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Gary Hunt is Founder & President, Scalable Growth, an independent strategy adviser to energy technology and information services companies on leveraging intellectual property for scalable growth and go-to-market strategies. His checkered past includes stints as VP-Global Analytics &... More
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  • Sustainability Treasure Hunt at Wal-Mart

    The goal was announced with great fanfare.  We will reduce greenhouse gas emissions by the equivalent of 3.8 million cars within five years---that’s 20 million tons across our supply chain by 2015.  We expect all of our suppliers and vendors to participate in achieving this goal and we will measure their performance. Only this was not some politician or government bureaucrat handing down this pronouncement, this time, it was serious because the man doing the talking was the CEO of Wal-Mart!

    “Energy efficiency and carbon reduction are central issues in the world today.  Wal-Mart has been working to make a difference in these areas, both in our own footprint and our supply chain. We know that we have an opportunity to do more and the capacity to do more.  Reducing carbon in the life cycle of our products will often mean reducing energy use.  That will mean greater efficiency and, with the rising cost of energy, lower costs, making our business stronger and more competitive. And, as we help our suppliers reduce their energy use, costs and carbon footprint, we’ll be helping our customers do the same thing.”

    ---Mike Duke, Wal-Mart CEO and President

     Cynics may say this is a crass attempt by the world’s largest retailer to get politically correct with the world by throwing its weight behind the carbon reduction movement.  Wal-Mart officials described it as a search for treasure in the form of cost savings from direct energy use at Wal-Mart stores and distribution centers.  They also see that treasure multiplying exponentially by expanding their efforts across their vendors and suppliers making both the company and its suppliers leaner, meaner, more competitive and---oh yes, we almost forgot greener too. 

     

    Now this is sustainability we can believe in, but let’s face it, Wal-Mart may actually have more influence, be faster in achieving the goal of reducing greenhouse gas emissions than the Federal or State governments, and---more importantly, Wal-Mart is not in line with its hand out for Federal stimulus payments.  But its goals are even broader than this announcement and laid out clearly on its sustainability home page:[1]

    “At Wal-Mart we know that being an efficient and profitable business and being a good steward of the environment are goals that can work together. Our broad environmental goals at Walmart are simple and straightforward:

    1. To be supplied 100 percent by renewable energy;
    2. To create zero waste;
    3. To sell products that sustain people and the environment.”

     Just as important to recognize here as Wal-Mart’s strategy is the shift in approach by one of the country’s most important environmental protagonists—the Environmental Defense Fund whose managing director for corporate partnership, Elizabeth Sturcken said Wal-Mart was defining a goal that was aggressive yet achievable and she applauded them for rolling up their sleeves and taking action where they could effect change directly without waiting for the next Copenhagen conference or the Federal government to do something.

     Wal-Mart has also hired independent energy efficiency consultants and a carbon measurement firm to search for the treasure and add up the savings while they measure progress toward the goal. The other thing I liked about this Wal-Mart approach was the transparent concept of a Sustainability Index.[2]   By measuring the energy use, potential savings from efficiency, and carbon footprint of each product Wal-Mart sells it creates a powerful, effective and targeted process for achieving its broader strategic environmental goals.

    The reality is when so much of what America consumes is produced internationally the ONLY way to be serious about reducing emissions across the supply chain is with an integrated approach like this.  Setting arbitrary targets for emissions reduction enforceable only on American producers may be good politics but it is lousy policy.

    Mike Duke, Wal-Mart’s CEO described this process as creating an open, shared database to communicate substantive information to consumers about the sustainability and lifecycles of the products they purchase from Wal-Mart stores. The three-step, five-year process to produce the sustainability index includes:

    Survey Wal-Mart Suppliers’ to Get the Facts about energy use, climate actions, materials efficiency, natural resources, and people and their community impacts.[3]

    Make the Data Transparent by creating a consortium of universities, NGOs, retailers, suppliers, and government to turn the data collected into actionable research, measurements, and peer reviewed analysis of results to improve transparency.[4]

     Help Our Customers Make Informed Decisions by turning the information and insight learned by the consortium into “a simple tool that informs consumers about the sustainability of products” so they can make more informed purchase decisions.

