastructure is very hard, especially in the case of the tractors and the types of-
Right
... vehicles. How have you addressed that? What are or what haven't you... You know, what have you seen in dealing with EV charging?
Yeah, infrastructure is a big deal, and we're learning as we go on this journey. We established out in Riverside, California, what we call our first electric vehicle hub. So we're leveraging solar within our own site.
... to receive some of that power, put it in the infrastructure, and charge the electric tractor, and then actually now bring an electric trailer into play. If you're not familiar with how it works, you can have a tractor and then the trailer. If you got an EV tractor pulling a diesel-fueled refrigerated trailer, that doesn't work so well. So, we need the trailer, too. So it's what we call electric vehicle hub, an electric tractor, an electric trailer, fueled by solar on site. We can do that in some instances for that infrastructure, and that works.
We don't have the real estate everywhere to be able to do that, so in other instances, we need to get more creative with the infrastructure and be sure we're leveraging the terms, if you will, on the charging, have the right space to be able to use charging, and in other instances, get even more creative. It helps when we can figure out the right incentives and the right locations to help offset some of the investments we need to make. That's part of the overall mix, as well. But I'd say solar is kind of point one, building the infrastructure with partners, and then probably charging as a service is a path in which we're heading down more so, because we're not infrastructure experts, and that's part of our learning, too.
We're really good at delivering food, but we're not, you know, the expert in infrastructure. There are others who are, and so we're working on partnerships, again, across the supply chain to do that.
Great. Well, we're about done with the panel. Please start submitting your questions. I wanted to just do, before we get to the questions, one last rapid-fire question for the panelists. I won't make this, you know... You'd only have one word. I'm gonna give you a whole sentence. But, you know, you're given that great lamp with a genie inside. The genie gives you one wish. What would you wish to help address the energy transition? You can't wish for more wishes. So in one sentence, what do you-
A long sentence.
Yeah. No. Renee, I'll start with you. Just what, what would be your wish?
You know, I envision, say, a war room of sorts, where, say, you could have, you know, a city, state, nation, but a war room where you're looking at all the energy. You can kind of design what your, you know, your best-in-class situation could be, and then it prints out, "Here's your playbook to go ahead." And then everyone throw in all your solutions, but just make it easy.
So for me, it would be a credible, auditable, fungible, financially tradable way to capture the price of carbon through the value chain and pass the value. Because I think if you could, if you could develop a financial... A, a way to see that financial clarity, you could, you could very easily afford more things upstream than we are doing today.
Every country in the world pretty much is committed to comprehensively decarbonize their economy by the middle of the century. So any director that is approving a strategy for a corporate that's inconsistent with that is putting the company on a collision course with the respective regulatory environment. It's just a reality. So what I would like to see is that every company is proactively auditing its operations to quantify their proven abatement capacity. That's technically and economically feasible today. A probable abatement capacity, technically feasible, but not quite economic. And lastly, their uneconomic abatement capacity, it's either not possible or requires a $150 carbon price that we're gonna fortunately have now. With a view to providing not only the board the information it needs to approve transition plan, but provide the capital markets the insight they need to actually price transition.
I'll go with, consistency of regulations and connectivity across the space, from government down to larger businesses like us, but particularly down to smaller businesses, where we have a lot of our customer base. Small business owners, entrepreneurs, trying to understand whether they're on the supply side or the consumer side, what this all means, and then inconsistency across state borders, makes it even more challenging, for them. So that consistency would benefit all of us.
Great. Great. Well, thank you. We'll switch now to questions. I have a couple questions here, but also, if folks have a question, you know, feel free to stand up. I'll also call on you and try to repeat the questions. But maybe I'll start with one here, which is: How do we ensure net zero by 2030 or 2040 doesn't shift to net zero by 2050, 2060, etc ?
I think, and I'll weigh in, I think a big piece of this comes from kind of the regulatory involvement of the regulatory environment on ESG reporting. Because it's just, it's another layer of, you know, your commitment and sticking to your commitment at all layers of the organization. So this move from voluntary to regulatory reporting, I think you're gonna have to answer some pretty big questions if those dates start to slip.
Great. I'll start with, I don't think net zero by 2030 is possible for most industry, period. So anybody who's telling you that is probably not credible. So I think it's developing the credibility and then ensuring that those numbers and those discussions stay consistent with the actions that are being taken with, you know, 2023 performance goals, 2030 performance goals, and frankly, 2050 performance goals are for my grandchildren, right? I have to act on what I'm doing today. It's a long journey, but we've got to start the path.
I'd say we've got to try and overcome the human desire to oversimplify this. That this is not easy. You know, whether, when and how we get to net zero is going to be informed by the interplay between five different things. Whether consumption habits change, whether technology is developed to help us out, whether the market infrastructure, you know, we need to provide the appropriate economic incentives is in place, whether corporates deliver what they say they will, and lastly, whether regulation is there to provide it. And I think there's been multiple episodes over the last few years where the debate has tried to focus on a singular silver bullet to get to net zero. This isn't just about regulation, this isn't just about the real economy, this isn't just about the financial system, this isn't just about the end consumer.
This is about all of us working together to make some of the hard choices we need to make to deliver the outcome we all really seek.
