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ENVIRONMENT REPORT
FY2014
1
CONTENTS
2 Key Achievements
4 Environment Policy & Goals
6 Global Environmental Initiative
8 Carbon Reduction
11 Waste Reduction
13 Engagement
16 Solar Power
18 ECO:nomics Conference
2
KEY ACHIEVEMENTS
We believe sustainability begins as a business proposition, but
doesn’t end there. Our mission is to inform discussions and decisions – our core business provides a platform for informing
people for the good of society. Our authoritative and trusted news
and information content sets agendas, starts conversations and
influences outcomes. We expose fraud, malfeasance and
negligence, and we engage our readers about critical issues such
as climate change with highly balanced, journalistic integrity. Our
information products are directed at a broad, influential audience
and provide accurate, fair and trustworthy information that helps
business become more sustainable.
3
The company’s achievements this year and in the recent past
reflect investment and a corporate priority for protecting the
environment and energy conservation. Highlights include:
Reduction of carbon emissions globally by 39% in FY13 from
baseline year FY06, and a 10% reduction from previous year.
All 8 Dow Jones owned print centers are “Zero Waste” facilities for 2013.
Solar power at our Princeton NJ campus has reduced carbon
emissions by over 14,000 tons since its startup.
Five offices are now LEED and/or EnergyStar certified,
representing 28% of leased office space, including our
headquarters at 1211 Avenue of the Americas in New York City.
At our Bronx Print Center, a "Power Down" initiative and chiller
efficient motors upgrade is saving 318 tons of carbon and
$148K per year.
Energy audit completed at a print center resulted in 10
recommendations that can reduce carbon by a total of 300 tons
and save almost $50K per year.
ONE, the Dow Jones employee rewards program that
recognizes employees for their above and beyond contributions,
has integrated green initiatives into the program.
Eight new “Green Teams” formed at our facilities to tackle energy & waste reduction projects.
100% of all newsprint purchased for our newspapers is from
paper mills certified by either FSC, SFI, PEFC, CSA, or
equivalent.
Our seventh annual ECO:nomics conference featured top CEOs
and non-profit executives, government officials, entrepreneurs,
and investors discussing the intersection of business and the
environment, hosted by the editors of The Wall Street Journal.
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ENVIRONMENTAL POLICY
Integrity defines the culture at Dow Jones just as it does its journalism and business. Dow Jones strives
to be a responsible consumer of energy and resources, and as a positive influence in the communities
where we work and live.
We affirm to all our employees, customers and the public that we will conduct our activities in an
environmentally-sustainable manner while providing a safe and healthy workplace for our employees, in
compliance with all governmental regulations and company policies.
OUR GOALS
In 2007, News Corp & Dow Jones set a target to be carbon neutral in 2010. Upon reaching this target,
a new long-term vision was communicated with a set of short-terms goals and strategies to support that
vision. Dow Jones believes that tackling climate change risk, and related issues, requires a long-term
focus. Our new long-term vision, which is aligned with News Corps’ vision, is to:
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1. Reduce our carbon footprint while growing our business, and minimize landfill waste within our business and communities
2. Engage our customers, employees, suppliers and partners on sustainability outcomes
3. Source our paper from paper mills using third-party certified sustainable forest management systems and/or recycled content, and power our operations with clean energy
Our targets to meet these goals are:
Reduce absolute carbon emissions 40% by 2016 (compared to 2006 baseline)
Secure new office leases at facilities using renewable energy and/or are LEED, BREEAM or
similar certified
Achieve zero waste to landfill at our owned print centers by 2016
Continue to lead the discussion where business & the environment intersect via the
ECO:nomics conference
Source 100% of newsprint from paper mills operating under third-party certified sustainable
forest management systems by 2015
To achieve its carbon mitigation goals, the company conducts energy audits, solicits ideas for
operational improvements from local managers, and promotes best practices. Financial analysis,
including calculation of ROIs, is completed for proposed projects. Recently, the company adopted new
approaches to prioritizing and financing projects with high financial and environmental returns to further
help reach its goals. The company has also improved internal tracking and communications to better
respond to increased regulatory and customer requests for environmental data.
To ensure regulatory compliance, a compliance calendar system is in place for our plants and major
offices that tracks all federal, state, and local requirements. Tasks are assigned to responsible
managers and coordinators at each site and documents are submitted to corporate EHS to verify
compliance.
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GLOBAL ENVIRONMENTAL INITIATIVE
Prior to the company split from 21st Century Fox, News Corps’ Global Energy Initiative (GEI) managed
all sustainability and energy efficiency programs at the corporate level. As the new News Corp,
additional risks and opportunities were identified that directly impact their businesses, specifically
around the use of forest commodities in its publishing businesses.
As a result of the company split and revised sustainability strategy, the name of the corporate News
Corp team was changed to the Global Environmental Initiative (GEI) to more accurately reflect its
broader scope beyond energy and carbon. The GEI program is part of a broader “Corporate Citizenship” initiative at News Corp, encompassing both philanthropy and volunteerism in addition to environmental initiatives.
Dow Jones’ Global Environmental Initiative has
developed specific targets and strategies
implemented by green teams across the globe.
These teams have developed best practices to
reduce energy usage and engaged employees,
readers, advertisers and suppliers in the quest to reduce consumption and protect the environment.
Day to day implementation and management of environmental programs within the company is handled
by the Director of Environment, Health & Safety, who also leads News Corp’s corporate GEI program.
The Dow Jones GEI team is made up of leaders from HR, Real Estate/Facilities, Communications, IT
and Operations. The team reports through to Dow Jones’ Senior VP of Operations, who reports to Dow
Jones’ CEO.
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The GEI team communicates regularly with senior executives across the company about energy/carbon
reduction projects and other aspects of the company’s environmental sustainability efforts, as well as the progress being made within the businesses, via regular summary reports and in-person meetings.
The GEI team conducts regular meetings to discuss strategy, share successes and challenges, and
invite external experts to share perspectives with the group. Internal websites are also available for
employees to access environmental information.
Climate change risks and opportunities are reviewed on an ongoing basis by the GEI team. The team is
responsible for monitoring business impacts from climate change-related issues (including regulatory
changes, energy costs, customer/consumer preferences, and other sources), identifying opportunities
or risks with the help of cross functional teams, and reporting these to their respective senior
management, as well as to the News Corp corporate GEI committee.
For printing and distribution operations that can be impacted from climate change and energy issues,
there is a systematic evaluation process and dedicated personnel responsible to monitor, evaluate, and
report potential risks and opportunities.
The GEI team reviews risks and opportunities each year to determine priority areas and assigns
resources accordingly. The specific threshold for evaluating materiality and the related criteria are
variable depending on the potential magnitude of impact, likelihood, and timeframe presented, as well
as the aspect of the business that could be impacted. However, from a general perspective the
company reviews each of these components for each risk presented and determines the appropriate
response.
The GEI strategy – rooted in carbon measurement and mitigation of its operational impact – allows the
company to take advantage of opportunities to lower costs of inputs, work with partners to reduce costs
and generate new streams of revenue, attract and retain top talent, and build a reputation as a
sustainability leader to support business objectives and make an impact on pressing environmental
issues. Increasing regulatory and market pressures are also drivers of the company’s environmental strategy. The decentralized management structure and cross-divisional communication allows Dow
Jones to leverage local expertise and experience and react quickly to changing dynamics.
A key focus of the initiative has been on improving the company’s own internal operations and on being as transparent as possible about the goals, actions, and progress that the company is making. This
sustainability program is part of Dow Jones identity and a differentiator in the marketplace. In addition,
as a new generation of employees looks to work for companies that are addressing their environmental
impacts, failure to do so could impact a company’s ability to recruit and retain talent.
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CARBON REDUCTION
Dow Jones shares the details of its carbon footprint in a transparent manner, publicly reporting
greenhouse gas (GHG) emissions through the Carbon Disclosure Project (CDP) via News Corp. The
GHG emissions covers Scope 1 (direct emissions such as gasoline and diesel fuel), Scope 2 (indirect
emissions such as purchased electricity & natural gas), as well as business air travel (Scope 3), in
accordance with the WRI/WBCSD Greenhouse Gas Protocol.
Dow Jones has a robust program in place for collecting, measuring and analyzing its emissions data,
and has developed a comprehensive repository of data with an enterprise data management software
tool. The company has been voluntarily reporting emissions and energy data since 2007. The results of
our carbon reduction projects are shown below:
In FY13, Dow Jones’ footprint was 49,512 tons CO2e, a 39% reduction from its baseline FY06 year, and a 10%
reduction from the previous year. The majority of our
footprint is from electricity used in our print centers and
offices. Our footprint via News Corp is third party
certified.
Some of the energy efficiency projects that were completed to reduce our carbon emissions include:
Installation of variable frequency drives on a roof top unit HVAC fans
Installing new LED and other efficient lighting and occupancy sensors in our print centers and
offices, including solar light sensor timers for parking lot lights
Continuing energy best practices such as minimizing lighting, heating, air conditioning and
production equipment during unoccupied times
Installing energy efficient variable frequency drives for 2 chillers
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Air compressor leak checking and adjustments
Forklift battery charging during off-peak times when electricity rates are lowest
A Six Sigma project that analyzed the most efficient use of press motors at our plants
Energy efficiency upgrades for our data center in Princeton, NJ
Energy Star, 100% recyclable white membrane new roofs installed at two printing plant to
reduce the cooling load on the facility. This roof is LEED-rated to radiate away 95% of the
energy absorbed.
Dow Jones continues to invest strategically in
sustainability, including in energy efficiency, energy
measurement/tracking systems, and analyses of
supply chains to find opportunities for improvement.
Many of the energy efficiency projects completed at
the company have an average payback of less than 3
years.
Due to the volatility of energy prices and the
expectation of consistent cost increases, continuous
evaluation of energy efficiency and renewable energy
opportunities will continue as part of a long-term
strategy.
The company’s process is already yielding some
strategic advantages, and with a continuous
improvement philosophy built into the program, it
will continue to do so. Benefits include
operational cost advantages, more efficient
supply chains, and the opportunity to build
sustainability intelligence into content for news
and information media outlets. The company has
also identified opportunities to generate revenue
through new product deliveries, deepen
partnerships with customers and suppliers, and
make more meaningful connections with
customers.
For example, our Distribution & Delivery group reviewed its newspaper delivery operations and was
able to eliminate redundant truck and airline routes in the U.S., partnering with third party delivery firms
to use their existing routes. This resulted in a reduction of carbon emissions by 361 tons in 2013
(compared to 2006 baseline).