     

    So what?

    These actions are obviously good public relations by Wal-Mart, but it is more than that---much more.  Wal-Mart decided to spend the money used previously to fight off its critics to take actions that improve its shareholder value, the value it brings to customers through lower prices, and its own bottom line. 

    The Environmental Defense Fund also deserves a lot of credit for shifting its strategy to encourage partnering with the business community instead of endless litigation to help achieve its environment policy objectives.  Institutionalizing a sustainability strategy at Wal-Mart that is good for the environment and good for the bottom line ---and is a much more sustainable achievement than all the lawsuits put together.

    So here’s a message to Washington: 

    Forget Waxman-Markey ---while you boys were scoring political points for the TV cameras Wal-Mart, EDF and a bunch of others likely to join them are getting the job done. 

    How can you help?  Get out of the way!


     
     
    Disclosure: No Positions
     
     
    Mar 11 10:44 AM | Link | Comment!
  • Peering into the Energy Future: Signposts & Setbacks

    This is part of an occasional series looking for signposts of our energy future.  It is not a forecast or a prediction, but a search for clues about the path we seem to be following to meet our energy needs.  I also included a few bumps in the road.

    Signposts of our Energy Future

    1. Unconventional Gas is a 100 Year Winner!  The steady growth of natural gas supply from unconventional sources like shale plays across North America is real and sustainable.  That was the clear message from speakers at the IHS CERAweek conference in Houston.  Jim Mulva, CEO of ConocoPhillips told the crowd on oil day that the proved reserves of natural gas from shales has grown from 30 years to more than 100 years supply with more to come.  While this is not new news it does represent a significant recognition that unconventional gas is both substantial and sustainable.  Even Energy Secretary Steve Chu acknowledged that natural gas was the key to America’s energy security and a major factor in achieving any reduction in greenhouse gas emissions from coal.  He told the CERA crowd that he had asked the National Petroleum Council to begin a study in Spring 2010 of the Prudent Development of North American Natural Gas and Oil Resources.  So What?   Expanding development of America’s domestic oil and gas resources is essential to our energy security and a key factor in restoring America’s global economic competitiveness. The potential for oil & gas from unconventional sources depends upon American technology and America’s oil and gas expertise being demonstrated in play after play across North America. Will this open the door to offshore drilling?  Too soon to say.  Will this be good for the environment?  Yes, since natural gas has one-half the emissions impact as coal.  Will gas expansion hurt wind and solar development?  No, since renewables require backup to offset their intermittency. Is domestic oil and gas development good for America’s economy?  DUH!!!
    2. Economic Recovery is Slow but seems Durable.  OK, the glass is half full, but after all we’ve been through we’ll take it.  Key signs of green sprouts include the sharp growth in the ISM index with industrial production up 5.3% since it bottomed out in June according to Wells Fargo Economics which also said that manufacturing jobs grew in both January and February suggesting that we have now eaten up excess inventory and suppliers are beginning to restock the shelves to meet the strengthening of consumer spending which has also been stronger than expected.   Well Fargo Economics predicts real GDP growth of 3.4% in Q1:2010 but still sees slower growth by midyear.  So what?  So the rough spots remain stubbornly high unemployment which is always a lagging indicator and the continued problems in the housing sector.
    3. Is the Stimulus working? And do we Need it?  The Administration and Democrat majority in Congress claim the $862 billion in stimulus spending approved is saving jobs and doing its job of turning the economy around.  But others who are tracking the progress and problems with stimulus spending tell a different story.  ProPublica reports that only $195 billion of the stimulus money has been spent with another $151 billion somewhere in process.  You can read their report here.[1]  So What?  If the Government cannot spend this stimulus money when we need it, do we really need it?  And if the economy is turning around on its own BEFORE we get all this stimulus money handed out could we just save the billions not yet spent and reduce the deficit?