There'll be a consistent theme here, I think. I'll leverage off one of my colleague's comments earlier. You got to start somewhere, and you need to make progress. You need to be transparent, credible, show the progress you're making, and it's okay if you need to justify a move to a different time, if you're making the progress and moving forward. If you're not moving forward, that's where the challenge will come in. Make progress, start somewhere, and move forward.
Great. So I'm, I'm afraid I'm not tech advanced to see the questions that are coming up here, so can I just take questions? Yeah, please.
So many of you on this panel and on a previous panel talked about the importance of regulation and the need for regulation to create standards and metrics that help each industry comply and get to its goals. That's obviously very different than the current political conversation, at least in the United States, which so often turns toward an anti-regulatory, ideological bent. And I wonder if you could just address that, because what you're saying sounds a lot more refreshing than what I hear in Washington, D.C. every day.
Yeah, I mean, I think my comments come more from the European Commission, CSRD, right? So they, as... You know, we all know kind of what they've put forth. As well as I would say, what they put forth is pretty specific around what you have to, you know, the analysis you have to do and then what you need to disclose. So a lot of us are readying ourselves there. I would say a common thread with the SEC draft was, you know, even just simply TCFD. I think it was mentioned over 250x in that draft. So at least we're starting to see some tea leaves of where this is going to go. In my position, I'm just trying to get ready for whatever it ends up being, that we're ready to report against and be held responsible for.
At the same time, maybe regulatory reporting, again, CSRD. I think our investors are asking the question at the top of the call, right? Every single time. We have, you know, all the stakeholders along the way are asking us about our commitments, our performance year on year, what happened, we have the detail, the level of questions is significantly different than five years ago. So I still believe, even if it's not regulatory in the U.S. we'll be held accountable by the investment community.
You get, go ahead.
As you said, look, I, historic climate policy is focused on making gray activities unattractive. In the last 12 months, we've now embarked upon an alternative approach, which is let's make green activities attractive. And, I do think we need to be careful in terms of how we frame regulation. What most people are seeking certainty in the direction of travel, that over time, certain things need to stop, over time, other things need to start. Just using the stick is not obviously the only way to achieve this. You know, we do need to see some carrots. But I think the other opportunity we've got here is actually leveraging governance rights. That, shareholders don't have many rights, but they do appoint the board. And boards ultimately are accountable for approving strategy.
If strategy is being approved, that's not consistent with the direction of travel that's been set by governments, then I do think there's an opportunity for the investor industry to engage more proactively and seek, you know, strategies consistent with the expectation that has already been provided quite publicly by government.
Look, I'll build on what you said, which is, I find the stick-only approach that Europe has used to date basically has run its course, and I'm not sure that it's going to lead to a good outcome. European industrial production is down dramatically and, you know, emissions are down somewhat as well, but a lot of that has been by doing strange things, like replacing nuclear with renewables. Why not replace coal with renewables or coal with nuclear? That would make a lot more sense to me.
So I believe, fundamentally, that there can be a different, less onerous regulatory model that drives to smart business decision making, because if there really is a consumer who wants a lower carbon product and the stuff you make, like what we do, is 98% of all things you touch have something to do with the business of chemistry, we are part of the solution here. We're going to bring value, and that value is going to be rewarded if it's lower climate impact, more renewable, you know, more circular. So that's important. If you want to regulate the bad actors, I'm all for that. But we have to balance the carrot and stick here a little bit. I love the point about strategy and board. So at Cisco, I'm responsible for sustainability, I'm also responsible for strategy.
So I think having that combination is important and helpful as we think about ultimately
... how do we move forward long term, regardless of what the regulations may be? Completely agree with that, and I would encourage more companies to have that type of thinking.
So, got a question here. We have focused a lot of this, maybe implicitly or explicitly, this panel around electricity. But we know there are challenges with thermal energy. You know, the use of coal, natural gas, for heat. Reactions are, you know, is hydrogen, carbon capture? And, Edward, I'll start with you. I know this is an important topic for Dow.
Yeah. So for us, about 40% of our purchased power is renewable, but there comes a time where you can't do more than that because you don't get enough temperature. Nuclear current technology, nuclear really is too low temperature for what we need to do, which is why we're investing in small modular reactors. We're actually announced our Cedar facility that we're gonna deploy the first commercial industrial use of advanced nuclear technologies by about 2030. You also need, you know, a lot of the business of chemistry makes methane as a by-product. You need to reuse that methane in your processes, which is why carbon capture is so incredibly important. You can take the carbon off it, and then that leaves you, you know, methane less a carbon equals hydrogen.
That's blue hydrogen, and that's how we can use that for heat. I'll just leave it there because I think we're out of time.
Great. Well, thank you all for a lovely panel. We do not have a genie in a bottle, unfortunately. And so I know it's gonna be up to both the panelists here and this group to overcome these important challenges and constraints, and deal with this messy middle. But just on behalf of this entire group, I'd like to thank the panelists, and let's give them a round of applause.
To all the panelists and speakers, we've. It was really fantastic having you take part. It was a really interesting discussion. Talking of transition, we are going to swiftly move on to our next session on the pathway for accelerating EV growth across the global south. It'll be very interesting. And, we're just gonna mic up the speakers, and we'll get started straight away. So thank you very much.