News Corp’s GEI committee continues to monitor possible physical changes attributable to climate change. Additionally, Dow Jones sites have in place Emergency Action Plans and business
contingency plans.
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The company does manage physical risk by preparing for
potential disruptions to operations or to its supply chain. For
example, print centers and newsrooms have backup power
generators in the event grid power fails. The backup power
plan can be used or modified to address increased climate
related risks, as the physical aspects of climate change are
more precisely modeled and understood.
During past years, disruptive phenomena highlighted the
effect of extreme events on business operations, while
disruptions to operations and employees caused by
Superstorm Sandy highlighted direct business impacts of
extreme weather. For example, weather-related missed
deliveries of the Wall Street Journal have increased over the
past 3 years. To the extent that any increase in frequency of
extreme events can be correlated to a trend like climate
change, there is a continued need to prepare for business
disruptions.
Current investments in on-site renewable power production
(as well as low emissions fuel cells), including the installation
of the solar power system in New Jersey, will allow the
company to meet at least some its power needs should
there be a disruption to grid-supplied power, and in the
interim helps the company deal with the financial impact of
energy price volatility. Additionally, the company has various
contingency and backup plans in case of physical risk or
damage. As an example, critical data records are backed up
at offsite locations and emergency communications plans
are implemented in the event of extreme events.
Managing such risks requires consistent and effective
communication. Measurement, disclosure, and improvement
of the company’s own environmental impacts help form a strong reputational basis on which the company may engage
externally. The company also engages through partners and
industry groups on sustainability issues to drive
improvement in the broader business community.
600 new LED bulbs were added to the
Princeton NJ campus to replace higher
wattage bulbs. This project will reduce
our carbon footprint by 51 tons per year
and save us almost $9,000 annually in
electricity costs. Our payback due to NJ
state rebates: 7 months!
39% amount of carbon (CO2e) emission
reductions by Dow Jones in FY13
compared to its baseline FY06 year
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WASTE REDUCTION
All Dow Jones owned Print Centers have recently
become “Zero Waste” facilities as defined by the Zero Waste International Alliance.
This means that at least 90% of waste generated at
the facilities must be recycled or reused to be
considered a Zero Waste facility. The plants raised
the bar further by achieving a 94% average
recycling rate for 2013.
All Dow Jones owned print centers recycle waste
newsprint, used aluminum plates, end rolls, cores &
wrapper paper, cardboard, scrap metal, wood skids, plastic drums, used fluorescent bulbs, batteries,
computer and electronic equipment, and office paper, cans and bottles. The plant green teams also
continue to review ways to change processes and eliminate the generation of waste, and look for
alternate ways to recycle or reuse raw material in order to minimize waste entering landfills.
The Zero Waste print centers are located in:
• Beaumont, TX
• Bowling Green, OH
• Bronx, NY
• Chicopee, MA
• Highland, IL
• LaGrange, GA
• Seattle, WA
• White Oak, MD
This achievement by the print centers not only helps Dow Jones achieve its GEI goals, but it also meets
one of the business’s three goals to drive its business forward: rigorous cost management. Reducing
waste reduces costs and creates a smart, efficient and green operational environment for print centers
to succeed in providing quality products to Dow Jones’ customers.
Our plants use soy-based inks for our Wall Street Journal and Barron’s newspaper products, which minimizes Volatile Organic Compounds (VOC) emissions into the air.
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All computer equipment
that is no longer usable at
Dow Jones’ U.S. locations is recycled
through approved
recycling facilities. A
milestone was reached in
2012 when over 2.5 million pounds of computer equipment
waste was recycled since the inception of the program.
Our print centers have reduced hazardous waste to just
1% of the total industrial waste generated at its facilities.
News Corp has developed a new paper policy to ensure
that paper is purchased from suppliers who use
sustainable forest management practices.
At Dow Jones, 100% of all newsprint purchased for our
newspapers is from paper mills certified by either FSC,
SFI, PEFC, CSA, or equivalent. These considerations are
combined with investments that are part of a larger
sustainability and business strategy.
A waste management
plan has been
developed for our print
centers and major
offices to document
procedures and best
practices.
2.5M LBS Amount of computer waste recycled at
Dow Jones through 2012
70% of U.S. newspapers were recycled in
2012 (source: US EPA)
100% Percent of newsprint purchased by Dow
Jones from paper mills certified by FSC,
SFI, PEFC, CSA or equivalent
“Characteristics of an excellent
business recycling program are
evident at Dow Jones… they
have a comprehensive and well
organized recycling program in
place." Montgomery County Maryland Department of
Environmental Protection, after awarding our
White Oak Print Center the “Outstanding
Recycler Achievement Award”
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ENGAGEMENT
Employees
Reduction activities are supported through numerous employee led initiatives. Through these local
programs, employees are informed about the company’s overall environmental priorities and
encouraged and empowered to take action locally. Several employee engagement programs recognize
and reward successful ideas for emissions reductions activities in the home and workplace.
News Corp conducted a staff survey to evaluate their
knowledge of the company’s sustainability initiatives, gauge employee preferences, and evaluate the effectiveness of
the communications. 89% of News Corp employees
reported that it is important for their company to reduce its
impact on the environment. Hence, the company knows that
effectively communicating about the GEI is critical to
employee satisfaction and not meeting these expectations
could affect turnover or other HR issues.
Effectively engaging employees is critical to the success of
the GEI program. Not only can engaged employees help
carry out many aspects of the program, but communicating the company’s commitment to sustainability and giving employees the opportunities to get involved presents an opportunity for recruiting and
retaining talent who are increasingly looking for employers that share their values.
At Dow Jones, green recognition
initiatives has been integrated
into an existing employee
reward program called ONE,
with the first “ONE Goes Green” award to be announced in early
2015.
According to Gallup, businesses with the highest levels of employee engagement experience 37% less
absenteeism, 25-50% less turnover, 60% fewer quality issues, 12% higher customer satisfaction, 18%
higher productivity, and 16% higher profitability. Moreover, according to HR assessments, replacing a
good employee costs companies 70- 200% of an employee’s annual salary, making retention a key financial driver.
Effectively engaging employees is critical to the success of the GEI program
and can provide financial benefit through employee-led solution generation
and implementation, and by reducing costs for employee recruiting and
retention. Through these local efforts, employees are informed about the
company’s environmental priorities and are empowered to take action locally.
These programs provide tangible carbon reduction opportunities, and have
played a significant role in fulfilling the company’s sustainability goals. Sustainability program details are utilized in recruiting efforts and materials as
well.
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Carpool/High MPG priority parking lot spaces
have been created at two of our major offices for
employees who take the personal initiative in
helping to conserve energy and reduce
greenhouse gases.
Suppliers
Dow Jones works with its suppliers to measure
the company’s environmental impacts and develop strategies to reduce them. The company
has engaged dozens of suppliers for
newspapers, and other important product
categories to collect data, calculate life-cycle
assessments (LCA), and address LCA hotspots.
For example, in 2008 the company conducted a carbon product life cycle analysis of the Wall Street
Journal newspaper to aid in understanding the impact of the company’s operations and supply chain. We recognize that a large portion of our product manufacturing processes reside within our supply
chain. The result was an analysis that begins with the harvesting of timber and ends with the disposal
of the non-recycled percent of newspaper that decomposes in a landfill. The company found substantial
emissions in the supply chain, principally on the production of newsprint. This data will help to focus our
efforts on future reductions in GHG emissions.
As previously mentioned, Dow Jones purchases newsprint for our newspapers from paper mills
certified by either FSC, SFI, PEFC, CSA, or equivalent. Dow Jones has also utilized high levels of
recycled fiber in its newsprint for many decades.
Partners
Through working sessions and meetings, the company also consults with outside experts, non-profit
organizations, industry peers and corporate sustainability leaders. Much like its engagement with
suppliers, Dow Jones collaborates with partners in areas of highest impact. Industry partners offer an
additional benefit of enabling improvement industry-wide. Therefore, engagement prioritization consists
of high-impact categories where industry collaboration can scale and amplify success. As the company
learns more about how to address its emissions, it continues to share lessons and best practices with
business partners.
In the US, Dow Jones participated in the Environmental Defense Fund’s Climate Corps program, an innovative summer fellowship program that
placed specially-trained graduate students in our Bronx, NY Print Center
facility over the course of 3 summers to identify energy inefficiencies and
reduce both carbon emissions and costs.
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Dow Jones believes that its environment strategy – rooted in carbon measurement and mitigation of its
own operational impact – enables the company to strengthen relationships with its employees,
business partners and readers. Specific to business partners, given the evolving sustainability
requirements of companies that advertise through Dow Jones’ media platforms, a positive reputation on sustainability issues presents an opportunity for revenue generation.
Customers
Dow Jones has continued to take aggressive actions to reduce the impacts of its own operations and to
connect with its customers on sustainability issues. These actions have helped build the company’s reputation as a leader on the topic, both in the corporate and the environmental/NGO communities, and
are a key component of the company’s efforts to build its program on a platform of transparency and credibility. In
addition, through programs and efforts like The Wall Street
Journal’s annual ECO:nomics conference, the company has
strengthened its reputation as a leader in sustainability
among its customers.
As a result, News Corp consistently ranks among the top performers in the CDP Disclosure Leadership
Index, leads its competitors in the Climate Counts environmental sustainability rankings, and was 30th
among US companies in the 2012 Newsweek Green rankings.
As consumers become more aware of environmental issues and change their buying habits, the
company has an opportunity to staying ahead of these trends; as customers shift from products with
physical footprints, the company can gain an advantage by continuing to lead in the area of physical to
digital media transformation. For example, the Wall Street Journal continues to increase its readership
in the digital and social platforms, increasing 15% in 2013 compared to the previous year.
Dow Jones continues to face new customer requirements as they are increasingly asking for evidence
of positive environmental and sustainability performance from their suppliers and partners. A growing
number of advertisers want to partner with companies that are taking action on environmental issues.
Other major advertisers have indicated that they will pull ad dollars from companies who do not have
sustainability strategies aligned with their own. Building and maintaining a strong reputation by
addressing its environmental footprint will continue to provide a positive impact on Dow Jones’ relationships with customers.
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SOLAR POWER
The 4.1 MW system at our Princeton NJ campus is one of the largest solar power installations at a single commercial site in the U.S. Its 13,000 solar panels cover nearly 230,000 square feet of parking space, and produce 5 million kilowatt-hours of electricity per year. Capable of supplying 50% the site’s energy needs during a sunny day, it supplies nearly 15% of the campus’s energy needs over the course of a year.
