Thursday Jan 21, 2010

Dispelling Green Grid Rumors

Over its three year history The Green Grid has become a critical resource in the effort to make the world's datacenters sustainable. What I particularly appreciate is the focus on practical information and tools, in addition to the standards and advocacy work that you would expect.

One of the core tenets of the group, from the beginning, is that it include end-user companies as well as datacenter product and service providers. Despite that fact that over 15% of the membership is end-user companies, the organization continues to fight rumors that it is limited to IT providers.

Mark Monroe, Sun's rep on The Green Grid and current Green Grid Treasurer, summarizes the situation:

...there is a strong rumor that "end user" organizations, i.e., non-IT equipment or service vendors, "are not allowed to join The Green Grid." The rumor appears to be especially strong in the financial community.

The Green Grid was formed with the idea that it was to be "an end-user driven organization" right from the start. More than 15% of TGG's members are pure end user organizations, that is, companies that offer no products or services in the IT arena, but only use IT equipment in their operations.

In addition, TGG formed an end user Advisory Council in November of 2008 to help guide the organization at the highest level. The Advisory Council consists of 8 large end user companies, including AT&T, Verizon, Walt Disney, ADP, Strato AG, eBay, Nationwide, and Tokyo Electric Power, who meet and advise the board of directors of The Green Grid directly on issues of organization direction and strategy.

Membership is open to any company, any size, industry, or geography who is interested in improving data center efficiency. When a company joins, every employee is eligible to participate in The Green Grid's work, and contribute to the effort of improving the efficiency of data centers globally.

Please help get the word out, and support TGG anyway you can!

Monday Jan 04, 2010

Green Education: What We Need

Over the holidays USA Today had an article talking about the sudden rise of green-oriented minor and major programs at universities. According to Paul Rowland, Executive Director of Association for the Advancement of Sustainability in Higher Education, two factors are driving the surge: students want the courses, and employers want the trained students.

When I give talks on our book "Citizen Engineer" at universities this topic always comes up. In specific, we discuss what employers are looking for in these students.

The first point is clear from the article: energy is a "sweet spot". The examples at Illinois State, MIT and UC Berkeley all centered on energy. For the first time in decades there is a wave of innovation in this sector, and not only in companies that generate energy, but also those that depend on it for their operations or products. We certainly fall into this latter bucket at Sun, and more of our engineering jobs come with a requirement of understanding electrical energy and how our electricity infrastructure works in real life.

The second point relates to general sustainability degrees. While these were barely mentioned in the article, we are starting to see some students come from programs with majors in sustainability, and I hear of many universities considering adding such a degree.

My feeling on this has become pretty clear cut: a minor degree in sustainability is a wonderful idea, a major is not. We need more awareness of environmental needs and solutions in all of our roles in business: our engineers, chemists, lawyers, business people and operations teams. But the key is that these are all highly specialized roles, and the people need to be able to do these first. I want the major to be in these areas, and will highly value a minor in sustainability.

The proof, of course, is in the pudding. At Sun we have no sustainability generalists, and I don't anticipate that we would ever hire one. In every real-world case we've always needed someone with training or experience in a specific expertise.

To sum up, my advice to universities is always the same: energy is a great major or minor, but be careful of majors in general sustainability. Be world class in the things you already do, and layer in sustainability minor to make those folks even more marketable.

Friday Dec 18, 2009

Datacenters and Solar Panels

This week i/o Data Center announced plans to cover their 11-acre Phoenix data center with solar panels. While I applaud their investment in clean energy, the details of the installation point to the current challenges that both data centers and solar energy face.

Our green energy guru, Mark Monroe, blackbox_wind_small.jpgpointed out the following energy disconnect:

  • When fully loaded, the 11-acre datacenter will use 120MW of power, or 1.05M MWh per year. If powered with coal-produced electricity, you're talking about a mile-long train of coal each week.
  • When complete, the solar panels will generate 4.5MW peak. Using NREL's PVwatts site, we find that the annual output is projected to be 7.8K MWh per year.
  • Result: the solar panels will cover 0.78% of the data center's power needs. So, basically, the coal train will be 40 feet shorter.

We're run some numbers some numbers on other data center projects, including making solar-powered Blackboxes and they all come out with similar results.

So is there a point to this, other than to be depressing? Believe it or not, there's some good things happening here.

First, large data centers have higher energy density than just about any kind of building. Homes, warehouses and office buildings are much lower, and even today's solar panels are aren't such a mismatch. So the extremeness of this case is a result of the contents of the building, not a statement about solar and buildings in general.

Second, the trend towards these mega, high density data centers is a good one. These new designs are generally much more efficient in power distribution and cooling, and larger projects have more budget to focus on efficiency. For example, look at the interesting things that they are doing to shift power demands between day and night. In other words, spreading the same computers over lots of small data centers would be less efficient. Do we have work to do on both the computers and the power and cooling? Yes, we have a long way to go. But don't let the consolidation upset you - its almost always the right thing. (And before someone sends me an email challengingthe-green-grid.png the mental capacity of someone who'd put a datacenter in Phoenix, take a look at this chart from the Green Grid).