Okay. Okay. So yeah. Hi, everyone. Hi, everyone. We're gonna start the next session now, so if you could make your way to your seats, that would be super. Can you hear me okay? Is it loud enough? Too loud? Yeah? Okay, excellent. Everyone, can we take our seats, please? We'll just give it one more minute, let a few more people come in. Sorry, can we take our seats, please? Thank you. Okay, I'm gonna kick off. Welcome, everyone. Welcome to this session on integrated energy. I'm Toby Morgan. I'm the built environment lead at Climate Group and also lead the work on energy efficiency. Welcome to this event entitled, Is an Integrated Energy Our Next Climate Hero? How Connecting Buildings, Fleets, and Grids Can Fuel the Future.
As a reminder, we've got the live stream up and running, so welcome to all of our online viewers. Really good to see you today. And also a reminder of the hashtag, so if you wanna do any social media, #ClimateWeekNYC. So we'd love to see lots of tweets and pictures of the event as we go along. We're here to talk about integrated energy, and what do we mean by that? So it's the new nexus of the energy transition, linking up on-site, on-grid, on-road solutions. It can achieve not only carbon savings and financial savings, as well as helping balance the grid as we increase the amount of renewables on stream, and also we're, you know, obviously massively undertaking electrification of buildings and transport. It's an area we're really interested in at Climate Group.
We've been exploring it with our partners, Integrate to Zero. I know they're watching online, so hello to them. And also, we've been talking to our corporate network of members to examine what progress is already underway, and examine those remaining barriers as well. What has emerged is really a mixed picture. So there's been some really interesting examples, case studies, one-off projects, but actually progress is still quite slow overall. So in this event, we want to examine, hear from some expert speakers, from utilities, research institutions, solutions providers, to see where we can collaborate on this important area of work for those carbon savings, but also the business benefits as well. Okay, that's enough for me for the time being. So I'm very happy to announce, we've got Dr.
Jessica Granderson from Lawrence Berkeley National Laboratory, who's an energy expert, and she'll be giving us a keynote speech on this exciting area. So Jessica, over to you.
Thanks, Toby. Thank you all for the warm welcome. I have spent my career working at the intersection of energy technologies, the people who use them, and the organizations that embed them into process, so I'm very excited for today's conversation. We have, over a very short period of time, developed a strong fluency in the how-to of decarbonization. We recognize that we have to electrify everything that we can, beneficially, and we have to serve those electrified loads with power from a clean grid. We've made great success towards that front. I show in the plot on the left, the U.S. electricity sector emissions from 2005 to present, and that blue line shows we've already reduced those emissions 35%.
The orange line shows the trajectory of what was predicted at the time, and we've reduced 50% relative to that, and that's thanks to advances in technology, in efficiency policy, and renewables having outpaced expectations at the time. As we've gained that fluency in electrifying everything and serving loads with a clean grid, we've been able to also develop a stronger, more nuanced vocabulary to bring out the fact that energy efficiency and demand-side flexibility are critical to making sure that our energy transition is affordable and also reliable, and that's for two key reasons. Now, I'm showing some work here from Berkeley Lab relative to the California grid. As we electrify, we're going to increase the size of the peak and its timing. So in the top plots I show summer on the left, shoulder seasons in the middle, and winter on the right.
The blue is cooling, the red is heating, and the pink is electric vehicles. We, I'll focus your attention on that heavy black dashed line. That's the system net, so that's once we take out distributed solar and once we take out utility-scale wind and solar. So in 2025, we expect a summertime peak on the California grid just under 30 gigawatts. By the time we hit 2050, you see the prevalence of the electrified heating and electric vehicle loads. We've increased the peak by over 30%, to 40 GW, and we've moved it from the summer into the winter. Reason number two, as we see increased renewables on our grid, we're also increasing the mismatch between supply and demand. California instituted renewable portfolio standards in 2002. By 2015, we had 25% renewables.
By 2020, we had 35%, and we're marching towards a net zero 2045 goal. The plot shows curtailment from 2015 to present. We've increased those by a full order of magnitude, setting a record high this past spring of 700,000 MWh of generation that we could not use. So we've got increasing loads at new times and this kind of dynamic mismatch between the clean supply and the downstream buildings and vehicles that need them. So that translates into high expense and challenges to reliability. We've seen this nationwide. This all speaks to the value in looking to our buildings and fleets for grid services in support of the energy transition.
When we say grid services, that's really three things: It's efficiency to reduce the overall loads, it's storage, so that we can shift energy use to the times of day when our electrons are cleanest, when they're least expensive, and when they're most abundant, and we're also layering in control to reduce the peaks even further. This decreases the need for investment in generation and transmission capacity for that clean grid. Now, the benefits of doing so could be tremendous. Recent results from Berkeley Lab analyses show over $100 billion in avoided cost by 2050, investment in the bulk power system just from our building measures. Now, those avoided costs are enough to offset over 80% of the cost of getting the measures in in the first place.