Through the end of 2014, the solar installation has reduced over 14,000 tons of carbon emissions and $1.9M in electricity costs since its operational startup in 2011. This is equivalent to planting almost 3,000 acres of trees
or removing over 2,500 cars from the road for a year.
Dow Jones was among the top 25 companies in America leading the use of commercial solar use as measured in the 2013 Solar Means Business Report. The 2013 Solar Means Business report is released by The Solar Energy Industries Association and Vote Solar Initiative and identifies major commercial solar projects and ranks America’s top corporate solar users. The Top 25 companies, ranked by installed capacity, also included Walmart, Costco, Kohl’s, Apple, IKEA, Macy’s, Johnson & Johnson, McGraw Hill, Staples, Campbell’s Soup, U.S. Foods, Bed Bath & Beyond, Kaiser Permanente, Volkswagen, Walgreens, Target, Safeway, FedEx, Intel, L’OREAL, General Motors, Toys “R” Us, White Rose Foods and Toyota.
Construction, Ceremonies & Quotes:
A groundbreaking ceremony at the Princeton campus was held in June 2010 with the late US Senator Frank Lautenberg of NJ, US Senator Robert Menendez of NJ, and Bob Martin, Commissioner of the New Jersey Department of Environmental Protection. Calling it a demonstration that “a clean energy future is both possible and profitable” and “groundbreaking in every sense of the word”, U.S. Senators Frank Lautenberg and Robert Menendez of New Jersey praised Dow Jones’ solar energy project.
“I salute Dow Jones for its leadership. The company is demonstrating that a clean energy future is both possible and profitable,” Senator Frank Lautenberg said in his comments to nearly 1,000 Dow Jones employees gathered for the groundbreaking ceremony.
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“This will be one of the most outstanding examples of what America’s clean energy future looks like, and it will be yet another innovation in the long innovative history of Dow Jones & Company,” said Senator Robert Menendez. “We need to embrace the potential of a clean energy future, and it is through bold investments like this that we are doing so." "Our dependence on fossil fuels hinders our state economically and hurts our environment," Commissioner Martin said. "Dow Jones' leadership in solar power is a significant step to a better energy future."
“Investing in solar power confirms our commitment to environmental responsibility. Dow Jones wants to be one of the companies making a difference,” said Les Hinton, former chief executive of Dow Jones. “What makes this investment attractive is that not only are there meaningful environmental benefits but we also will see significant tax incentives and a substantial reduction in our annual energy costs,” said Stephen Daintith, former chief operating officer for Dow Jones. “New Jersey is a leader nationwide in supporting solar power installation, and we’re grateful for the support of the state as well as PSE&G and the township of South
Brunswick for assisting us in sourcing alternative, renewable energy such as solar,” Mr. Daintith said. “Dow Jones’s leadership position with solar energy is a real-world example of how this technology can make sense for the environment,” said Ralph LaRossa, PSE&G president and chief operating officer. Discussing the "major commitment to the environment" made by Dow Jones and News Corp. at the solar christening event in 2011, Les Hinton, former chief executive of Dow Jones said: "(This) commitment to environmental responsibility pre-dates this system and extends beyond it. For decades, Dow Jones has aggressively strived to reduce waste, minimize hazardous emissions and optimize electric efficiency. These programs didn't begin with solar and they won't end there." "If this solar installation stands for anything at Dow Jones, it should stand as a testament to a company with vision," Hinton said. "Dow Jones isn't waiting for the future. We are making it. We are pioneering profitable digital business models, and we are developing innovative technology to make information more accessible and more useful and ultimately more interesting."
"Solar fits a company like this. It is consistent with a company that isn't limited by convention, a company that isn't afraid to lead the way," he said. In 2012, Dow Jones received an Environmental Stewardship award from the New Jersey Department of Environmental Protection for the solar project.
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ECO:nomics
On April 2-4 2014, top CEOs joined leading investors, innovators and academics for ECO:nomics, The
Wall Street Journal’s celebrated conference on the future of business and the environment.
Led by senior editors from the Journal, the event included interviews about the future of a diverse set of
industries, with an unparalleled roster of top CEOs from the world’s largest companies including Walmart, Cargill, Tyson Foods, Toyota, Southern Company, Edison International, Peabody Energy, and
Embraer.
The program kicked off on Wednesday evening with an
opening dinner and a conversation between Wall Street
Journal Editor in Chief Gerard Baker and Walmart
chairman Mike Duke. The event continued on Thursday
with interviews about the future of utilities, nuclear,
solar, coal, aviation, agriculture, food, waste, insurance
and automotive, as well as focused luncheon
roundtable discussions on key topics. On Thursday
night, Wall Street Journal contributing editor Jeff Ball
led a lively discussion with Professor Vaclav Smil, who
questioned the search for a global energy solution.
In deep-dive sessions on Friday morning, Journal
editors led intimate, in-depth conversations with
attendees and top CEOs including Helge Lund of
Statoil, Christophe de Margerie of Total, Eric Smith of
Swiss Re Americas, and Nick Akins of American
Electric Power. Editorial hosts included John Bussey,
Kimberley A. Strassel, Joseph B. White, Russell Gold,
and Leslie Eaton. The event was sponsored by Shell,
Toyota, and NASDAQ/SolarCity. To find out more
about the ECO:nomics, visit http://economics.wsj.com.
A Wall Street Journal special report on the conference is provided on the next few pages.
© 2014 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Wednesday, April 9, 2014 | R1
JOURNAL REPORT
IT MAY HAVE been a celestial signthat, smack in the middle of The WallStreet Journal’s ECO:nomics conferencelast week, a company called OpowerInc. launched its initial public offering.
Opower uses behavioral science toget homeowners to reduce energy use.It priced at $19 a share and now tradesnear $22.
The message to conference goers:There’s still plenty of momentum—andmoney to be made—at the intersectionof business and the environment.
That may seem obvious. But the pastfew years produced a lot of pileups in
that intersection.Fisker, Solyndra, cel-lulosic ethanol—thelist goes on. Those inventure capital, pri-vate equity and gov-ernment loan officeshave all been lickingtheir wounds.
Even long-popular recycling has hita speed bump. David Steiner, chief ex-ecutive of Waste Management Inc., toldthe ECO:nomics audience that process-ing the garbage that goes into recyclingnow costs more than what you cancharge for the product that comes outthe other end.
And yet, the pressure to rethink en-
ergy just keeps building, and with it theneed for innovation and solutions.That’s what this year’s ECO:nomics par-ticipants heard loud and clear. The con-ference gathered together innovators,investors, and CEOs of some of theworld’s biggest companies in energyproduction, distribution, and consump-tion. They talked about climate changeand promising innovations that could
recast energy con-sumption—but overdecades, not years.
Shaping their out-look: the world’sever-growing de-mand for energy,particularly in smog-
choked China and India. For all thepromise of clean energy such as windand solar, old-fashioned coal is com-manding a larger role in global powergeneration.
Forty percent of those at the confer-ence said shale-gas production is themost effective way to supplant dirtierfuels over the next decade. Some 60%expect hydrogen fuel-cell cars to sell in
volume within 15 years.And when asked to reflect on the
successful IPO in December 2012 of So-larCity Corp., a solar-power firm, halfsaid 2014 will see a similarly strongIPO of a renewable-energy company.
How good are these people at fore-casting? At last year’s ECO:nomics con-ference, attendees vetted six startupcompanies and voted for the one mostlikely to succeed.
Its name: Opower.
Mr. Bussey is an assistant managingeditor and executive business editorof The Wall Street Journal. He can bereached at [email protected] oron Twitter @johncbussey.
BY JOHN BUSSEY
Hungry for Power,Hungry for InnovationThere’s money to be made at the intersection of business and the environment.
But it isn’t necessarily easy money.
Fred Krupp of the Environ-mental Defense Fund on howcorporate chiefs aren’t prepar-ing for climate change, R2
Peabody Energy’s GregoryBoyce says coal isn’t goingaway anytime soon, R2
Michael Duke of Wal-Martgives a status report on thecompany’s efforts to gogreen, R3
Stuart Bernstein of GoldmanSachs predicts venture capitalwill return to renewables aftersome recent successes, R4
Irene Rosenfeld on why Mon-delez International is helpingcocoa farmers in developingcountries stay in business, R5
The Navy’s Roger Natsuharadescribes the military’s effortsto run a cleaner fleet, R6
Daniel Yergin outlines thechanging geopolitics in ashale-gas era, R6
Nicholas Akins of AmericanElectric Power details the newlandscape facing utilities, R7
PLUS: J. Eric Smith, Chris-tophe de Margerie, Thomas A.Fanning, David Steiner,Edward Fenster, Helge Lundand Gregory Page
INSIDE
IF YOU WANT to understand thefuture of energy, says VaclavSmil, you need to think locally—and skeptically.
There are no easy fixes or patglobal answers in the slog to addenergy while reducing carbonemissions—only hard choices,notably about getting people touse energy more wisely, thewide-ranging author and scholarat the University of Manitobatold Wall Street Journal contrib-uting editor Jeffrey Ball. BillGates recently wrote this aboutMr. Smil, who has penned somethree dozen books, writing onsubjects as varied as energy,food and the decline of U.S.manufacturing: “There is no au-thor whose books I look forwardto more than Vaclav Smil.”
Mr. Smil explored what hesees as the limits of wind andsolar power; the profligate useof energy in China; the evenmore profligate use of energy inthe U.S.; and the admirable en-ergy efficiency of Japan. Hereare edited excerpts of the dis-cussion.
The Spark for ChangeMR. BALL: What’s the motive forwhatever energy transition ishappening now?MR. SMIL: Many, many motives.One of the fastest transitionswas when the Dutch discoveredone of the world’s largest gasdeposits. Within 50 years, they
closed down all coal mines inLimburg and became a gas-fueled society. Look at France.The oil crisis comes. They say,“We have to do something else.”Less than 20 years, and they’vegot 75% nuclear.
MR. BALL: Is there a big energytransition going on now?MR. SMIL: There is and thereisn’t. Have you ever heard aboutRussians wanting to have morewind turbines and more solar?Have you had Turks being terri-bly interested about any of thesethings? Have you had people inIndonesia worrying about put-ting up more solar?
There are hundreds of mil-lions of people around thisplanet, and their leaders, whocouldn’t care less.
