For a growing number of U.S. companies, the potential failure of Congress to pass a law reducing carbon emissions will not be a disaster. They will continue reducing emissions anyway because it increases their profits and helps them find new and often lucrative markets.
The companies, gathered in Washington this week for the Energy Efficiency Global Forum & Exposition, are not necessarily hanging on every nuance of language as Senate Democrats reveal their latest version of climate legislation.
"For some companies, lacking that kind of [regulatory] certainty makes it very difficult for them to plan. We don't need that," explained Beth Shiroishi, who directs AT&T's sustainability programs. "If it happens, it could be good for us or bad, depending on what they do. But we're in a nice spot."
The niche that her company is most interested in is moving more business off the nation's highways and onto its cellular and telephone networks. Encouraging telecommuting and virtual meetings is a meat-and-potatoes business for AT&T, which operates in 22 states. The potential for expanding it, according to one industry study, could reduce emissions by as much as 22 percent in the United States by 2020. That would mean more cars off the road and more income for AT&T, as well as big savings for some of its customers.
Developing internal products, then selling them
AT&T, she explained, is also beginning to sell fleet management programs, derived from its own experience managing its 77,000 vehicles. It has been finding ways to reduce travel time, emissions and fuel expenses using the same technology plus the satellite-driven Global Positioning System. The company is also experimenting with ways to reduce the energy costs of 500 of its buildings, and the spinoff from that, she added, may open up another business: helping homeowners reduce their energy usage through electronic monitoring and communications.
In a way, the company is betting that as energy costs will rise, the incentives to reduce them and the related emissions will spread from businesses, which are very aware of the costs, to homeowners, who are generally not. "Where we are right now is that there are really no incentives for most consumers to change their behavior."
If new climate legislation resembles the "American Clean Energy and Security Act," which the House passed last year, the government may nudge these consumers into more energy efficiency. The bill, put forward by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), tightened energy standards for new buildings, set new standards for appliances, and assigned some funds to states for beefing up their efficiency campaigns.
Yet to the efficiency industry, the linchpin of the bill, a roughly $30 price per ton of carbon, doesn't always set hearts aflutter. George David, the recently retired chairman of United Technologies Corp., calculated that a $30 price comes out to roughly $12 per barrel of gasoline. He said it took a brutal price spike in 2008, with gas prices topping $100 a gallon, to actually change American energy habits, and that $12 was a pinch by comparison.
That has moved some companies to base their strategies on long-term trends, rather than the immediate future.
Paying more to win a $10 million prize
Philips Electronics hopes its cutting-edge "L Prize" entry light bulb will represent a breakthrough. The company has been guarded about its avant-garde design, which includes a bright yellow coating on the outside that converts harsh light-emitting diode light into warmer, more traditional bulb light.
The bulb still screws into a socket like an ordinary light bulb, but it requires one-sixth the electricity of a conventional light bulb and is built to last 25 times as long.
Zia Eftekhar, the CEO of Philips' lighting subsidiary, runs through the math: There are 4.4 billion light bulb sockets in the United States. Putting one of these bulbs in each socket would save the same amount of energy each year as is produced by 312 average-sized power plants. "The potential is unbelievable," he said.
Moreover, the U.S. Department of Energy appears to be ready to help the Netherlands-based company into the U.S. market because it is running a contest to develop such a bulb. The winner of the "L Prize" gets $10 million plus contracts from federal agencies to install the bulb in their buildings. It also promises that 31 utilities will recommend the bulb to their consumers.
So far as Philips knows, it is the only entrant in this contest, which Congress called for in its 2007 energy bill. Part of its appeal to congressmen and senators was a requirement that the winning bulb must be produced in the United States before the government can buy it. Many utilities like the bulb's energy efficiency because it could help them avoid the stiff costs of building new power plants.
But when will consumers get to like it? There's the rub. According to Eftekhar, the company won't know the exact price of the bulb until it starts producing a commercial version later this year. The retail price, he admitted, could go beyond $8 a bulb, versus under $1 for a conventional light bulb. The consumer who buys one begins reducing emissions immediately, but it will take as much as eight years for the bulbs to produce payback, or consumer savings.
Some businesses, he said, are also wary of the new product. "Their response is, 'What I have right now is not broken, so I don't have to replace it.'" It cost Philips, he said, considerably more than $10 million to develop its L Prize bulb, but, like AT&T, it is betting on a future of rising energy costs and the eventual discovery by consumers that their bottom line is affected by energy bills, too.
Companies feel the energy pinch first
As things stand, explained Shiroishi of AT&T, businesses are already beginning to feel the pinch and to look for products to reduce energy use. In some polls of consumers, they worry about rising energy costs and emissions, as well. She predicts the awareness will build, but only gradually. "Ninety-nine percent of the studies show that what people say they are going to do is not what they are actually doing."
At Schneider Electric, a multinational energy-services firm, company representatives don't have to watch Washington with bated breath. Jeff Drees, the company's U.S. president for buildings, says the company shrank 19 percent in 2009, one of the worst years for business in memory. But its energy management division grew 12 percent.
Part of the reason is that so much "low-hanging fruit" remains to be picked. He said Schneider can actually go into a year-old building, even one that is certified under the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) program, and find 20 percent worth of energy and water savings.
"Even though it's LEED-certified, what happens is that you have a building staff who is focused on fix-repair; they're not trained to do energy management on a building," he said. "So the building drifts; it gets out of control."
Drees sends technicians to see where energy-efficient instruments are being neglected or misused, and Schneider can set up a long-term contract -- called an Energy Savings Performance Contract, or ESPC -- to promise that over 20 years or so, every system will function optimally.
The company has to put its money where its mouth is. In Houston, where Schneider has won a contract to retrofit a number of city buildings, the company has guaranteed a certain amount of utility savings over the contract period. If it fails to deliver, Drees says, he has to cut a multimillion-dollar check to Houston.
Branching into China
A tougher market to crack is in commercial and residential buildings, whose owners often don't have the patience or money to do deep retrofits with multi-decade paybacks.
Even here, Schneider expects more low-hanging fruit. He said buildings can benefit from lighting controls, thermostats, and new fans for air conditioners -- a sort of "a la carte" solution that can nick off energy waste while staying within the commitment level of a less gung-ho client.
China presents another growth area for Schneider. Chris Curtis, the company's CEO for buildings in North America, said in an address to the Energy Efficiency Global conference that two years ago, such a conference in China would have been empty. Now, he said, efficiency conferences are standing room only.
Who's interested? Government buildings appreciate the long-term payback, as usual. But a prime growth area is multinational firms: As they set up Chinese branches to hop on the country's economic rocket, they want their buildings to be consistent with their global culture -- which often includes energy-efficient buildings in wealthy nations.
Drees credited the American Recovery and Reinvestment Act for driving some business in the United States, and he said the Energy Policy Act of 2005 is still paying dividends by requiring buildings to get power meters -- a boon to Schneider when building managers discover how much energy they're using.
As for climate policy, Drees said it may yield some new business prospects, but he also pointed out that Schneider has 45 manufacturing sites in the United States whose smokestacks would face that regulation.
"What does it mean to us? If our carbon emissions is above a benchmark, we're going to have a carbon cost," he said. He mused that the company's energy-efficient products and services, however, will also have greater use in a carbon-constrained economy.
"It's both an opportunity from a market [perspective], but as a manufacturer, it could be a cost to our plants," he said.