Utilizing Electricity More Efficiently with Schneider Electric’s Shon Anderson
February 7, 2011
JOHN SHEGERIAN: Welcome to Green is Good. Mike, it’s so wonderful being here and sitting with you today. MIKE BRADY: Well, absolutely, John, and happy holidays to you. We’re sitting here with a big old cup of cheer and a cozy fire going on – environmentally friendly, of course – and we are looking forward to entertaining, informing, and empowering our audience. There’s so much going on in the green revolution, and it’s more than just a thing that seems to be a passing fancy. Let’s face it, kids. The environment and stewardship is what it’s all about. JOHN SHEGERIAN: Well, that’s our holiday gift today to all our listeners. We truly have two, again, great guests. We have Schneider Electric and we have the University of North Texas, and they are going to so inspire all of our listeners. So I think we’ve got to listen to this commercial first, and then everyone should come on back to the holiday edition of Green is Good. JOHN SHEGERIAN: Welcome back to Green is Good, and we’re so honored today to have Shon Anderson, who’s the Vice President of Sales and Energy Solutions for Schneider Electric on with us today. Welcome to Green is Good, Shon. SHON ANDERSON: Thanks. I’m tickled pink to be here and looking forward to talking about how we’re making the world a better place. JOHN SHEGERIAN: Listen. Let’s start off from the beginning here. Schneider Electric. Mike and I, we read a lot, we watch television, we think we understand a lot. Give us a little background on whole Schneider Electric really is, because really it’s a huge global firm that not all of us have heard of. SHON ANDERSON: It is. Schneider Electric, our vision is to be the global specialist in energy management. A lot of folks haven’t heard of us because we deal mainly with people who own a lot of buildings or other physical infrastructure that uses energy. So, if you run a university campus, or you run a hospital, or you own a data center or something like that, you probably know who we are. If you don’t do any of those things, you might not, but we’re in 110 companies around the globe with over 100,000 employees waking up every day to help our clients make the most of their energy. JOHN SHEGERIAN: I just want to ask you a question. It’s not 110 companies, you mean you’re in 100 companies. SHON ANDERSON: Yes sir, you’re correct. JOHN SHEGERIAN: OK. 110 countries, so you’re truly a global firm and you’re making a difference everywhere you’re at. Before we really get going, I just want to share with you a statistic that Mike and I just learned this morning, and why your segment and your brand is so relevant to where we are today and where we’re going. We learned this morning, and we just want to just confirm this with you, that 51% of all the energy in the world that’s being produced is being wasted. Truly, what you’re doing then, is creating a more efficient way of using energy and creating a better grid. Does that sound correct? SHON ANDERSON: That’s exactly correct. If you look at the units of energy it takes at the power plant to equal a unit of energy at the plug at your home or your business, the amount of waste in that process is unbelievable. JOHN SHEGERIAN: Well, let’s start from the beginning. Explain to us what this new term of art “performance contracting” means, how it works, and what you’re doing at one of your new projects at the University of North Texas. Explain what performance contracting is for our listeners and for all of us. SHON ANDERSON: Absolutely. Performance contracting is coming into a building or a campus of buildings, in the case of the University of North Texas, and identifying ways that we can help them accomplish what they need to do in terms of providing a comfortable learning environment, using less energy, less water, generating less waste along the way. So, we will identify what things need to be done in those buildings, what systems need to be reengineered, what equipment may need to be replaced, and then we’ll implement that project, make those replacements, do those redesigns, and then guarantee to our customer that they’ll see those savings off their utility bill throughout the term of our contract. We’ll implement the program and put the proof in the pudding for them to see. JOHN SHEGERIAN: So, then how did this University of North Texas contract come about, and why there, and where else have you done this recently? SHON ANDERSON: We implemented a project with the University of North Texas for the first time about 12 years ago. We were able to cut the utility bill at the time almost 30%. Since then, the University has grown immensely. They now serve about 36,000 students, they’ve got a much larger infrastructure, a whole lot bigger campus, and after seeing the proof in the performance of our first project, they went through a competitive process to select a partner to do another project. We were chosen as their partner to do that, and we’re out there implementing about a $42-million project for them now to take their infrastructure into the next phase of energy efficiency and sustainability. In addition to the University of North Texas, we’ve done this in other places really around the world, but other places you’ve heard of, like North Carolina State University, Los Angeles Community College District, we’re doing work right now with the Coast Guard, we’re doing work with the General Services Administration, other arms of the federal government, we’ve done work in commercial office buildings in places like Dallas, Ohio, you name it, we’re there. We’re trying to touch our customers’ buildings and make them better. JOHN SHEGERIAN: Shon, just to make it as simple as possible. 