MR. BALL: What you’ve essen-tially described is that nothingfundamental is happening. Am Iwrong about that?MR. SMIL: It is and it isn’t. Lookat the Chinese example. They arebuilding all these wind capaci-ties and solar capacities, but inthe past eight years they addedone billion tons of coal produc-tion. It took the good old U.S.150 years to gear it up to onebillion tons. And they want toadd another one billion tons ofcoal in the next six years. So itdoesn’t matter how many windturbines are built.
MR. BALL: So renewable energy isinsignificant?MR. SMIL: Renewable energy isvery significant. I live in a prov-ince where we have the cheapestelectricity in North America, in-deed in the Western world, butall of it is perfectly renewablebecause we have beautiful Mani-toba Hydro. Every few tens of ki-lometers we can put a river dam.Bingo. One gigawatt here. Onegigawatt here.
MR. BALL: So there’s no one an-swer for the world. There arespecific resources that work inspecific places.MR. SMIL: Wind is my favoriteexample. I live in one of thewindiest places of this continent.This is a wind corridor all theway from Texas through Ne-braska all the way to Manitoba.
Except when do I need mostof my juice? For the past threemonths, we had the third-coldestwinter in the past 100 years. Butthere’s absolutely no wind forthree months and it’s minus 45overnight and we have a chillfactor of minus 55. What wouldI do for those three months?
It’s all regional. It’s all local.And we just have to descend tothat level to judge it. If you justsay globally, that tells you verylittle.
When you talk in terms ofelectricity, renewable is very im-portant. Hydro in Manitoba.Hydro in Sweden. Wind in Den-mark. Of course, those are veryimportant.
But when you look at the totalprimary electrical supply, it re-mains insignificant. Globally, thenew renewables, that is wind
and solar, are still way less than5% of global total primary en-ergy supply. If you look at thefossil fuels in 1990, they were88% of the global supply. In2012, they were 87% of globalsupply. These are very embed-ded, inertial things. These thingsdon’t change rapidly.
MR. BALL: You have thought a lotand written about energy con-sumption. How does one changeenergy consumption?MR. SMIL: Again, it’s nation tonation. For a variety of reasons,I have this weakness for Japan.What I like about Japan, theyare the only modern civilizationthat remained within certainlimits and proportions.
Which nation has more foodsupply, more consumption, Chinaor Japan? The Chinese are now
producing more food per capitaand are eating more than theJapanese, despite their riches.The Japanese have the lowestfood supply in the modernworld. And they live longer thananybody else and are happyabout this. They are disciplinedon an individual level.
The Chinese could have fol-lowed Japan. No. Whom did theyfollow? The U.S. Basically, allChinese policy in the past 20years has one goal: to out-Amer-ica America. Gated communities.Superhighways. Everybody driv-ing a Jeep, Land Rover, SUVs ev-erywhere. Every child is sent toHarvard. The American dreamwrit large. Not Japanese.
Living With LessMR. BALL: Are these trends goingto continue?
MR. SMIL: China may try to copyAmerica, but China will never goto the U.S. level. Very few peoplego to the U.S. level. You peopleconsume about 320, 310, giga-joules of energy per capita. Ja-pan and the rich countries in theEU are about 170. I ask people: Islife so unbearable in Florence,Lyon or Munich that youcouldn’t live there at 170?
There is always the excuse ofclimate and these things. Exceptthat excuse doesn’t work. Swe-den is not at 340 and they areabout as cold as—well, not ascold as Winnipeg, but they arepretty cold there.
And you have the excuse ofdistance. I’m not going to driveto the nearest city east of me,which happens to be 2,000 kilo-meters away. And so we have tofly more.
There are always these ex-cuses. But still there is no reasonwhy nations couldn’t live a veryprosperous, satisfied life. This isthe question I’m asking: DoAmericans live twice as long be-cause they consume twice asmuch energy as Europeans? Areyou people twice as smart as theaverage Frenchman? Do you en-joy life twice as much as the av-erage Danish guy?
What have we gotten for con-suming twice as much energy asEurope? What have we gotten inreturn?
Vaclav Smil says what we produceand use depends on where we are
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Percentages don't total 100 due to rounding.
Source: U.S. Energy Information Administration The WallStreet Journal
Local FlavorU.S. energy consumption by type in2011, and some notable contrastsin other countries that year
69% of China's energyconsumption came from coal
56% of Russia's energy consumption came from natural gas
35% of Brazil's energy consumption came from hydroelectricity
23% of India's energy consumption came from solid biomass and waste
Coal20%
Oil36%
Naturalgas
26%Nuclear8%
6%
Hydroelectric | 3%
Other renewables
Looking for a Global Energy Solution?Well, Don’t. ‘What have we have
gotten for consumingtwice as much energyas Europe?’Vaclav Smil
R2 | Wednesday, April 9, 2014 THEWALL STREET JOURNAL.
FRED KRUPP goes about hisbusiness as head of the Environ-mental Defense Fund by apply-ing leverage where the interestsof business and the environmentintersect. He sat down with TheWall Street Journal’s JohnBussey to discuss climatechange. Edited excerpts of theirconversation follow.
What’s AheadMR. BUSSEY: CEOs of the estab-lishment energy companies,power distributors and foodcompanies have shared with ustheir outlook for the energy pic-ture over the next few years. Ididn’t hear a lot of mentioningof climate change. Are they dis-counting the effects climatechange and other impacts willhave on their business?MR. KRUPP: I was surprised thatI did not hear the CEOs sayingthey were going to navigate theprofound changes. I didn’t hearmuch talk about profoundchanges. I didn’t hear talk aboutthe report released last weekfrom the IPCC [Intergovernmen-tal Panel on Climate Change]that said we are already seeingwidespread, unequivocal, conse-quential effects of climatechange that are growing. The re-port talked about the fact thathuman health problems are go-ing to increase, among otherthings, because of food-borneand waterborne diseases; thefact that we can expect the se-verity and frequency of extremeweather events to increase.
I think the CEOs are underes-timating what’s coming. Becausethe people are connecting thedots.
Pew took a poll not long agoand found 65% of the Americanpublic favor pollution limits onpower plants, which included amajority of Republicans, 52%,and 67% of independents. Andwhen you look at people under30, another poll found 85% wantcarbon limits on power plants.
To me, that means any politi-cal party in our country that
wants a future is going to haveto start talking about not justdoing the small, incremental,status-quo things, but how wereally bring down carbon emis-sions to avoid what otherwisewill be catastrophe.
Party ResistanceMR. BUSSEY: No political partyseems to agree with you.MR. KRUPP: You’re right. Thehigh-water mark in Washingtonwas in 2009.
But let’s look at what’s hap-pened in those five years. Cali-fornia has adopted the mostcomprehensive cap-and-tradeprogram in the world. Green-house-gas emissions in the U.S.have actually gone down signifi-cantly, due to the recession,about 40%, but also because ofmore renewables, energy effi-ciency and natural gas substitut-ing for coal. We’re about 10%now below the levels we were atbefore.
MR. BUSSEY: Give us a reportcard on the environmental move-ment now. This has been a pe-riod where there have not beenany big wins in Washington.MR. KRUPP: Shale gas took a lotof people by surprise. A lot ofthe energy experts were blind-sided by the fact that Americahas a vast amount of this re-source. We’re now pulling 28trillion cubic feet out of theground. The key is to do it right,
in a way that protects the neigh-borhoods and maximizes the ad-vantage natural gas could haveover coal.
There’s no protests aboutleaking pipes. But it’s very, verydangerous. We commissioned areport which showed that wecould reduce 40% of the emis-sions of methane in this countryfrom the oil and gas industry fora cost of just one penny [per]1,000 cubic feet of produced gas.
MR. BUSSEY: What happens tothe push for renewables?MR. KRUPP: There’s no questionthat gas makes it hard for every-thing else to compete. At thesame time, we’re seeing, evenwith low gas prices, SolarCitydevelop a business model wherethey’ll pay for and put solar pan-els on your house. It’s a businessmodel that’s been picked up inmany states in the country. Weneed to clear out the thicket ofdumb rules that we have in somestates that are impeding thespread of energy efficiency andclean energy.
MR. BUSSEY: Isn’t momentum to-ward coal in the developingworld just so substantially moresignificant to climate changethan whatever incremental moveis made here on renewables?MR. KRUPP: I think the winds areshifting in China. The govern-ment is very serious aboutcleaning up its conventional airpollution and also in reducingcarbon emissions.
It’s undeniable that they’renow reliant on coal, and thatthey’ve built a lot of coal-firedpower plants. But there’s a hugeinterest to find ways to continueto increase the availability ofelectricity with other sources ofenergy.
A Blind Eye to Climate Change?FredKrupponhowcorporate chiefs—andpoliticians—aren’t preparing forwhat’s coming
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‘I think the CEOs areunderestimatingwhat’s coming.’Fred Krupp
JOURNAL REPORT | BUSINESS & ENVIRONMENT
Work With MeThe Environmental
Defense Fund
has been working
directly with com-
panies to benefit
the environment
while cutting the
companies’ costs
since 1990. Here’s
a sampling of
those partnerships
in recent years.
2010 | EDF collaborateswith General Electric Co.to develop Ecomagina-tion Treasure Hunts, aprogram designed toinspire employees toidentify energy-efficiencyopportunities in theworkplace.
EDF works withCarlyle Group to launchthe EcoValuScreen, a toolthat helps investmentprofessionals identifyopportunities for envi-ronmental managementto improve operations,cut costs and strengthenthe market position ofpotential portfolio invest-ments.
2013 | EDF and AT&Tdevelop the WaterEfficiency Toolkit, apackage of toolsand resources thatorganizations can useto help build their ownprograms to reducewater and energy usein buildings.
2014 | EDF helpsWal-Mart Stores Inc.develop a SustainableChemistry Policy aimedat phasing out the useof certain chemicals inconsumable productssold in Walmart andSam’s Club stores inthe U.S.
2002 | EDF showsCitigroup Inc. howto switch to 30%postconsumer recycledcopy paper at no ad-ditional cost.
2004 | EDF andFedEx Corp. developa cleaner, more fuel-efficient delivery truck,reducing the fleet’ssmog-causing emis-sions by 65%.
2005 | EDF, CompassGroup PLC and Smith-field Foods Inc. unveil apurchasing policy to curbantibiotic use in hog andchicken production.
2007 | DuPont Co. andEDF launch the Nano RiskFramework, a comprehensive,practical system to addressthe potential risks of nano-technology.
2008 | EDF launches theGreen Returns program withprivate-equity firm KohlbergKravis Roberts & Co. , reducinggreenhouse-gas emissions, wa-ter use and waste and increas-ing recycling at companies inthe firm’s investment portfolio.