Finally, its great to see that they believe that a project of this scale will make economic sense over its lifetime. That's promising for other projects in two ways: 1) they are also likely to make sense, and 2) projects of this scale will help drive down costs of solar, and will make future projects even more financially sensible.

Monday Dec 14, 2009

Employee Engagement

Two members of the Sun Eco leadership team, Marcy Lynn and Lori Duvall, have been holding a conversation through their blogs recently (last two posts here and here).

In her latest post Marcy is lamenting the state of employee engagement at Sun. She cites the lack of "green teams" and inactivity in the Eco Facebook community as evidence for her sense that employee engagement hasn't gotten going to the extent that it has in other companies where "green teams" have taken off.

But I wonder if we really take our motto, "Every job is an eco job", to heart, and we look at what's taking place in the organization, are these valid ways to measure employee engagement?

For example, our Workplace organization has made serious strides in embedding sustainability into their activities for this year, embodying the "Every job..." concept. But since they're already a team, would it make sense for them to register as a "green team"? Do they need to share the ideas they're working on within their org on Facebook, since they already have the authority and budget to act on them?

I could cite similar examples for what's going on in energy efficient design in the product teams, or the great work our datacenter teams have done creating much more efficient IT and labs for Sun.

My realization from reading Marcy's blog and thinking about this is that if you really execute on "Every job...", then it just becomes part of what they do, and it gets harder to see exactly what they are doing and how they are doing it. A parallel may be to say "Every job is a business job", which in a company is generally true. But that doesn't mean that every employee self-identifies as a business person, or as part of a business team.

Ironically, one of the reasons we started the "Every job..." campaign was that we realized there was lots of opportunities in areas we didn't know anything about, so we wanted people to find them themselves. What we didn't think about was that folks might buy into the idea, find opportunities we didn't see, do the work, and we'd never find out!

Finally, I don't want to risk overstating what we've accomplished in employee engagement. We've got a long way to go. But I also don't want to miss out on what is happening. In at least some areas I don't believe we have a disconnect in employee engagement, but instead its a failure of recognizing and measuring employee engagement.

Tuesday Nov 17, 2009

Updated Version of Chemicals Paper

Here's an updated version of the chemicals paper. Thanks to various folks for comments, including the Sun team, Ken Geiser at UMass-Lowell, and Kathrin Winkler at EMC.

Wednesday Nov 11, 2009

Paper on US Chemical Policy

Federal chemical policy in the US has been fairly stagnate for years, but there is increased discussion about the need for new policy and what shape it should be.

One of the most important changes in the last couple of decades is the increased role of product manufacturers in the chemicals ecosystem. Manufacturers are now held responsible for the chemicals used in their products, for the sources of those chemicals, and for takeback and recycling.

In order to raise awareness of the increased challenges to product manufacturers and the possible opportunities in new, federal chemical legislation, I've laid out the basic issues and some proposals in a paper entitled "US Chemical Policy - A Product Manufacturer's Perspective".

This is part of an ongoing discussion, so please send me any feedback.

Wednesday Oct 28, 2009

Thoughts on the Future of Green Marketing

As part of a LinkedIn discussion group run by the Association of Climate Change Officers, I responded to a question on green marketing that I thought would be worthwhile to copy here as well.

The question from Janet Smith: Is Green Advertising Overload Blocking Successful Value Propositions? She elaborated on her question in her blog.

And here's my response: I believe that green marketing related to product benefits which accrue directly to consumers (e.g. lower energy costs) will continue to be effective, while image-related green marketing will generally become ineffective for most companies. In fact, I think it is likely that we will get to a point where a generally good green image will be table stakes for being in the game. At that point positive differentiation will be very difficult, leaving only negative differentiation for those who stumble or don't get the basics right.

Tuesday Oct 20, 2009

I'll Be the Judge of That

Two different news items recently led me into the same train of thought: we are all increasingly in the business of judging Goodness, and of being so judged. I purposefully capitalized Goodness here, because I mean it in the highest sense of the word. This probably sounds vague, so let me use the examples to explain.

The first item is from the NYTimes, and discusses the conundrum caused by a proposed solar plant in Nevada. While the plant will produce copious free energy, it will also require over a billion gallons of fresh water a year, or over 20% of the water supply for the valley in which it is to be cited.

This is a classic tradeoff that we're going to hear more and more about. What are we willing to give up in exchange for cleaner energy? Many types of solar power need water, as shown above. But how much water is too much? How many dead migratory birds are too many at a potential wind farm location? How much car safety should we sacrifice for better mileage? How much can the view from the shoreline be impacted by offshore wind farms before it crosses the line? There are tons of these questions, there are going to be more, and they are going to get more and more complex.

Presumably you can see why I described this as judging Goodness. We might try to reduce decisions such as these to financial terms, but its hard to put a price on scenic beauty or a single bird. And your answer may not be the same as someone else's. I'll react differently to a wind farm I can see from my deck than one that's a thousand miles away in a place I'll likely never visit. How we approach these decisions reflect our personal or group morals.

