HBS and Advanced Leadership Institute Think Tank on Energy Recap
- Opening Keynotes
- Panel: Shaping Policy
- Panel: Remaking Energy at Scale: Issues and Opportunities
- Panel: Reshaping Demand at Scale: Issues and Opportunities
- Day two opening remarks
- Panel: Where is the VC/PE Model Working – and Not Working – and Why?
- Panel: Customers, Partners, and the Challenges of Scaling
- Panel: Leadership for Multi-Stakeholder Solutions
Dr. Samuel Myers
- Many people don't consider the impact of climate change on the poor.
- in 2009, ~1 Billion people (15% of the population) were malnourished
- To meet demand, food production world wide will have to be doubled in the next 40 years.
- A 1°C rise in temperature results in an ~10% reduction in major grains yield
- Ozone levels are expected to rise 20% in next 40 years, resulting in a 10-40% reduction in crop yields.
- “Impacts of climate change will be indirect, systemic, and surprising.”
Dan Schrag
- Energy Supply world wide grew 20 fold between 1850 and 2000, while fossil fuel usage grew 140 fold.
- CO2 has never been above 350PPM in the last 650,000 years (possibly 35M years) and is now 390 PPM
- “We have no clue what is going to happen in the future to the climate”
- The real question shouldn’t be about setting limits, we should worry about whether we can avoid going above 1,000 PPM.
- By the end of the century, snow melt in the Sierras will be 60-90 days earlier in the year. (Central Valley of CA will not sustain agriculture if that happens)
- Only 3 ways to reduce atmospheric carbon and emissions: Efficiency and conservation, non-fossil fuel energy, and carbon capture/sequestration.
- “Climate change itself may limit climate change.” – Will there be a negative feedback loop?
(Top)
- Moderator: Susal Leal
o Trip Van Noppen (EarthJustice)
o Douglas Foy (Serrafix)
o Robert Stavins (Harvard University)
o Nancy Kontou (European Commission)
- Nancy Kontou
o Copenhagen Accord doesn’t enable anyone to meet the scale of the of the challenge we face
o Accord useless as a non-binding agreement, but useful as a building block moving forward
- Robert Stavins
o “Climate change policy is a marathon, and not a sprint”
o Copenhagen was a logistical nightmare, featuring much political grandstanding, saved at the last minute but building a framework.
o Of 197 participating countries, only 20 account for 90% of emissions.
- Douglas Foy
o Buildings use large percentage of energy, and solution has to be in the existing building stock
o “Cities are the answer”
o Businesses need to be sited in good locations with transportation options.
o Policy and innovation have to flow from city to state to region to nation
o US outlook is “Spend, Borrow, Patch” while China is “Save, Invest, Build”
- Trip Van Noppen
o To move forward, we need to frame policy as business issues rater than climate issues
(Top)
Panel: Remaking Energy at Scale: Issues and Opportunities
- Moderator: Forrest Reinhardt (Harvard business School)
o Jim Hackett (Anadarko Petroleum Company)
o Kevin Knobloch (Union of Concerned Scientists)
o Jim Rogers (Duke Energy)
o Timothy Wirth (UN Foundation, Former US Senator)
- Jim Hackett
o “Properly priced oil will drive alternative fuels”
o Natural Gas and Nuclear are scalable, Wind and solar are not
o Water usage, energy security, and balance of system are too often ignored when considering energy
o The discussion needs to be shifted to what is right for the world, and not what is right for shareholders.
o Usage of Natural Gas for 50% of energy needs would go a long way to meeting standards set in Waxman-Markey bill
o A price on carbon above $50 would drive the usage of renewables, but “not in my back yard” hampers scalability, and less than $30 would mean business as usual and no changes
- Kevin Knobloch
o The sense of urgency among Climate change scientists is at a panic level
o Smart policies will expand markets create new revenue streams, and yield environmental and health benefits
- Jim Rogers
o All of Duke Energy’s infrastructure will be retired or replaced within 40 years
o Duke energy is the 3rd largest emitter of CO2 in the US, as well as the 3rd largest producer of carbon free energy.