So those measures on the left, I'll call your attention to the teal and the orange shading. That's envelope, that's HVAC, and that's hot water. Now, on the right, I'm showing the commercial sector in blue, the residential sector in red. It's only the lightest wedges that are efficient electrification. All the other benefits are coming from aggressive efficiency and from demand-side flexibility, and these are benefits that don't even account for distribution system level. That's where we have a lot of constraints on capacity, a lot of aging infrastructure, and it's the interface between our buildings and fleets and that renewable bulk system grid. How we capture that value is the whole reason why we're here having this conversation today. It's through integrated use of our distributed energy resources and those assets that provide. It's not just about being a good citizen to the grid.
I don't think that's anyone's primary goal. We know that there are resilience benefits when the power goes out, and material bottom-line benefits to the owners of these assets. So how do we get it done from a technical perspective, is first getting the assets implemented. That's our mobile storage and our electric vehicle batteries, stationary storage, electric batteries, but also the thermal storage of chilled water and hot water in our buildings, and the actual mass of the buildings themselves. Of course, our distributed solar will continue to play a huge role. Now, the implementation of these assets is being fueled by, nationally by our investments in climate, also, the continuous investment in efficiency programs year after year, $10 billion a year of investment there.
Once we have the assets in place, we can fold in standardized communications to coordinate them, and we need policies in place that require the use of those standards. Then we can fold in the intelligence, and that allows these assets to respond to signals. Now, that might be price, time of use today, or more dynamic tomorrow. That could be grid events, like demand response on really, really hot days. That could be greenhouse gas emission signals. So these technologies are here today. I'm looking forward to the conversation from our panelists about how they're driving their use forward. Thank you.
Thank you, Jessica. Loved that. I could see everyone deep in thought at all that, and it's made you think, so that's what we want from these events. So really good overview. Right, we're gonna go straight into the panel discussion now. So I'd like to invite Mariana Heinrich from the World Business Council for Sustainable Development, WBCSD, up to the stage. And could the panelists also come up to the stage, please? Cara Carmichael from the White House Council on Environmental Quality, Luc Rémont from EDF, Renee Kezar from Johnson Controls, and John Hoekstra from Prologis. So I'll hand over to Mariana. Thank you.
Thank you, Toby, and thank you, Jessica, for that excellent presentation. We're so delighted to be here today and talk to you about integrated energy solutions as such an important topic, and the title of the session is really saying it. Is it the next big barrier that we need to overcome on the pathway towards a really sustainable energy system of the future? The way of how we're gonna look at it in the panel today is we're gonna take two angles to the conversation. So number one, a procurement angle. So we heard it's not about the price of renewables, it's not about the price of storage, it's not about the fact that electric vehicles are being rolled out all around the world.
It's how do you combine these together, and particularly also, how do you get companies and anyone, us being households or living all across the world, to actually look at these solutions in an integrated fashion, and what is it actually that's holding that back today? Where's the action element that we're missing, and why are companies not able to move quicker on installing integrated energy solutions? Cara, I'm really pleased to have you here because you're, you're actually representing the procurement angle from the public side, which can be such a huge enabler in driving these conversations forward. The second angle is: How does it impact the system? That's where Jessica is giving us some really nice examples of the peak impact that we're gonna have to deal with. But as much as it impacts the system, it's also an opportunity for the system.
So how can market design enable revenue streams and actually make the system smarter overall to get into that system of the future, where we've got prosumers, consumers, and suppliers interacting in a smart, efficient way together? So with that, I'd like to first come to John, because John is working at Prologis, and I know that Prologis has been a forefront runner in the deployment of integrated energy solutions, and I actually had one of your colleagues on a panel. I think it must... It was definitely pre-pandemic, so it must be at least four or five years ago, asking him very similar questions about how, how is Prologis doing it? How can you actually have these innovative examples already in your operations today? How did you make the business case work, and how did you kick it off?
Yeah, well, a lot's changed in the last four or five years, obviously, in what's going on. For those of you not familiar, Prologis is the world's largest provider of industrial logistics real estate, so translate that to warehouses, distribution centers that you see all over the place, right? Especially as e-commerce is moving forward, delivering product to shelves. You can think we're about 1.2 billion sq ft. The way that that translates is three of the 10 things in your home probably went through a Prologis warehouse. So the way that we see it is we sit at a very strong nexus point in the supply chain to think about: How can we play a role in decarbonizing logistics?
So that's both in the built environment, in the facilities themselves, as well as per the previous session, if you're in here, very enlightening around heavy-duty truck transportation and freight and goods. So the way that we look at it is, beyond real estate, we can really be an investor and deploy our strategic capital around decarbonizing energy assets that also connect to said buildings. So whether that's on-site solar, we've got about 450 MW of global on-site solar, a goal to get to 1 GW by 2025. How do we, to Jessica's point, think about building grid resiliency and capacity and resource adequacy? So we're also heavy into battery energy storage systems, both behind the meter and participating in front of the meter with utilities. And then as well, EV charging.
So how do we drive that to where? What better place to fuel up the vehicle of the future than at a Prologis facility and warehouse? So today, we've got about 25% of California's Class 8 EV truck charging infrastructure operating. And the way that we did it was, it comes down to economics. And so what we're able to do is leverage some of our scale, I think, to really pick what are the markets to start with, and then continue-
Mm.