Restaurant Associatesworks with EDF to developGreen Dining Best Practicesto reduce the environmentalimpact of food purchasing de-cisions and facilities operations.
2000s 2010s
Source: EnvironmentalDefense Fund
The Wall Street Journal
THE COAL INDUSTRY has a pub-lic-relations problem: Althoughcoal remains the biggest sourceof fuel for generating electricityin the U.S., its adversaries sayit’s just too dirty and just toodamaging to the environment.
Peabody Energy Corp.’s Greg-ory Boyce, chief executive of thelargest U.S. coal producer, seesthings differently. In an inter-view with Wall Street JournalAssistant Managing Editor JohnBussey, Mr. Boyce argued that re-ducing emissions isn’t the onlything the world should be worry-ing about. Lifting the global poorout of poverty is critical, too, hesaid, and coal can play a role inthat. Here are edited excerpts:
Too Dirty?JOHN BUSSEY: Can you give usthe lay of the land of coal usagein the U.S. and globally?GREG BOYCE: Many people viewcoal as something that we don’tuse anymore or that we are rac-ing away from. But coal gener-ates 44% of the electricity in theU.S., and it is still a massivebaseload supply of low-cost, reli-able, nonvariable energy for ourelectricity grid. Globally, it hasbeen the fastest-growing fuelover the past decade. In the nextthree years, the International En-ergy Agency projects that coalwill be the single largest sourceof energy in the world.
MR. BUSSEY: Gas has half thecarbon footprint of coal. Evenwith gas prices ticking up, isn’t itinevitable that political pres-sures, environmental pressures,even business pressures will takeinto account that difference andsay, “Coal’s just too dirty?”MR. BOYCE: You need to look at
the life-cycle emissions of anyfuel, [not just emissions at thepoint of generation]. And if youlook at the life-cycle emissions ofthe production, transportationand use of gas, it is much closerto the performance of coal.
You have to look at methaneleakage, particularly from uncon-ventional gas drilling, as well asthe energy it takes to transportgas through pipelines.
MR. BUSSEY: Let’s talk about Eu-rope, where we’ve seen an uptickin coal usage. There are somevery interesting geopolitical is-sues at play. It’s Ukraine. It’s Cri-mea. It’s Europe’s realization,again, that it’s so dependent onRussia for gas.MR. BOYCE: Whether you’re look-ing at a utility region, a countryor whether you’re looking glob-ally, we need a balanced portfo-lio of energy—we need solar,wind, renewables, gas, coal. Theonly way to reduce risk in theseenergy portfolios is to make surewe’re using all forms of energy.
When we say we’re going toeliminate a fuel source and we’regoing to go to another predomi-nant fuel source, we are settingourselves up for disaster from aneconomic perspective. And whenwe have a disaster from an eco-nomic perspective, it doesn’tmatter how hard we try, wearen’t going to get where wewant to get on the environment.
Energy InequalityMR. BUSSEY: You also make a dif-ferent argument, one related towhat you refer to as energy pov-erty.MR. BOYCE: There are 3.5 billionpeople in the world today whodon’t have what we would call
adequate access to electricity.There are 1.5 billion people whohave zero electricity access to-day. That is the largest and themost significant human and en-vironmental issue that we face.And until we solve that problem,we aren’t going to make theprogress that we want to interms of a lower-carbon future.
When you start to look atthose poverty demographics,that energy poverty, that energyinequality, then you understandwhy coal has been such a fast-growing fuel. How did China get700 million people out of pov-erty and into the developedworld? They did it with coal.
It’s a simple formula. It’s go-ing to get repeated. The questionfor all of us is how do we con-tinue to incentivize the use ofcoal and the best performancethat we possibly can.
MR. BUSSEY: China may be en-franchising their people with en-ergy, but they’re killing themwith the air quality.MR. BOYCE: Four million people ayear die due to energy poverty.While we’re here talking thismorning 300 people died due toenergy poverty. What does thatmean? No electricity. Malnutri-tion. No health care becausethere’s no electricity. Indoor airpollution. So let’s step back froma global view that says that theonly thing we need to worryabout is CO2.
MR. BUSSEY: Is your predictionthat in three or four years coalwill be the source of the greatestamount of energy production inthe world?MR. BOYCE: It isn’t just my pre-diction. It’s the IEA prediction.Because of the use of coal glob-ally and where they see the baseamount used here in the U.S. andthe rest of the developed world,sometime over the next threeyears coal will be the single larg-est source of energy use globally,surpassing oil.
In Defense of CoalPeabody Energy’s CEO on why it isn’t going away
‘There are 1.5 billionpeople who have zeroelectricity accesstoday.’Gregory Boyce
VOICES
FROM THE
CONFERENCE
‘Some people talkabout the comingstorm [from climatechange]. We’re in themiddle of the storm inour industry. If you goback to 1989, Hurri-cane Hugo was thefirst time that we sawa billion-dollar stormin the U.S.—and oneof the first in theworld. And now, wehave billion-dollarstorms very fre-quently.We’ve had to re-
spond and create nat-ural-catastrophe cov-erage for our clients,for insurance compa-nies and for govern-ments. It’s a robustfield, growing veryrapidly. But as we lookahead a few more de-cades, we could get tothe point where notonly are we out of in-surance capacity fornatural catastrophes,but it could also getto the point whereeconomically it’s not areasonable proposi-tion, either for us, asa reinsurance industry,or for clients.’J. Eric Smith,President and CEO,Swiss Re Americas
ECO:nomics Videos>>To watch videos of the interviewsat the ECO:nomics conference, goto WSJ.com/EnergyReport.
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THEWALL STREET JOURNAL. Wednesday, April 9, 2014 | R3
JOURNAL REPORT | BUSINESS & ENVIRONMENT
WHAT HAPPENS when theworld’s largest retailer decidesto go green?
For years, Wal-Mart StoresInc. has been carrying out anambitious program to make itsoperations more environmen-tally sound—an effort that hasan impact upon employees andsupply chains around the globe.
To see how the retailer’splans are faring—and what itplans to do down the road—TheWall Street Journal’s editor inchief, Gerard Baker, spoke withWal-Mart’s chairman, Michael T.Duke. Here are edited excerptsof their conversation.
The Effort So FarMR. BAKER: Your predecessor asCEO established the sustainabil-ity program at Wal-Mart. Tellus, almost 10 years later now,how it’s perceived, what you’veachieved so far and what youstill have to achieve.MR. DUKE: My predecessor wasLee Scott. I remember I spent alot of time with Lee at the timetalking about these big goals.
We talked about, how do weinspire all of our associates?This is not about a small group.It’s not about a corporate team.It’s about getting two millionpeople that work for Wal-Mart
excited all over the world aboutsustainability.
But also our partners that wework together with. How do wecreate a company that has zerowaste? How do we have a com-pany that sets a goal for 100%renewable energy? And a com-pany that also creates productsthat are sustainable for both in-dividuals and for the planet?
We started setting metrics toevaluate these goals early on. So,for example, take the topic ofzero waste. Since we establishedthe benchmark back about sixyears ago, in U.S. Wal-Mart andSam’s Clubs, 80% of what usedto go to the landfill no longergoes to the landfill. It goes to re-cyclable efforts and to producegood material from what somemight call trash.
MR. BAKER: You’ve said you’vegot a way to go in certain areas.The most obvious statistic is thatyour total greenhouse-gas emis-sions have increased since 2005.Obviously, you’ve grown as acompany and perhaps per-storeor per-square-foot emissions aresmaller. But if part of your goalis to reduce the carbon footprint,you still are producing a hugeamount.MR. DUKE: That’s true. And
there’s nowhere in our strategythat says we want to shrink thecompany. We still want to keepgrowing.
Butwe’ve established a goal toreduce energy consumption. Wewant to have a reduction of 20%of energy consumption, kilowatt-hours per square foot. So we dowant to keep growing the com-pany, but at the same time, perstore, per square foot, per cus-tomer served, per associate, wewant to improve the impact that
we’re having on the world.
MR. BAKER: Give us some exam-ples of how you’re incentivizingyour staff to contribute to thissustainability project.MR. DUKE: A good example wouldbe in our merchandising organi-zation. All of our product has tobe bought by our buyers, andmerchants then supply thestores with the product. Thispast year, we established some-thing for our merchandising. Itrelates to the sustainability in-dex, which lets us measure theproducts that we sell related tosustainability, from the footprintall the way through to the con-sumption and the full life cycleof the product.
We said this past year thatthe buyers in Wal-Mart, part oftheir objective would be thegrowth of the use of the index intheir categories of merchandise.It causes the merchants then tolook at everything that we selland say, “How do we improvethe index? How do we make itbetter?”
A couple of years ago, youwould have noticed a rapid con-version in liquid laundry deter-gent. Working with our suppli-ers, we went to moreconcentrated, taking water outof liquid laundry detergent. Sothe liquid detergent that wasthis big of a bottle became [asmaller] bottle, but did just asmany laundry loads. Recently,
we’ve worked with Clorox, andnow bleach is that way.
That is something that ourindividual buyers and merchantsare very engaged in.
Policing the ChainMR. BAKER: What about yourglobal supply chain? You areshipping tens of billions of dol-lars’ worth of goods fromaround the world. How can youhave any influence over the waythose goods are produced ortransported to get to you?MR. DUKE: We’ve had a big initia-tive in other countries to try toraise the bar with factories onhow product is manufactured.We kicked off just a few yearsago with a big summit in Chinawith support from the Chinesegovernment and several hundredsuppliers in China to increaseenergy efficiency, create moresustainable production practicesthroughout China. And I thinkwe’ve made some progress in re-cent years.
We kicked off this past year abig initiative on product made inthe United States. With the focuson sustainability and with risingcost of energy and moving prod-uct all over the world, it makesmore sense in the long term formore product to be made closer
to the consumer. And, obviously,there are more consumers righthere in the United States thananywhere in the world.
MR. BAKER: There’s a lot of skep-ticism out there that this is es-sentially a public-relations exer-cise, that it’s a gimmick. Thatyou’re still fundamentally a verylarge company, driven by a con-tinuing desire to expand thatscale. In going for growth, you’regoing to be consuming far moreresources, and this is just an at-tempt at window dressing.MR. DUKE: We want to growsales and serve more customers.This is really about customers.Where do I think and where doesthe company believe that cus-tomers are headed? That’s whywe’ve put so much emphasis onit. It’s also about the people thatwork for the company. Peoplewant to work for a responsiblecompany today. It’s about run-ning a better company. Andalong the way, we’ve saved hun-dreds of millions of dollars.