o “Utilities have to balance affordability, reliability, and clean”
o Utilities are making huge decisions without a road map – policy certainty is needed
o Natural Gas is like the crack cocaine of the energy industry because of the inherent volatility in price while fostering dreams if instant and clean energy
o 70% of the energy needs in the world can be solved by utilities and transportation
- Timothy Wirth
o The political system is “keeping the ins in and the outs, out” and it will only get worse going forward
o Change needs to spring from the individual level and work upwards, not top down.
o “There needs to be a relentless narrative around why you are doing what you are doing.”
o Political friction drives greater understanding
(Top)
Panel: Reshaping Demand at Scale: Issues and Opportunities
- Moderator: Arthur Segel (Harvard Business School)
o Henry Chow (2010ALI Fellow, IBM China)
o Ken Hubbard (Hines)
o Meghan McDermott (Robert A.M Stern Architects)
o Dayna Cunningham (Community Innovators Lab, MIT)
- Henry Chow
o “Green” is a market opportunity of $50 Billion
o IBM has made enough efficiency progress to power Paris for a year
o Don’t wait for legislation, make change happen on your own
o IT only consumes 2% of global energy
- Ken Hubbard
o Mayors own the “green” issue
o Exisiting building stock efficiency is key in going forward
o Efficiency retrofits to existing buildings will be done if payback period is between 1.3 and 10 years
- Meghan McDermott
o “It is not enough to just design and build an energy efficient building, it has to be managed as one as well.”
o Geolocation is critical to determine the starting point of the conversation – different resource scarcities in different places
o “Metrics are everything”
- Dayna Cunninghm
o Social exclusion aspects of sustainability need to be addressed
o Energy Efficiency is hard to scale in a residential market
o Recommended reading: “Utopian Imerative in a time of crisis”
o 50% of members of the building trades will retire in the next 5 years. Huge need for trained replacements
(Top)
Bill Sahlman (Harvard Business School)
- Government policy is randomized (it changes every 4-8 years)
- There is a need to frame the issue as insurance (i.e. $1B spent for diabetes research against an ongoing $200B cost stream). In 2009 there was $683M spent on energy efficiency, renewables, and nuclear; projected $200 Trillion dollar cost stream.
- Typical VC mantra is “Buy low, sell high, collect early, pay late” while CleanTech mantra is “Buy high, sell low. Collect late, pay early.”
- Some stats from the VC industry
o 50% of all distributions in the past 15 years came from 29 firms
o 63% of investments yield 3.8% of returns (<1X) while 4.3% of investments yield 61.7% of returns (>10X)
(Top)
Panel: Where is the VC/PE Model Working – and Not Working – and Why?
- Moderator: Bill Sahlman
o Will Nesbitt (Good Energies)
o Ajit Nazare (Kleiner Perkins)
o David Prend (RockPort Capital)
o John Lushetsky (US D.O.E.)
- Will Nesbitt
o Good Energies invests along the whole spectrum ranging from expansion stage to project equity
o Project investing informs decisions on emerging and manufacturing investments
o With 165 GW of solar to be installed in near term, investment in this space ($600-800Billion) is a good opportunity
o There needs to be simplicity in tariff regulations
o Put a price on carbon – any market opportunities rely on it
- Ajit Nazare
o Kleiner Perkins has $1.5B to invest in green tech
o Looking at 6 sectors: power generation, renewable fuels/chemicals, transportation, smart grid/storage, energy eff. (supply and demand), and waste/water
o “If your CEO can’t raise money, God help you!”