12 years ago, you went into UNT and you cut their energy usage by 30%. So now when you’re sitting with the decision makers now, and you’re asking them to spend sizeable amounts of money, how do you look at the metrics of ROI? Because even as Mike and I are homeowners and we are thinking of putting solar on our houses and doing other things to make the house more sustainable, make it more efficient, is ROI what a lot of the decision makers look at when they decide about your performance contracting? SHON ANDERSON: ROI is definitely a big variable in the equation. Typically, what our customers are looking for is there are some quick payback items that are great energy savers that everybody would do in a heartbeat. It’s things like retrofitting lights, recommissioning energy management systems, those things that generate savings quickly and relatively cheaply. In the case of the University, they’ve got this large expanse of buildings that in today’s economy, they don’t have the funding to go fix everything in those buildings that they would like to. So, what performance contracting allows you to do is bundle some of those quick payback items with some longer payback items, like equipment replacements or other more major system-level redesign, and combine them together into a bundled project that meets their ROI requirements. You might take some items with two and three-year paybacks, and combine them with items that have six-, eight- and 10-year paybacks to get an overall project in the seven-year range that the university can live with. MIKE BRADY: So, Shon, in doing your performance contracting, is it fair to state, then, that you would also look when you’re going in and doing your audit, you would anticipate the eventual failure and predict the time of failure of certain systems or subsystems and work that in your bundle? SHON ANDERSON: Absolutely. It’s key to understand that energy efficiency in any building is a result of a whole lot of different systems working together, and if we don’t identify exactly what you just brought up upfront, we could go implement a project today that as soon as a year from now, might not perform up to par, because we neglected to identify one of those key systems or key points of failure. JOHN SHEGERIAN: So, what are the challenges that you walk into with these kind of projects? These are massive projects, like you said, huge – campuses and things of that such with lots of people, lots of buildings. Explain to our listeners and to us, Shon, some of the challenges that you face. SHON ANDERSON: Well, some of the biggest challenges are also some of the most fun parts of what we do. I always tell people when it comes to business, the math and the engineering is the easy part. Pulling together the diverse groups of stakeholders that it takes to make something like this work is the most challenging and most fun part of what we do. The students have certain things they want out of those buildings. The facilities director has certain things he wants out of those buildings. The CFO of the University, obviously, has other things that he wants, and the President of the University has another set of expectations out of their physical assets. Sometimes what each of those different groups of stakeholders would want pull in the opposite directions from what some of the other stakeholders would want, so we’ve got to get in there and demonstrate to each of these different stakeholders around the table how this effort and this project helps them get more of what they want, and not only do that on the front end of the project when we’re walking through what the scope of work should be in the programming, but also on the back end to engage those different stakeholders in making sure that the project performs and meets expectations. JOHN SHEGERIAN: Wow. For our listeners out there who just joined us, we’re with Shon Anderson, the Vice President of Sales and Energy Solutions from Schneider Electric. If you want to learn more about his great company, which is in 110 countries around the world where Green is Good is heard, you can look him up and look his company up at www.schneider-electric.com. Shon, talk to us about this very unique internet portal that you’re creating for the UNT stakeholders so people can actually watch real-time building energy usage on the campus. Everyone will have visibility into that. Explain for our listeners what you mean by that. SHON ANDERSON: Well, we recognize at Schneider Electric that one of the key gaps in achieving energy efficiency today is that in the case a university, the people really in those buildings using all the energy have no idea where it’s going or how much is being used, and that would be primarily the students and faculty. If they weren’t there, we wouldn’t need to run all the light and air conditioning and everything else, so we’re working with the University to create visibility into that energy use on a real-time basis that will allow the people actually using the buildings to understand the impact they’re having on energy use, and then willingly modify behavior or adapt to help minimize that energy use, so that they too become a part of achieving a more sustainable campus. JOHN SHEGERIAN: So, through education, you’re creating the motivation for behavioral change. SHON ANDERSON: Exactly. It’s hard to get someone committed to doing something when there’s not a visible stimulus that A) shows them they need to act, and B) shows them the results of their efforts. We will create that visible stimulus and visible display of the results of their efforts to keep them engaged in helping the University be as sustainable as it can be. JOHN SHEGERIAN: How long will this massive contract take to