MR. BAKER: How do you see thepolicy environment in Washing-ton, in terms of some of these is-sues?MR. DUKE: The overall concern,which is even broader than thetopic here, is how do we createan environment in our country,and even around the world,where there really is more part-nership and bipartisan supportof the right initiatives for the fu-ture of the United States, andwhat’s better for the world. Asbusiness leaders, I don’t thinkwe can sit back and wait.
Wal-Mart’s Green Initiative: Status Report
Are Consumers On Board?A 2013 survey of U.S. consumers by market researcher GfK suggests growing skepticism about environmentalclaims for products and less willingness than before to pay more for green goods.
25% 35%had purchased a product inthe past two months becausethe advertising or label saidthe product was environmentallysafe or biodegradable
Down from 36%in 2008
Up from 30%in 2008
agreed that many of theproducts labeled environmen-tally safe are not any betterfor the environment than otherproducts
LIGHTBULBS
41%Down from 56% in 2010
HOMEAPPLIANCES
36%Down from 48% in 2010
HOUSEHOLD CLEANINGPRODUCTS
29%Down from 37% in 2010
AVERAGE FOR16 CATEGORIES
25%Down from 31% in 2010
Source: GfK Green Gauge survey of 2,000 U.S. consumers, conducted in May and June 2013 The Wall Street Journal
The survey asked if consumers would pay more for green goods in each of 16 categories. Even in the categorieswhere consumers were most inclined to pay more, fewer than half said they would, and fewer were willing to paymore last year than in 2010.
Categories where consumers were most inclined to pay more:
Genesis
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‘People want to workfor a responsiblecompany today.’Michael Duke
Chairman Michael Duke on why the retailer’s detergent bottles are smaller than they used to be
VOICES FROM THE CONFERENCE
‘We [oil companies]need…to see 30 years inadvance. With governmentslooking at the next three,two years because that isthe next elections—undo-able.’Christophe de Margerie,Chairman and ChiefExecutive Officer, Total SA
R4 | Wednesday, April 9, 2014 THEWALL STREET JOURNAL.
JOURNAL REPORT | BUSINESS & ENVIRONMENT
STUART BERNSTEIN is theglobal head of the clean technol-ogy and renewables group atGoldman Sachs Group Inc.,which has set a $40 billion tar-get for financing and investingin clean-tech companies over thenext decade.
In a discussion with The WallStreet Journal’s Russell Gold, Mr.Bernstein explained why hethinks recent successes in cleantech may draw venture capital-ists back to environment-relatedinvestments, and how GoldmanSachs benefited by doublingdown on the sector when thingsgot rough.
Here are edited excerpts:
A 20-Year HorizonMR. GOLD: You said recently thatyou believe we’re in a transfor-mational time in energy. Explainwhat you mean.MR. BERNSTEIN: Over the next 25years, 90% of energy demand isgoing to come from developingcountries, non-OECD countries.The per-capita consumption isincreasing rapidly. So there’s atremendous need to meet thatdemand.
You couple that with pollutionand health issues in large citiesin countries like China and India,and it’s a real problem. I thinkwe need to find renewablesources to meet that demand ina healthy way.
MR. GOLD: There was an assump-tion several years ago that wewere about to enter a rapid pe-riod of energy transition, that wewould be driving electric, auton-omous cars and powering ourhomes with solar and other re-newable resources. You actuallythink that we’re entering a pe-riod of fairly radical change inhow energy is used and deliveredaround the world, but you don’tthink this is going happen imme-diately, do you?MR. BERNSTEIN: I think it’s hap-pening now. But if people thinkit’s going to happen completelyover the next few years, they’llbe disappointed.
MR. GOLD: What’s your timeframe?MR. BERNSTEIN: We have a 20-year horizon. When we createdthis business unit within Gold-man Sachs, it was a new verticalwithin investment banking. Isaid to the executive office, “Wehave to take a 20-year view. It’s
going to be incredibly volatile inthe early years.” And it was.
Having said that, I thinkyou’ve also heard me say thatwe’re at a tipping point. Some ofthe technologies that four yearsago weren’t competitive withtraditional technologies are com-
petitive today.Solar was $100 a watt in the
1970s when people first startedputting solar panels on the roof.Now it’s going from $5 a wattlast year to $3 a watt in 2016. Soeven without a subsidy, it will becompetitive with the grid.
LEDs? When bulbs first cameout, they were $100 a bulb, $60a bulb. You can now buy one atCostco for $3, $4, $5, $6.
A New Dawn?MR. GOLD: There has been a lotof talk recently that the earlystage, the venture capital, theangel-investor stage has reallydried up. At least that was a bigdiscussion here last year. Is thatstill the case?MR. BERNSTEIN: Perceptionsometimes lags reality by six or12 months. If you talked to theventure community last year,they would say many things intheir portfolio hadn’t performedas well as they would have liked.And it’s harder to raise newfunds when that occurs.
Fast-forward 12 months. Nestwas bought by Google for $3.2billion. Every venture investorthat was invested in Nest did ex-traordinarily well. Opower hasbeen marketing the last coupleof weeks, and tonight they pricetheir IPO. Anyone invested inOpower, which is in the effi-ciency space like Nest, did ex-traordinarily well. We took Teslapublic in 2010, and we’ve raisedover $4 billion for them sincethen. These are all big successes.
MR. GOLD: So are venture capi-talists getting excited again? Ismoney starting to flow in to cre-ate and fund the next generationof Nests?MR. BERNSTEIN: Yes. It will takesome time because wheneveryou have carnage, it takes sometime for people to get past it.You also need to have visiblesuccess for people to be com-fortable to jump back in the wa-ter. But we’ve never been busier.
MR. GOLD: It has been a roughtime for a lot of the sectors thatyou’re investing in. Has your risktolerance gone down?MR. BERNSTEIN: When things gottough, Goldman doubled down.Many firms let the people intheir renewables groups go orshifted them to other industries.We hired the best people fromthose firms and doubled downour commitment to the space.Our market share went up dra-matically as a result.
Why Renewables Are Hot AgainStuart Bernstein of Goldman Sachs on how the energy revolution has begun
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* Includes cash investments by venture-capital firms, corporations, other private-equity firmsand individuals in companies that have received at least one round of venture funding
2009 2010 2011 2012 2013
U.S. $3,852 $4,706 $5,633 $3,358 $2,558
Europe 966 905 865 550 568
Israel 70 454 316 91 149
Canada 43 436 353 66 106
India 196 135 102 103 66
China 347 716 399 291 62
U.S. Europe Israel Canada India China
Energy efficiency $714.3 $174.3 $68.5 $12.0 $12.5 $13.5
Industry-focusedproducts andservices
609.6 117.4 71.2 4.0 10.1 16.1
Energy/electricitygeneration
430.5 90.6 0.0 10.9 28.1 0.0
Energy storage 322.1 72.6 0.0 10.0 0.0 0.0
Alternative fuels 238.3 40.0 0.0 48.2 0.0 0.0
Environment* 166.2 50.6 0.0 1.9 5.7 0.0
Water 77.3 22.6 9.0 19.1 9.3 32.3
Clean MoneyHow investment in venture-backed clean-technology companies is flowing around the world
Equity investments in venture-backed clean-technology companiesin selected regions, in millions of dollars*
Investments by clean-technology sector for each region in 2013,in millions of dollars
*Environment sector includes, among other subsectors, air, recycling and waste.
Source: Dow Jones VentureWire The Wall Street Journal
‘When things got tough[in renewables],Goldman doubleddown.’Stuart Bernstein
VOICES
FROM THE
CONFERENCE
‘There’s been a bigeffort in the [nuclear]industry to incorporateFukushima-type learn-ings. Vogtle 3 and 4[Southern Co.’s nu-clear-power plantsunder construction inGeorgia] is different inthree characteristics.One, it’s not located
near a coastline. Sec-ond, it’s not in a seis-mic-sensitive area.And third, remember,what happened atFukushima was theylost all their externalpower source. Thetsunami took out anysort of capability tobackup power, so theyhad to deliver waterwhere it needed to be.They couldn’t do that.[At Vogtle], this is
the reactor, this is thewater—it sits abovethe reactor. During atime of disaster…thewater will just dumpright into the reactor.It would have obviatedall of the problems ofFukushima.’
Thomas A. Fanning,Chairman and ChiefExecutive Officer,Southern Co.
THEWALL STREET JOURNAL. Wednesday, April 9, 2014 | R5
JOURNAL REPORT | BUSINESS & ENVIRONMENT
HOW GREEN can you make anOreo?
That’s a question facing IreneB. Rosenfeld, chief executive ofMondelez International Inc.,maker of the sandwich cookiesand other well-known brands.The company is trying to meet anumber of challenges facing thefood business, including loudwarnings about climate changedisrupting crops and calls to en-force sustainable practices.
Joseph B. White, a Wall StreetJournal editor, spoke with Ms.Rosenfeld to get an insider’stake on these issues.
Here are edited excerpts ofthe discussion.
Protecting SuppliesMR. WHITE: When agencies andindividuals and policy makersexpress concern about climaterisk, food is at the top of the list
very often. Are these concernsabout disruption to crops over-done?MS. ROSENFELD: Unfortunately, Ithink they’re quite accurate.
As we look at the volatility ofpricing, as we look at the volatil-ity of the availability of our sup-ply, there’s no question some-thing has changed. Without adoubt, there’s been a very dra-matic change in the availabilityof our raw materials.
We’ve taken a very active po-sition in addressing that bothfrom the availability perspective,as well as from a sustainabilitystandpoint.
MR. WHITE: You have initiatedprograms to try to help cocoafarmers in Africa and severalother developing countries tostay in the business in a sustain-able way.
MS. ROSENFELD: We’ve made a$400 million investment for thenext 10 years to help cocoafarmers in a number of ways.
One is to help them improvetheir yields. We’ve been able toteach them different methods offarming, which help them to im-prove their yields by up to 20%.
We’ve been working to helpthem to improve their salariesby up to 200%, because in manyof these cocoa-farming villages,many of the young people leavethe farm because they can’t seetheir way to making a sustain-able income.
We’ve also tried to help thecommunities to set up more ofan infrastructure. For many ofthem, their families don’t haveadequate health services. Theydon’t have adequate schools.
The last part is that cocoahappens to be a fairly seasonal
crop. We’ve been helping to tryto expand the number of cropsthat these various farmers cangrow, so that they have a year-round livelihood.