-to drive these integrated energy systems at scale, across our networks.
Can I drill down on the economics point?
Please. Yeah.
Because that is so important, and many companies are telling, even though, like, you know, if we do the calculations on paper, then there should be cost savings. There's obviously emission savings. There's often energy savings as well. So all of the decisions that you've been taking, they were all economic. You had no problem pushing them through the investment committees, you know, getting the green light. What helped you on the way?
I wouldn't say no problem, right?
Yeah, okay.
But, you know, all of those come with various cost justification. I mean, for us, it's, you know, developing energy assets is somewhat similar to developing real estate assets, but-
Mm
... returns change, those sorts of things. Getting an executive team comfortable with some of those decision points is an education process that takes some time.
Yeah.
But you know, with a number of the incentives out there, whether it's California, Illinois has a great battery storage incentive-
Mm.
We are looking to sort of say, where do we start with, you know, the green markets, looking at the yellow markets, and then the red markets on the horizon? And that's where I'm excited for this panel to also understand, you know, what is that evolution of the regulatory environment to support, I'd say, the confidence in these sorts of investments?
Yeah. Perfect. Thank you. We'll come back to one of the other aspects from a procurement angle in a moment. I wanna turn it over to Luc. You at EDF are looking at that from a perspective of a grid operator, but also obviously, as a perspective of being a supplier of some of the solutions, as it relates to industrial consumers. So where do you see your role in enabling or being able to enable some of these grid solutions to actually make more money because the market designs and regulations are ultimately supporting it?
Well, first, the ultimate goal is to provide to our customers the best solution. I think, yeah, the situation was well said. You, you described perfectly all the tools that are available. The biggest challenge is really to make our customers aware of these options and trigger these options. Because, you know, the first element is that 60% of the energy that is produced today is wasted. If we can make sure that our customers understand what they can do best out of the energy, there will be more energy available for other users. And we are entering a cycle where, even as an energy producer, we are...
I'm selling energy, normally, I should say, "Take more energy." Now, the reality is that at this stage, there will be not enough energy produced for all the users if we don't make a big effort on energy efficiency at the same time. So as we are shifting towards more electricity in the mix to decarbonize, there is a real need for the consumers to become more savvy, more intelligent on the way they use their own energy. So that's what we are doing at EDF, working with our customers so that we can enable them doing this, and by doing this, helping them in the journey where they can be a smart prosumer, most of the time. They would produce a little bit, they would shift their usage from time to time. So to give you an example, we have 34 million households as customers.
During the last winter in Europe, it's been quite challenging because of the global crisis that we have in Europe. We had to shift the water heating tanks of millions of people just by two hours to enable to have more flexibility in the grid for two GW. So that was equivalent of two nuclear power plants that we could not operate at that time. That was shifted by two hours, providing more flexibility to the grid just by doing this. We could do that because we had enabled the communication processes between the customers and ourselves-
Mm
because we had the smart metering everywhere, because we had many things that were already in place with our customers. So that's for households. We would do exactly the same today with business customers, of course, with a much more integrated approach of their overall energy uses. Not just electricity, but also heating and cooling, bringing everything together so that their equation can be optimized by the hour, sometimes less than the hour... so that we also have the communication protocol with the grid, and we can make a better optimization altogether.
Mm-hmm.
So that's for us, what is integrated energy today, and that's, that's where we are driving the-
Yeah
The effort now.
If you had a little magic wand, and you could change one policy or you know, one regulation, what would you think would be the one that you would change so that, like, you know, the business model for the side of EDF, as well as for the industrial consumers, would even be better than today?
Well, I realize that the barriers are actually quite different from one territory to another.
True.
That's really specific to each territory. You have territories where you have lots of solar, which is, by definition, very intermittent, but no other decarbonized power gen capacities. The answer to this kind of territory is not the same as the one that you would have, like Europe, for example, where we have lots of centralized generation. Solar is just peaky on now, so the elements of instability coming from solar, we are just starting to touch it, and we are able to offset that by dispatchable, decarbonized generation capacities. So that's every territory has its specifics.
Sometimes you have the grid, sometimes you don't have the grid, so there is always one good reason to make an effort, and you should focus on where you are missing the most element, the most important element that is enabling the balance of effort of power and other sources of energy at every moment, the closest possible to the customer. That, that's where the effort should be.
Mm-hmm. Okay, good. Cara, so now let's look at, from your perspective, now working in the public sector, what do you think, first, more widely speaking, in the policy space, what would be the biggest levers that are gonna make a difference for really accelerating the integrated energy solutions that we're seeing not really picking up at the moment?
Mm-hmm. Well, thank you, Mariana, and I also want to thank Toby and Hannah and the Climate Group team. This is a really wonderful and timely conversation today. I guess two thoughts on integrated efficiency to kind of kick off my piece in this is, first of all, it's critical, and second, I'll talk a little bit more about how the federal government is approaching it. So my role as the director for federal buildings is looking at our federal building portfolio, and the federal government is the largest owner/operator of buildings in the U.S., and we're also the largest purchaser of electricity. And so that buying power and that-
Mm
Doing power is all harnessed under the Federal Sustainability Plan and through Executive Order 14057. This came out from President Biden in 2021, and what it really does is puts federal operations on track for net zero emissions by 2050. So in our buildings, this looks like a net zero emissions federal building portfolio by 2045, including cutting those emissions in half by 2032. And we're talking about a large portfolio. This is over 350,000 buildings, 3 billion sq ft. On the CFE side, kind of the complementary piece in this puzzle, the goal established there was to achieve 100% carbon-free electricity on a 24/7 basis, hourly basis, by 2035. And so the intersection of those two points is where this conversation really gets exciting. And I would say we've...