    4. Renewable Energy Market Share is Growing but So are Rates.  We continue to see major expansion of the market share of wind and solar power generation across America driven by the state renewable portfolio standards. But this massive growth has only raised the total installed capacity of renewables to something like 9% but not even this fast growth is sufficient to materially affect the market share of coal and certainly will not do so cost effectively.  So what?  Utility rates are programmed to rise dramatically as the above market cost of renewable energy is factored into rates on top of the costs for emissions reduction and smart meters.  OUCH!
    5. Electric Demand is Returning to Historic Levels---will that mean shortages ahead? The US EIA short term forecast for U.S. Electricity Consumption assumes 5.5% growth in manufacturing output during 2010 which means an expected growth in electricity sales to the industrial sector of about 1%.  EIA forecasts electricity sales to the residential sector to grow by 3.5% during 2010 assuming normal weather. Total consumption of electricity across all sectors is expected to grow by 2.0% during 2010 and by 1.5% in 2011. [2]  So what?   These are signs that we are in the build up stage of the next electric boom and bust cycle and one signpost of that stage is perceived and real constraints on power generation. The states have favored renewable energy for most incremental power generation additions and many, many coal plants have been cancelled or deferred in the face of uncertain cap and trade regulation.  We have reduced our lead time for power plant construction and return to historic demand levels for power mean that the only practical choice to quickly catch up to demand will be to build natural gas combined cycle plants.
    6. US is not Serious About Electric Transmission.  The failure of US DOE to release the 2009 Electric Transmission Congestion Study due to Congress last September is a clear signpost that the US is not ready to face up to the need to take substantial actions to upgrade and expand the interstate transmission system essential to bring new renewable energy projects to market and enable smart grid investment to be practicable.  Problems are likely political given the historic conflict between the States and Federal Government over control of transmission siting. So what? Smart grid requires broad market access to make the networks and efficiency and demand response programs scalable.  Without transmission access new renewable solar in the Southwest and wind in Texas, Iowa and elsewhere cannot reach the load centers.   Federal preemption of the states in building natural gas pipelines has created a common market across North America for gas that is serving us well.  The fragmented state by state approach to electric transmission is holding us back and undermining our investment in smart grid and renewables.
    7. Utility Ratepayer Tea Parties Ahead.  There is a looming problem of rising utility rates brought on by the pancaking costs of renewable portfolio standards, feed-in-tariffs and other subsidies, the cost of emissions reduction especially AB 32 in California, and the rolled in costs of smart meter installation. So what?  So expect ratepayers to start coming to the street with signs when their rates double or triple over the next five years as a consequence of the political aspirations of politicians and regulators who have approved all these programs.  Polls show that ratepayers do not see this coming and it is likely to hit the fan before the economic recovery fully takes hold.


    The Energy Business Thrives on Volatility

    Peering into our energy future always reflects the volatility and surprises that characterize the energy business.  Add that to the natural boom and bust cycles of the business and you find a frothy stew simmering and ready to boil over.

    The good news is we have more choices today given the growth in unconventional natural gas that reduces our dependence on imported LNG and turns upside down the once forecasted transformation of our domestic gas market into a global gas dependence on the same countries that send us oil. 

    The other good news is the growth in clean and renewable energy from wind and solar and the exploding global demand that is bringing China and its low cost manufacturing prowess to bear driving down the equipment costs for wind turbines and solar panels.  If some of the stimulus money allocated to energy ends up in China because we bought their renewable equipment it is a good sign that the Chinese are our friends because they are committed to driving down the cost of renewable energy to grid parity prices in order to capture market share for exports.  When they do that we can end the subsidies of wind and solar and force them to compete on a level playing field with natural gas and clean coal.

    Now that’s an energy future worth working to achieve!




    Disclosure: No positions

    Disclosure: No Positions
    Mar 10 2:16 PM | Link | Comment!
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