MR. WHITE: How has it paidback? Are you able to say,“Look, this $400 million was acapital investment that’s return-ing capital?”MS. ROSENFELD: If we’re seeingan increase in yields to the tuneof 20%, we’re just gettingstarted.
I have great confidence thatas we continue to train them,that we will be able to makeeven greater strides. So it’s re-ally about protecting our supply
in the near term and for decadesto come.
MR. WHITE: Do your shareholderssay, “That’s the kind of invest-ment that we approve of,” ornot? And are your customerswilling to reward you for this?MS. ROSENFELD: I am findingthat there’s great support for theinvestments that we’re making.It’s a little more challenging tocalculate the return on those in-vestments.
But without a doubt, at theend of the day, we’re looking forthe benefits to our profit, to ourpeople and to the planet. And itseems to be playing out the waywe had hoped.
The Food ChainMR. WHITE: Are you making simi-lar investments in other com-modities?MS. ROSENFELD: We’ve madeabout a $200 million investmentin a program we call CoffeeMade Happy.
In the key coffee-producingcountries including Vietnam, In-donesia, for example, we havemade similar investments inhelping the farmers to under-stand better ways to improvetheir yields, helping them to im-prove their livelihoods.
In the case of wheat, we arevery heavy users of wheat in ourbiscuit products, besides Oreo.We have a very significant pro-gram going on in Europe withabout 2,000 farmers.
There again we are workingto ensure that these farmers areusing sustainable farming prac-tices.
MR. WHITE: Do you have to findcost savings in other parts ofyour business or your productionchain in order to offset the costsof a more responsibly producedcommodity?MS. ROSENFELD: Yeah, or wehave to find more ways to addvalue to the products that con-tain some of these ingredients sothat there’s adequate value.
It is about supply and de-mand, but it’s also about provid-ing adequate value to our con-sumers.
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VOICES FROM THE CONFERENCE
‘With recycling, you’ve got two components. You’ve gotconversion: What material do we have, how do we get itready to be recycled? And then, what can we sell it foron the back end?When the conversion cost goes up, and the product
value goes down, that’s when you run into a problem.And that’s what our world has been. Our conversioncosts have gone way up for a variety of reasons, and thesales prices have gone down, primarily because of lowerdemand from China. So, you’ve got higher conversion
costs, lower sales price on the back end, and for the first time since I’ve been atthe company in nearly 15 years, we actually lost money in recycling in the fourthquarter of 2013.And if you lose money, investment goes down. And that’s what you’ve seen in
recycling. The most recent EPA report says that for the first time in 50 years,recycling rates have gone down in the U.S. First time in 50 years.And we are the largest by far in North America. If we’re pulling back on invest-
ment, you can imagine what’s going on in the rest of the industry. And so, thereis an issue in recycling right now, which is, how do you build a long-term, sus-tainable business model to drive more recycling? We don’t want to see those re-cycling rates continue to go down.’David Steiner, President and Chief Executive Officer, Waste Management Inc.
How Oreos Hopes to Maintain ItsChocolate SupplyIrene Rosenfeld, CEO of Mondelez International,on helping cocoa farmers stay in business
‘We’re looking for thebenefits to our profit,to our people and to theplanet.’Irene Rosenfeld
VOICES FROM THE CONFERENCE
‘[A global carbon tax] is what we think is the best solu-tion, because it’s technology-neutral. Governments arenot picking winners, and simply the best technology andthe best innovation is prevailing. So it’s very efficient.But politically, of course, it is very challenging.’
Helge Lund,President and Chief Executive Officer, Statoil ASA
R6 | Wednesday, April 9, 2014 THEWALL STREET JOURNAL.
THE MILITARY is a huge con-sumer of energy and other re-sources. Roger M. Natsuhara isone of the people charged withhelping it get greener.
The principal deputy assistantsecretary of the Navy spoke withWall Street Journal editorial-board member Kimberley A.Strassel about the Navy’s effortsto run a cleaner fleet and otherinitiatives. Here are edited ex-cerpts of the discussion.
Sea of GreenMS. STRASSEL: The Secretary ofthe Navy has laid out ambitiousgoals. I wanted to start with onewhich is really fun. That is theGreat Green Fleet.MR. NATSUHARA: By 2016, theSecretary has challenged us tosail a strike group using ad-vanced biofuels. In 2012, we dida multinational exercise. TheU.S. Navy portion of that, all ofour assets, ran on advanced bio-fuels.
We don’t want to changeequipment. We want the samecapacity. And we want it envi-ronmentally neutral or better.
MS. STRASSEL: Part of this isdriven by wanting to expand thefuels you can use, to hedgeagainst volatility.MR. NATSUHARA: That’s one ofthe pieces of it. We use about 30million barrels of oil a year.When a barrel of oil went up$30, that was a billion-dollar hitto our budget we had to absorb.It’s a very significant cost for us,and that happened two years ina row. From the national-secu-rity side, fuel and energy is oneof our major vulnerabilities.
MS. STRASSEL: The other side ofthe Great Green Fleet is effi-ciency.MR. NATSUHARA: As an example,during the Great Green Fleet ex-
ercise, one of our cruisers hadone hangar with LED lights andone with fluorescent lights. Theaircraft maintainers said, “Weonly work in the bay with LEDlights, because we can see bet-ter.”
It’s safer. It’s easier to work.And the lights don’t have to bechanged as often.
MS. STRASSEL: Some ships arenow outfitted with an energydashboard. Is it like a Prius?MR. NATSUHARA: The energydashboard does better voyageplanning. What’s the optimumspeed, what are the weatherconditions, how to plan missionsso we decrease our fuel.
We do have the USS Makin Is-land, a helicopter aircraft carrieressentially for the Marines. It
has a hybrid drive. On its initialvoyage—it was built on the EastCoast—it went to San Diego. Onthat voyage alone, it saved $2million in fuel.
MS. STRASSEL: You partner a lotwith private industry. You weretalking about biofuels. A lot ofthat’s being done with privateconcerns, right?MR. NATSUHARA: The agreementwas we would buy 100% of thefuel they produced as long asthey met price and quantity re-quirements. Also, we’re earlyadopters of technologies. Wetake risks that probably the pri-vate side wouldn’t take, adoptingnewer technologies, trying to in-tegrate them in different ways tohopefully stimulate the market.
The New Kit BagMS. STRASSEL: Talk a little bitabout ExFOB.MR. NATSUHARA: The MarineCorps twice a year does the Ex-perimental Forward OperatingBase. They’ll set up a prototypeforward operating base, whatyou’d see in Afghanistan andIraq, and invite industry and say,“This is how we operate in the
desert. Show us your innova-tions on renewable energies,how to make water cheaper, anytechnologies we could rapidlydeploy.” The Marine Corps hasadopted some of those.
MS. STRASSEL: Can you talkabout that?MR. NATSUHARA: Soldiers andMarines are very wired, whichmakes them more effective. Butthey carry a lot of weight. On atypical patrol, if they’re goingout for three days, it’s about 90pounds of gear, with water, am-munition, batteries and armor.The batteries are one of the big-gest weights, about 30 pounds.Everything they use has power—sights, infrared, communica-tions.
They’ve developed blanket PVpanels where they can rechargetheir batteries during the day.You unroll it. It charges the bat-teries. They don’t have to carryas many batteries. It’s also a se-curity issue. When they throwthese batteries away, they’re ac-tually leaving a trail of wherethey’ve been. And it’s a badthing environmentally to throwthese batteries out, obviously.
A Green Mean Fighting MachineThe Navy’s Roger Natsuhara on the military’s effort to adopt alternative fuels
JOURNAL REPORT | BUSINESS & ENVIRONMENT
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‘We’re early adoptersof technologies. Wetake risks…the privateside wouldn’t.’Roger Natsuhara
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Aiming for Zero
Source: U.S. Army “Net Zero Progress Report,” published May 2013 The Wall Street Journal
In April 2011, the U.S. Army identified 17 pilot installations for its Net ZeroInitiative. Each installation is striving to reduce net energy consumption,water consumption or waste production—or some combination of thethree—to zero by 2020. Here are the best practices identified in a progressreport the Army issued last May.
Net Zero Energy
◆ Conduct thermal building-enve-lope analysis to detect energy leaksdue to gaps in insulation.
◆ Use energy-management controlsystems for automatic control ofsystems including lighting and heat-ing/air conditioning.
◆ Hire a resource efficiency man-ager to oversee efforts.
◆ Pursue alternative financing, suchas contracts that allow projects tobe paid for with energy-cost sav-ings instead of capital outlays.
◆ Conduct long-term masterplanning, keeping future goals ofachieving energy efficiency andsustainability in mind.
Net Zero Water
◆ Maximize the use of xeriscap-ing—landscaping that minimizes oreliminates the need for watering.
◆ Implement leak detection on thepotable-water distribution system.
◆ Maximize water recycling.
◆ Install purple pipe—a separatesystem of pipes to allow for the useof reclaimed water by keeping itseparate from potable water.
◆ Maximize the use of alternativesources, such as rainwater or brack-ish water, for irrigation and othernonpotable uses.
Net Zero Waste
◆ Establish a Qualified RecyclingProgram, which enables an instal-lation to use the proceeds fromscrap-metal sales to expand theinstallation’s recycling program tocollect and sell other recyclables.
◆ Periodically analyze wastestreams, including sources and quan-tities, to facilitate planning.
◆ Improve sustainable purchasingpractices to reduce waste at thesource. This can include revising sup-ply contracts to minimize packagingwaste, require compostable packag-ing or include “take back” clauses forcertain packaging, like pallets.
◆ Take advantage of opportunitiesto reuse materials at little or nocost. Examples include furniturereuse or donation to nonprofits, fooddonations and recovery of buildingcomponents prior to demolition.
◆ Take advantage of opportunities toexpand recycling at little or no cost,such as personal-electronics recyclingin partnership with outside vendors.
THE GLOBAL ENERGY equationhas changed dramatically in re-cent years, thanks in large partto the impact of the shale-gasrevolution. To get a handle onhow the expectations of hugegas exports may shape the geo-political future, The Wall StreetJournal’s John Bussey talked toDaniel Yergin, author and ViceChairman of IHS Inc. Edited ex-cerpts of their conversation fol-low.