RMI did some analysis to look at, well, what does, what does this mean? What is the value of demand flexibility on the grid? And what they found in a 2010 study to a 2021 study was that in this grid, this grid that we're all in right now, if we could flex this load, it's worth about 3% reduction in GHGs today, based on the grid today. But in a 2040 grid, where there's a whole lot more of those renewables, a lot more wind, a lot more sun that generates when the sun is shining and the wind is blowing, that value of demand flexibility increases to 40% GHG reductions. So this demand flexibility asset that we're talking about here today, it's important today, and it's gonna get even more important in the future.
I would add that from the federal perspective, our foundation really is energy efficiency and electrification. So how can we take the loads that rely on fossil fuels today and convert them to electricity so that we can use those clean electrons when they're generated? I would say that's our starting point. It's not the end state.
Yeah.
So, can you have demand flexibility without efficiency? Yes. Is it something that I would recommend?
No.
No, definitely not. I mean, it would be like water skiing behind a big ferry boat, you know, the car and people movers, you know. It's, you're not cost-optimizing your solutions, and it just doesn't make a whole lot of sense. So we really need to right-size the loads in our buildings, in our federal buildings in particular, and then we can really harness some of the cost effectiveness that flexibility provides.
Yeah. While the government is not a business, you still need to take smart decisions about how do you actually get 350 billion sq ft converted into a net zero by 2032 strategy. What, what do you hear from the ground, particularly? Like, you know, what makes it really hard for people in those buildings who have the job of converting this actual building to turn it into what it should be? What, what do they say? What are the biggest barriers that they face?
I think that there's, as always, there's cost barriers, and I think we're in a unique situation now where we're, we're really emphasizing through the Climate Smart Buildings Initiative at the federal level, which is driving, performance contracting. How can we leverage access to capital that we, as government entities, have, to double down on efficiency and electrification? And I guess I would say, there are some challenges in market. There's perceived challenges in market technology availability.
Yeah.
I would argue that we're there. GSA just within the past month cut the ribbon on a new federal building in Oklahoma City, 180,000 sq ft, multi-tenant retrofit using a performance contract, so lots of hard stuff. And this was really a demand flexibility or a grid-interactive efficient building pilot.
Mm.
And they're saving $400,000 a year, on a $9 million investment. And that's. You know, it was delivered through innovative mechanisms and a deep collaboration with the utility.
Nice!
I think we're seeing it.
Yeah.
It's ready.
It's coming through. You mentioned something interesting there. You know, like, there's there can be perceived misinformation about certain technologies, and I hear this on a regular basis about heat pumps. People saying, "Oh, like, you know, they, they can only do up to 100 degrees. They don't work for my building because..." And then, like, we know, oh, actually, like, you know, technology actually quite moved on in the last five years. You can now get much higher, you can-- And I think that's where Johnson Controls is really important, as one of the companies who's really leading in, in that area of, of, of technology development. And so from your perspective, you're looking at solutions for your own operations, as well as obviously providing those to, to your customers.
So how do you make the business case to your customers that this is a good investment? Coming back a little bit to this economic point that we already discussed earlier, 'cause, you know, you're saying again, cost is an issue, right? So, like, you know, all of the subsidies and the business cases, it's hard, and John was just saying it as well. So Renee, from your perspective, how do you, how do you hear that from your customers, and how do you make the business case towards them?
Yeah, absolutely. I mean, I think, you know, Johnson Controls is a buildings product solutions company for over 100 years, so we've been doing energy efficiency for cost savings, reduction in energy, for much longer than decarbonization was the question.
Mm.
But it's how do you transition it? Because it's, it's not to say it's not without some capital, upfront capital costs, especially when you get into the deeper decarbonization. So how we think about it, and even kind of bringing in integrated energy, 'cause it's important even for the heat pump and the economic question. So we can look at integrated energy within one facility, we can look at a, a campus of facilities, it could be manufacturing, healthcare, college campuses, and really understanding how the system works together. In thinking about integrated energy, systems, it's how do you optimize the synergy between production of energy and then the use? In flipping this around a little bit, you know, you talk a little... You talk about the, you know, the, the amount of energy that is released from buildings, right?
So in our energy efficiency work, what we think about, and a lot of our engineers call this, it's more of an art than just a science, of how do you look at all of this energy lost, or say, waste heat in air con, in air conditioning. Right now, that waste heat, you can dispense it to the air, you can use it for heating another process, to heat up water, which is a cost savings, or you can look to push it to storage, right? All of these are, and I think about it like circular economy of keeping energy in its highest utilities for as long as possible. How do you take some of this waste product and then put it back in to have a compounded effect on energy efficiency and then again, cost savings?