realize? How many years is this whole performance contract going to take to implement? SHON ANDERSON: It’s going to take us about two years to get all of the systems and construction and software and all those other parts of the implementation complete. MIKE BRADY: Alright, Shon, now, as part of the process, we go back again to anticipating failure of certain systems and subsystems. By the time the energy contract and the performance contracting is completed and implemented, might there not be an anticipation of some new technology that will make things even more efficient, and therefore, warrant another performance contract down the road? SHON ANDERSON: We would certainly hope so. Technology is evolving so fast, and we are learning so much as a global community about how to be sustainable, how to not only change the systems in a building, but change the way we use the building to get the most out of the building with the least energy consumed, that I believe it’s absolutely realistic to expect that 3, 5, 7 years from now, there are going to be tools available to us and to the University that just aren’t in our toolbox today, that we’ll be able to come in and make an even bigger impact. JOHN SHEGERIAN: Shon, explain that. You’re done. Two years from now, as you just discussed and explained, everything is done with this last performance contract that you worked on with them. What happens? Do you just hand them the keys and walk, or is there ongoing relationship built with the University of North Texas and your other great clients, where there’s an ongoing management education role that Schneider Electric maintains? SHON ANDERSON: We take great pride in the ongoing relationship we have our clients. As you gentlemen raised the question about payback and ROI earlier, and I mentioned how a lot of these projects are blending quick and long payback items to end up in the 7-8 year range, when the President of that University and that Board of Trustees make a commitment to go do a $42 million project that has a seven or eight-year payback, they want to know that that payback is really there all seven or eight of those years, not just in year one. We have an entire team of people that we call our performance assurance group that stays on campus with that client and makes sure that their management team, their facilities team, and in the case of UNT, with its real-time energy dashboard, the other stakeholders on campus are engaged to ensure that we deliver on our promises to that customer in terms of both maintaining the comfort in the buildings and achieving the energy savings. That performance assurance team will be there throughout the term of this contract until that project is paid back. JOHN SHEGERIAN: So, there’s training that’s done on the upfront, and there’s ongoing training and management done even after the physical equipment is put in and the retrofit is done itself. SHON ANDERSON: You bet. There’s a big misconception sometimes that systems and equipment save energy. To a small extent, that’s true, but what we really need is better systems, better equipment, operated properly by trained people who are continually looking for new and better ways to run those buildings to meet the needs of their stakeholders using less energy. That’s what that performance assurance team is there to make sure happens. JOHN SHEGERIAN: So can you also, then, explain again – some new terminology here – how Schneider Electric is converting megawatts to negawatts? SHON ANDERSON: I’ll do my best. I’m assuming you gentlemen and your listeners are familiar with incidents like the blackouts in California from a few years back, or the big blackout in the Northeast. We hear our politicians talk about the need to make our utility grid more robust. We hear people talk about carbon emission reduction and carbon footprint reduction. In Schneider Electric’s mind, the easiest way and most cost-effective way to make our grid more robust and meet the needs of utility consumers is not by building new power plants; it’s by helping them get their needs met more efficiently, thus, instead of adding megawatts, we’re freeing up capacity on the grid by creating negawatts, which every unit of energy we can prevent being needed by someone like the University of North Texas is a whole bunch of units of energy we don’t need to produce somewhere at a power plant. JOHN SHEGERIAN: Interesting. That is really, really interesting. MIKE BRADY: Yeah, because this goes back to the original starting point today, talking about the amount – and go over that for our listeners that just joined us – about the amount of energy that is lost from production, what it costs to create energy in terms of energy by the time it gets to the plug. SHON ANDERSON: If you look at a natural gas-fired power plant, the units of energy going in as natural gas, generating the heat to spin those turbines to generate the electricity that travels through those lines, through the transformers, down to your home or your business, through the electrical system in your building into that plug, if you started with a rushing river, you’re getting a little drizzle out of that plug. JOHN SHEGERIAN: Wow. That’s simple to understand, and I hope our listeners are listening to this one because, Shon, that is fascinating. Obviously, 12 years ago, your experience with the University of North Texas was massively successful. 