o Capital intensity determines investment strategy
o Power generation is high capital intensity (>$250M in equity investing), means project finance and government funding
o Low capital intensity (i.e. energy eff.) leads to traditional VC investing
o DOE needs to increase the money for basic science (there is a 15 year lag period)
o Transparency in DOE awards is desperately needed
- David Prend
o “In energy, technology isn’t the barrier, it is economics.”
o Capital intensity isn’t the worry, it is all about the value proposition
o “There is no such thing as a level playing field in energy.”
o All money being invested by the government right now is going towards playing catchup, and not towards getting ahead
o Need a strong internal demand for energy products before they can be exported.
o A price on carbon, while needed, wouldn’t help ANY of their portfolio companies
o Non-profits need to shift public perception and drive behavioral change.
o Many “me too” companies in a sector are a good thing – means you will get winners and losers
o Residential –everything- is a fragmented marketplace; maybe a branding play is needed
- John Lushetsky
o Walls are breaking down between government and private sectors
o Government is looking to avoid blindly throwing projects/companies/investments over the wall
(Top)
Panel: Customers, Partners, and the Challenges of Scaling
- Moderator: Joe Lassiter (Harvard Business School)
o Alan Greenshields (Fortu PowerCell)
o Michael Skelly (Clean Line Energy)
o Craig Huff (Reservior Capital)
o Jeff Kupfer (Atlas Energy)
- Michael Skelly
o Capital markets allow companies to shift gears to match funding to growth stage
o “Texas doesn’t get the credit for leadership in renewables that it deserves.”
o Shift the debate to local and state level as gridlock happens at the national level
- Craig Huff
o Partner with multi-nationals to get to scale
o Emerging markets have different roadblocks
o Politicization of utilities causes problems
o US hasn’t done nuclear plants well, but others have.
o Previous problems around nuclear plants stemmed from changing the regulations halfway through.
- Alan Greenshields
o “Getting to massive scale is only important in commodity markets”
o The stepping stones along the way to massive scale are niche markets
o The question of scale is being asked too early most of the time
o ARPA-E is looking too far down the road
o Lack on IP respect in China is hampering interenal innovation there
o Find trustworthy partners
- Jeff Kupfer
o Tools that the government has are very limited and developed over a long period of time
o Friction between career DOE employees and political appointees causes problems as well
(Top)
Panel: Leadership for Multi-Stakeholder Solutions
- Moderator: Rebecca Henderson
o Jonathan Rose (Jonathan Rose Companies)
o Ray Rothrock (Venrock)
o David Vieau (A123 Systems)
o Mindy Luber (Ceres)
- Jonathan Rose
o “Boundaries are entirely mental”
o Looking at energy issues forces you to balance three time scales (immediate, next decade, and next century)
o The way to solve issues of great complexity is to break it down into simple projects
o A social mission can create a structure that generates reliable cash flow, as can the integration of the public and private realms, health, and energy concerns.
- Ray Rothrock
o “If you hear about something three times, listen up!”
o Solutions to energy problems already exist – pattern recognition is key
o Four groups, four actions
- Government, industry, technology, public
- Adopt, adapt, innovate, evolve
o Action plan for the future
- Put a price on carbon
- Electricity baseload – add nuclear power to replace carbon
- Expand renewables – develop storage
- Mobile fuel innovation
o “Separate what government can and should do from what it actually does”
- David Vieau
o Government cooperation was key to A123’s growth curve
o Prove you can do it once, gain trust, prove you can do it again
o Build opportunities around multi-stakeholder solutions
o Provide continuous differentiation
o Develop the market demand while developing your product is key
o Innovation in the national labs should be kept here in the US
- Mindy Luber
o “Think about the issues, not the politics of the issues”
o There is a disconnect in most companies between the board room and the copy room – buy in must be found at all levels
o “Sustainability is not about compliance”
o Until there is a price on carbon, companies will have to work to show that climate risk is a financial risk
o Companies are starting to realize that sustainability is about shareholder value, not shareholder action
Upcoming
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January 30, 2012 - 5:30pm - 7:30pm