Mm-hmm.
'Cause I do believe how to unlock and really build momentum with any organization is to show them the economic value. An example that we have, and I'll bring in the heat pumps, is within the healthcare. So hospitals have a need for high cooling temperatures and high heating temperatures. And so our engineers will go in, and they'll design a system where, through chilling, there'll be amounts of waste heat that then is kinda pushed through our heat pump system in order to have that high-temperature heat. They're always trying to think about how do we keep that energy within the system for as long as possible.
So it doesn't always a hundred percent add to that economic question, but I think when you come in with thoughtful, smart solutions, where we're conserving energy to a different degree than we already have, and you bring in something like a heat pump, you have electrification, you have low cost, and you have the high energy of heat, people are starting to see that business value. So we try to focus on, you know, at least how, how can we keep it whole? The other, the next big piece that we're looking at is in high heat climates. So where this kind of use of waste heat may not be as always needed as somewhere in a colder temperature, how do we look at sector integration?
So an example we were just talking about the other day is a facility in Saudi, you know, where we have a lot of waste heat from all of their cooling. Are there other sectors who could use it? So we're looking at manufacturing within pharmaceuticals or chemicals or food and beverage and really looking at how can we pull cities together, that collectively you can draw down the cost. So just a couple different dynamics. We don't have it completely solved, but we're continuously trying to work on the most efficient, you know, solutions that are available.
Yeah. I find that really interesting how you're phrasing it, because actually what you're telling me is that you're not trying to sell the actual, the actual solution. You're not trying to sell the heat pump, but you're selling the story, you know, that is behind it, grounded. And that's, you know, ultimately, that's what most of us in the audience and in the panel probably do most of our time. So, good. One thing, do you have any examples of, you know, how you implemented a system for your own operations, and what your internal learnings were from that?
I could talk for days. Yes. So we, you know, so Johnson Controls does all these wonderful things that I just described. Okay, so I'm also responsible for getting us Scope one and two to Net zero by 2040. In our facilities, 1,300 facilities worldwide account for 50% of our greenhouse gas emissions. So we are certainly on the path of dissecting which regions to focus on, which for us, it's North America, is 40%, and Asia Pacific is the other 40%. Our some of our highest emitting sites are right here in the United States. So what we did is we actually took a facility in Norman, Oklahoma, you say Oklahoma City, and we created a showcase site of not just all of the solutions I talked about. We did on-site solar, we did EV charging.
That way, we also have not only a case study of our site being decarbonized, but a place for ourselves and our customers to go and see energy efficiency, electrification, the digital optimization underpinned with renewables. So we're trying to build at least that case study where we can test models out. We're also, though, taking that case study and translating it to the next 3 sites in the U.S. It's now, I would say, more of a programmatic approach, where we kinda spread some of the improvements. That way, we get some scale across our facilities, but it's also a way that we're just looking to fully decarbonize. Our targets are 55% by 2030. We're at 42. Most of that has been energy efficiency, some electrification. So now we're at that next tranche of work where, you know, it does cost capital.
We use some innovative financing models, where we take that upfront capital cost, and we put it in as OpEx. That way, it's a little bit less on the and from the cost as we go, but we're trying to, you know, work all the mechanisms we possibly can to truly hit 55%, let's say, a few years early. We don't wanna be sitting here October of 2029, wondering how we're gonna get there.
That sounds good. I was interested in the internal element of it because, I think what, what we've been hearing quite a lot at WBCSD as well with our, with our Switch project, which looks at the integration of, all of these different elements and, and really making the business case, which again, like, you know, when you do a calculation, it works. But one of the things that we keep on hearing is also that companies are really struggling with internal siloing, between, procurement, finance, sustainability, building operation or, or industrial, facility operation.
We've been recommending for years, honestly, to have task forces internally that really drive a strategy towards a specific energy overall strategy for the entire company, to only looking electricity use, but also how do you actually decarbonize all of your transport and your buildings and manufacturing? And, you know, we've got nice best practice, like, you know, and nice examples of, well, here are the top tips to do. It's not helping. You know, so it's not actually... Companies are still telling us the same thing about this area. John, how did you Did that Was that a problem for you at Prologis, or have you heard this from, you know, other peers who are struggling with exactly this internal siloing problem?
Yeah, certainly. And I think a lot of it comes down to is, you know, all of these different functions or groups are incentivized by different things.
Mm.
Meaning, if I'm in procurement, I wanna manage to tightly to a budget. If I'm in finance, I gotta make sure that that investment is in line with kinda that finance strategy. And so I think in the space of things like integrated energy systems, a lot of times, too, it may or may not be, and generally not, central to what that business does. And so you begin to compete for capital as it relates to all of these different things.
So I think the one thing for Prologis that has been super effective is, you know, engaging with our ExCom to understand how does it integrate into the core of the future business strategy for the organization, and then using that, a little bit in a trickle-down effect, to educate real estate, educate procurement, educate these different groups, and it's not a one and done. It's a very... You know, you've got to go many times to that to help educate and really, almost bring folks along where they feel empowered. They're actually the ones driving the activity as well in collaboration and as a team.