30% energy savings. Now this performance contracting sounds like you’re taking it to a whole new level and it’s going to be, again, very, very successful under anybody’s sense of success. How hard is it for you to go now to other universities, hospitals, and other huge institutions across America and across the world – We know Schneider Electric serves in 100 countries – and sell these performance-contracting contracts? It sounds like this is the wave of the future. You are on the cutting edge of energy efficiency. SHON ANDERSON: Well, certainly we hope to make an enormous impact. The trick to doing this right, it goes back to engaging those various groups of stakeholders. If all of those groups of stakeholders don’t see a tangible win, it’s hard to get them to move forward simply because they do require buy-in from such a large group of people. What we’ve found is that by investing in resources upfront to do education and do workshops with our clients and help them understand what this undertaking looks like and what the benefits can be on the back side, by making that investment, we’ve been able to be very successful at this, from federal government to other countries to universities, hospitals. We’ve done this work in prisons, you name it. It’s a tool that can fit a lot of different places. JOHN SHEGERIAN: Shon, you have a unique perspective and visibility because you are part of a company that does business in 110 or so countries. Explain to our listeners a little bit, where are we, as the United States, in the green revolution, as opposed to Asia, as opposed to India, as opposed to Europe? Where are we, and how is it going? Are Schneider Electric’s biggest opportunities here in the United States in the years to come? Is it in India? Are you finding your biggest opportunities in China or in Europe? How does this really shake out, both for you company, but more macro speaking? Geographically, where is the United States in the green revolution? SHON ANDERSON: Well, that’s a great question. At Schneider Electric, we see tremendous opportunities in all of those markets, and the opportunities look very different. If you think about the United States, as most of your listeners probably know, we are the largest consumer of energy on the planet. China has surpassed us in terms of raw consumption, but in terms of consumption per capita, we still hold that dubious title. When you live in a society where even our cars now have access to the internet and people have flat screen TVs built into their refrigerators, a byproduct is we use a lot of energy and a lot of natural resources. So Schneider Electric sees opportunities in the United States doing things like we’re doing at the University of North Texas. It’s taking existing systems and existing buildings, and finding ways to help them operate more efficiently. The key is, and you’ve heard me say it multiple times, is helping those stakeholders understand they can still get their needs met, because as a society here in the United States, we have very, very high expectations. We want our food warmed instantaneously, we want to watch television while we’re looking at the refrigerator, we want to go back over here to our flat screen TV that has the internet pulled up, we want to go to our computer where we’re streaming live video into our home, and all of that fantastic technology is very energy-intensive. When we go to a place like China, Brazil, India, the emerging economies on the globe, we see tremendous opportunity there as well. There the opportunity looks a little different. Instead of taking existing infrastructure and helping make it more efficient, it’s more about helping them build it right the first time. As the growth is happening there, how can we help them design buildings and systems and equipment that will be more efficient and more sustainable from the get-go than the infrastructure that’s been here in place in the United States? In some cases, some parts of our utility grid are 100 and some years old. So, you think about Europe, where the cutting edge of green and sustainability and those concepts have been around for a long time. Not many people know it, but up until a couple of years ago, Germany was the largest generator of electricity from photovoltaics of any country on the planet. You don’t exactly think of Germany as a place with lots of sunshine that you’d put a lot of solar panels, but because there were thought leaders, they had incentives in place to get people to make that investment. They actually did a tremendous job in that area, and we’re being based in France. Obviously we’re highly in tune with that European conservation mindset. We have a tremendous presence in Nordic countries where conservation and sustainability is as much a way of life as instant access to information for us Americans. So we’ve got solutions there that relate to the types of systems that exist in their buildings, helping with their even older infrastructure than what you see in the U.S. The long answer to your question, but the opportunities exist in all those places, they’re just different. JOHN SHEGERIAN: Shon, you’ve done such an amazing job today. Mike and I just want to say thank you. We are so honored that you came on the show and you’re making such a great case and proposition for our listeners who are all very excited about being part of the solution, for being more energy efficient. Besides looking at new technologies, which we know are wonderful and important, wind and biomass and solar, but being more energy efficient is a simple solution to a massive problem, so you’ve done a brilliant job doing that today. For our listeners out there that want to learn more about Shon and his great company and what they’re doing, please go to schneider-electric.com. Shon Anderson of Schneider Electric, you are an energy solution rock star and are truly living proof that green is good. SHON ANDERSON: Thank you both, John and Mike, for having us on, and we look forward to coming back to you with more great stories to tell in the near future.