New MuscleMR. BUSSEY: Give us a geopoliti-cal map of the world. What arethe rising and diminishing pow-ers?MR. YERGIN: We’re seeing a re-balancing of global oil supply inwhich we’re going to a have anorth-south and south-northflow in the Western Hemisphere.That means that the Middle Eastand Asia, and particularly China,are going to be much more con-nected. That raises very interest-ing questions about who’s re-sponsible for guarding the sealanes and so forth.
Obviously, the immediate en-ergy problem is Ukraine, whichhas just seen, in three days, itsgas price double, and the coun-try has no money. The West willprovide money to Ukraine sothey can pay their gas bill toRussia. It’s sort of back to theend of the Cold War. Energy se-curity’s back on the agenda forthe Europeans. And for the U.S.,it’s the first time that our energyposition is different. There isn’t
this sense of vulnerability, butrather the sense that there’s anew dimension to what we do.There’s new muscle to it. Gas ex-ports will come in three, four,five years. By 2021, the U.S. maybe one of the three largest LNG[liquefied natural gas] exportersin the world.
MR. BUSSEY: Is your expectationthat the U.S. will be a majorplayer in gas exports?MR. YERGIN: Absolutely. We’veseen a pivot on global energypolicy in the U.S. Before, it was,“Do we want to export any ofthis?” Now, it’s much more,“Hey, this is good for our econ-omy and it’s good for our foreignpolicy.”
MR. BUSSEY: Some say exportinggas is the last thing we shoulddo because it will raise the pricedomestically at a time when U.S.manufacturing needs to recover.MR. YERGIN: That’s the concern.Our view is that the market isnot constrained by supply, aswas the case in the past, but bydemand. People keep looking atthe numbers; they keep gettingbigger, for the gas supply.
OPEC’s RoleMR. BUSSEY: Does OPEC stillhave clout, just not as much withthe U.S.?MR. YERGIN: We’ve got to dividebetween gas and oil. Certainlythis means the U.S. becomes abig player. All the major Asiancountries, including the Chinese,
want the U.S. as part of theirportfolio, and this gives an addi-tional dimension to the U.S. rolein the world.
On oil, I think the Saudi pointof view is, “Demand’s going togo up, so we’re not worriedabout the U.S. supplanting us.”
But there is the question—and obviously, the president wasjust in Saudi Arabia—what’s go-ing to be the interest of the U.S.in the region? What does itmean for the security of coun-tries along the Persian Gulf thatface Iran?
MR. BUSSEY: Do we want a Chi-nese aircraft carrier guardingthose sea lanes?MR. YERGIN: I’ve discussed thiswith countries in the MiddleEast and, let’s put it this way, it’snot at the top of their priorities.But the reality is that China getsmore oil through the Strait [ofHormuz] than the U.S., and theydepend upon the U.S. to guardthe sea lanes.
MR. BUSSEY: Do Japan and Ger-many return with greater vigor,eventually, to nuclear?MR. YERGIN: Yeah, I think Japanwould like to see a restarting ofmaybe 10 plants. They saythey’ve gone through the regula-tory process, and they, too, arereally worried because their en-ergy costs are so high. The CEOof Nissan said they’re going tobe producing more cars in Mex-ico than in Japan.
Germany, you know, Chancel-lor Merkel made the decision ina weekend to shut down theplants [there]. I think it’s veryhard for them to turn it around.Five of the plants already shutdown. The rest by 2022. They’dhave to have a major event ofsome kind to make them revisitit.
Geopolitics in a Shale EraDaniel Yergin on the coming global realignment
‘By 2021, the U.S. maybe one of the threelargest LNG exportersin the world.’Daniel Yergin
VOICES FROM THE CONFERENCE
‘As solar technology continues to become less expensiveand, more importantly, soft costs that companies likeours face are coming down radically at a very highspeed, you’ll continue to see solar grow to locationswhere it’s cost effective. Is that 20%? Certainly I think inCalifornia and Hawaii those are reasonable numbers. InNorth Dakota will it be 20%? Maybe not.’
Edward Fenster, Chairman, Sunrun Inc.
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JOURNAL REPORT | BUSINESS & ENVIRONMENT
THE POWER BUSINESS is facingunprecedented change,
Across much of the U.S., de-mand for electricity is flat or de-clining. The industry’s aging in-frastructure needs to be beefedup with a big capital investment.And more people are turning todistributed generation—makingelectricity on-site with solarpanels and other methods.
To see how the industry canmeet these challenges, WallStreet Journal contributing edi-tor Jeffrey Ball spoke withNicholas K. Akins, chairman,president and chief executive ofAmerican Electric Power Co.Here are edited excerpts of theirdiscussion.
A Different LandscapeMR. BALL: I want to give you acouple of numbers: 2009 atAmerican Electric Power and to-day. Coal, as a percentage of to-tal electricity generation, hasshifted from 86% down to 70%.Natural gas has doubled from6% to 12%. Nuclear has doubled,from 5% to 10%. Wind renew-ables have more than doubledfrom 2% to 5%. Energy efficiencyhas increased a lot as well.
There was a time when yourbusiness was about maintainingand building coal-fired powerplants. Is that still the case?MR. AKINS: In the past, coal waspredominantly in the Midwestpart of the country, South-Cen-tral part of the country. Naturalgas was not available in manyrespects.
The technological innovationaround renewables and so forthhad not occurred. Everythingwas centered around invest-ments to ensure that the coalfleet remained running.
We as a utility have to thinkabout it from a broader perspec-tive. It’s like a stock portfolio.We need to think about re-sources being balanced.
We had a period where theEPA rules associated with coalwere taking effect. You also hadthe specter of greenhouse-gas-type activities. So, you not onlyhad those additional costs, butthen natural gas became preva-lent as well.
The thought process changeddramatically, where it wasn’tjust let’s invest everything wecan in the coal fleet.
Instead, it became, let’s bal-ance out the portfolio. Let’s in-clude other types of resources.There’s a distinct opportunity inthe history of this country to dothat. And we’ve taken that op-portunity.
MR. BALL: Where is clean coal? Isit going to happen?MR. AKINS: Ultimately it will, be-cause it has to. When you look atthe balanced portfolio in thiscountry, and the indigenous re-sources, coal has to be a part ofthat puzzle.
MR. BALL: If the premise is thatthe country’s not going toachieve big reductions in carbon-dioxide emissions without clean-ing up coal, given that coal’s go-
ing to remain a big portion ofthe generation mix, what’s thebig problem?MR. AKINS: It’s going to taketime to make a transition, par-ticularly on retrofit activities.With new generation, there’s anopportunity to advance the sci-ence.
But there’s a big differencebetween [small-scale projects]versus a large-scale project in anindustrial environment.
Scaling UpMR. BALL: You’re not buildingcoal-fired plants anymore. Notonly are you not doing that,you’re effectively not buildingnew plants of any sort, because
your load is flat to declining.You’re becoming a transmissionand distribution company.MR. AKINS: That’s right. We re-cently completed the first andonly ultra-super-coal unit in thiscountry. Fifteen percent less car-bon emissions out of that partic-ular facility. It’s operating verywell. That’s probably the lastcoal unit that we’ll have.
MR. BALL: Is solar, or distributedgeneration of other sorts, reallya threat to you? Or is it an op-portunity? Is it material to yourbusiness?MR. AKINS: Technology’s movingacross the board. Distributedgeneration can either be a threat
or an opportunity, depending onwhat kind of business you wantto be in.
We’ve segregated our busi-ness from generation, transmis-sion, distribution to one of infra-structure development and thecustomer experience.
You want to make sure thatfor customers that choose solar,they have the opportunity to dothat, or fuel cells, or batterytechnologies or whatever. Andour infrastructure developmentneeds to be centered aroundtechnologies that accommodateboth the efficiencies of opera-tions of the grid and a multitudeof different types of resources.We have to make sure we have a
system that’s managed so it canoperate in that kind of environ-ment.
MR. BALL: What do you think the
U.S. ought to do if it wants toscale up a more diversified port-folio of generation?MR. AKINS: I think the U.S. hasan opportunity to think about abalanced portfolio, becausewe’re not saying no nuclear.We’re not saying no coal. Wehave an opportunity to reallybalance out our portfolio.
That means we use our indig-enous resources. Coal, naturalgas, nuclear-energy efficiency,smart-grid activities, all thosetypes of things produce re-sources for us.
It’s a Whole New Energy GameAmericanElectricPowerCEONicholasAkinsonhowthe industry isno longerall aboutcoal
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‘It’s like a stockportfolio. We need tothink about resourcesbeing balanced.’Nicholas Akins
Smart ThinkingUtility executives are optimisticthat smart-grid technology willimprove their business in a numberof ways, but they see several bar-riers that will need to be overcometo realize the full benefits.
◆ Improve levels of service forend customers . . . . . . . . . . . . . . . 93%
◆ Improve grid reliability andoutage response . . . . . . . . . . . . . 89%
◆ Improve end-consumer energyefficiency and conservation. . . .81%
◆ Lower the costs of distributionoperations. . . . . . . . . . . . . . . . . . . . 79%
◆ Accommodate distributedsources of energy . . . . . . . . . . . . 74%
◆ Accommodate new sources ofdemand (e.g., electric vehicles) . .72%
◆ Limited return on investmentfrom smart-grid technology . .67%
◆ Lack of regulatory or policysupport. . . . . . . . . . . . . . . . . . . . . . .56%
◆ Lack of mature technologysolutions . . . . . . . . . . . . . . . . . . . . .52%
◆ Cybersecurity concerns . . . .48%
◆ Consumer antipathy oropposition . . . . . . . . . . . . . . . . . . . . 37%
◆ Lack of skills . . . . . . . . . . . . . . .24%
Source: Accenture Ltd. interviewswith 54 utility executives in 13 countriesconducted in 2013. The Wall Street Journal
The benefitsfrom smart-grid tech-nology willexceedthe initialforecasts.
Percentage of utility executiveswho said the following are im-portant or critical drivers of thedeployment of smart technologies
What are the main current barri-ers for the deployment of smartsolutions for your network?
Agree
69%
Disagree
31%
VOICES
FROM THE
CONFERENCE
‘Our stance has beenthat we can feed theworld without [geneti-cally modified food].We just shouldn’t. Be-cause it demonstrablywould require moreland, more water,more inputs. Themore land it requires,the further the cropsare going to have tobe grown from popu-lation centers, so [youget] the greenhouse-gas footprint thatcomes with transport-ing food further, andyou’re going to havemore soil erosion, be-cause you’re going tobe using cultivationfor weed control.’
Gregory R. Page,Executive Chairman,Cargill Inc.
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R8 | Wednesday, April 9, 2014 THEWALL STREET JOURNAL.