And so long as that meets financial hurdles or other things that are set forth, we found a lot of, lot of success in sorta breaking down those silos and really trying to meet at a place where everyone's working, you know, in harmony on those opportunities.
So if there's anyone here working in procurement having exactly that same problem, then please do reach out to John for the best lessons learned. Luc, do you have, and this is an honest question because I don't know the answer, do you have the same issue in EDF in terms of like, you know, that the people who are working on the distribution side are not necessarily talking to the ones dealing with the industrial customers? 'Cause they're completely different business units. You know, in Europe, they're actually unbundled, making it even harder. Do you have the same problem, and if yes, how do you actually navigate around that?
Look, we are a company with 170,000 employees.
Yeah.
So yes, there might be some silos here and there. So now the main challenge we have is to act as one, first, on our own production. We are starting from a production that is already 91% decarbonized, so there is not a lot of equivalence in the world of utilities producing 91% of their electricity for more than 400 terawatt-hours. It is already decarbonized, but even that, we need to bring it to 100%. So that's the first element, and that's a common goal for the entire company to move there. But the most important element for us is to drive the impact for the customers, is to work with the customers-... And this is where the silos might occur, because-
Mm.
We are specialist of the EV charging, we are specialist of the supply of electricity.
Yeah
Specialist of the rooftop solar.
Mm.
Where the integrated energy plan comes together is when-
Mm
you bring all these specialties together, and the customer-
Mm
the one who produces and uses the energy, becomes the center of the system. That's the challenge we are currently in, which is to bring all these components that are strong in the company, all of them being the best in their area, working together around the customer, so that at the end, what wins is the customer interest into decarbonization, 'cause this is the winning game.
Mm.
So that's where we are today.
Yeah. Thank you. So to bring our discussion to a close, I'd like to get my magic wand out again and see Cara. So, like, I'm not gonna ask for one silver bullet, right? 'Cause there's no silver bullet here. If there was, like, we had it, right? But, so hence, it's more a question of if you could flick your magic wand, and you could get rid of one barrier that you would feel would make a real difference to the task given to you, decarbonizing all of these public buildings, like, you know, which one would you just switch which away?
Yeah, good question. Well, Amory Lovins, from RMI, said, "We need a silver... It's a silver buckshot approach not like a silver bullet." So it's gonna take a lot of different fronts to make it work. But from, I think, from an industry perspective, and, I'm an engineer and an architect, and I love talking about controls and mechanical systems and, you know, show me some BAS systems, and I'm, I'm at home, but it's just not cool. So, like, and I, I'm cool. Like, that's okay. I accept that maybe some of us in this room get excited about that, but if we could find a way to make it more interesting and a little bit, like, take the nerd out of these solutions, I think it would go a lot farther.
Mm.
'Cause it's really like leaning back on the foundation of, you know, strategies that we know how to do today, and we can do it. I mean, you guys can deliver with your eyes closed, but it's... We just need to make it a little bit more desirable.
Yeah, we know that engineers vote here.
I thought I might be in good company.
Wonderful. So it's coming back to the storytelling aspect, right? We're, we're bad at telling the story. Okay, Renee, what would be your magic wand flick?
That's a very cool engineer recommendation. I think it's, for me, I would say on permitting. So any new projects that you have regulatory district heating, district cooling, built into the project requirement.
Okay, wonderful. Thank you so much to this excellent panel exploring with us together, like, you know, what are the barriers today, what are real barriers, what are perceived barriers? You know, how can we look at this topic from different angles of business procurement, of public procurement, but also the system integration with the grid that offers different impacts and different opportunities. Thank you to the four of you for being present here today. Thank you again for Jessica, and I think I'm handing it over to Toby for a couple of closing remarks.
Yes.
Yes.
Thank you. Thank you, Mariana. Thank you to the panel. Give them a round of applause. Could I ask the panel to come down and take your seats, please? I was gonna do my summary with you on stage, but the stage is a bit tight, so if I don't want to be stood in front of you, you know? Yeah. Thank you very much. And yeah, really interesting discussion. Really enjoyed that, and I think we're in a safe space here to say, you know, we're proud energy nerds in this place, so I think we're preaching to the converted. But yeah, we do need to tell those stories and make it, make the business case, make those wider organizational benefits clear as well. I just wanted to point to two QR codes on the screen here.
So the one on the left, we really want to continue to explore this topic with Climate Group, with our partners. We would love to talk to you. So please go to this QR code, fill in your details, and we will, you know, get in contact with you. But as we've heard from this session, it's such an exciting area, such a growing area. Like Cara said, it's critical, we need to be doing this, but progress is still too slow. So yeah, please get in touch, and we would love to talk to you about what your organization is doing on this. And what Climate Group tries to do is accelerate action, so bring together our corporate voice, our government voice, to really accelerate action, and we can really collaborate on this to get this thing going.
And also the one on the right as well, so WBCSD, Mariana, has produced a report on integrated energy, so that's well worth a download as well. So please go to that site, and download there. But yeah, I think that's it. We're a bit early, but I think we can wrap up there. I know there's lots of questions we could ask, so please come and grab me or the panelists afterwards. We would love to talk to you further. So I'm gonna wrap up there. Thank you very much, everyone.