The second example isn't about tradeoffs, but about people trying to quantify the Goodness of others. You see this all of the time: green rankings of companies, ethical lists of schools, etc. For example, Sun was recently included in the Newsweek green ranking, coming in 14th out of 500. (Note: I'm not singling out the Newsweek ranking - there are dozens of examples I could have used and this just happened to be a recent, well publicized one.)

This, however, is even trickier than the task above. We're not talking about an either/or situation, we're talking about trying to capture all of the factors that make up the green-ness or ethical-ness of an organization in a single number. And to make matters worse, these the organizations being compared usually don't even do the same thing. How do you compare an airline to a consulting company? A manufacturer to a non-manufacturer? A small school in the north woods to big one in Manhattan?

But as we've seen, there's no shortage of people who feel they are up to the task. They're willing to put relative weights and scores on various sources of quantitative and qualitative data, deciding what the underlying components of "good", "green" or "ethical" should be. Sometimes we get to understand these weights and data sources, but usually we don't.

In the Newsweek case, one of the three major factors in the ranking was a "reputation survey" audit they did using unnamed CEOs and other "experts". Since Sun Microsystems is not a consumer brand and we don't advertise much, its not hard to predict that we may not score as high in that as organizations that are household names, or are use big ad budgets to tout their sustainability. Sure enough, Wal-Mart tops the list in that category followed by GE, Coke and Nike. (BTW, Wal-Mart is doing some outstanding sustainability work, but that doesn't validate the scoring methodology.)

Don't get me wrong - I'm not saying that Sun deserves to be scored or ranked higher. In fact, I'll go a step further and say that I have no moral grounds on which to judge the ethics or greenness of any organization, Sun included. I'm confident in telling you that we're using less fresh water and emitting less GHG than we were a year ago, but that's as far as I'm comfortable going. In short, who am I to judge?

So what's the alternative to rankings? I'm a huge proponent of measuring things and making the data public - that's what we've been trying to do at Sun through our CSR report, annual CDP response, OpenEco.org data and other avenues. I hope that companies, investors, and consumers are using that data to understand what we're up to, and are making better informed decisions.

As organizations are trying to exhibit more social responsibility, there is a necessary increase in moral judgement in business decisions. In light of this, my advice is simple. First, recognize that you're using moral in your decisions. Second, figure out what's important to you (not Newsweek or anyone else) for the specific decisions you have to make. Finally, gather your own data.

There are lots of things that are OK to outsource - your moral standards aren't one of them.

Thursday Oct 15, 2009

Trip Report: A Visit to the Capitol

Last week I was down in DC with a group of investors and business execs, many of whom were in the green space under the banner wecanlead.org, a collaboration between Ceres and the Clean Economy Network. John Doerr was the headliner of the group, but there were CEOs of some hot company like A123 and Seventh Generation. The motivation for us all to be there was to impress upon our legislators that well-constructed, comprehensive legislation could be good for business.

(Aside: one of the dangers of these events is that the "well-constructed" part of the message is ignored or left to be defined by the audience, so the message can be interpreted as "pass anything!". My experience with business folks who are savvy about climate policy is that they are fairly particular about what "well-constructed" means. Another risk is that the press and others will try to figure out what your profit motive is, and often zero in on one part of your group, such as happened here. So whenever agree to participate in one of these missions you have to think through risks like this.)

Overall we were well received, and the trip garnered good press attention. In particular, the executive branch pulled out all of the stops, allocating time from three Department Secretaries: Sec'y Salazar (Interior), Sec'y Chu (Energy) and Sec'y Locke (Commerce). We also heard from Carol Browner, Director of the White House Office of Energy and Climate Change Policy, and several other members of the administration.

With all of these meetings we were able to get a sense of the administration's overall mood and approach to climate change legislation. These impressions were probably slanted somewhat by the fact that the administration knew it had a favorable audience. The good news was that, overall these folks all knew their stuff. Obviously Sec'y Chu is deep into the science side of energy and Director Browner into policy, but Sec'ys Salazar and Locke both exhibited a deep knowledge and personal passion on environmental issues.

Compared to past trips to DC, the biggest change for me was a new focus on clean energy competition with China. Particularly Sec'y Locke and Director Browner emphasized China above all other reasons to get legislation done, and done soon. Personally I think this is a good change. I believe it can get more broad-based support, and will focus the discussion more on innovation. However, if China truly takes center stage as the driver for legislation, it can't help but change the focus on the individual elements of the package. In particular, is cap and trade a central mechanism in a competitive agenda as opposed to a climate change agenda? This will be interesting to watch.

Beyond the emergence of China as a motivator, there were some other notes of interest:

  • The administration isn't waiting for climate legislation to get started. They discussed what they were doing with stimulus money and within the jurisdictions of their own departments. Earlier in the week the President had signed an executive order to drive the greening the federal government.
  • The message on timing for climate legislation is "as soon as possible". But it was pretty clear that a climate bill is second fiddle to health care, and everyone was very careful to avoid making commitments about Copenhagen. Carol Browner was particularly careful with her words, and I was left with the sense was they're willing to let the timetable slide past December if the higher priorities aren't complete yet.
  • Nuclear is back on the agenda. Sec'ys Locke and Chu both talked about an increase in US nuclear capability in a manner that assumes its a done deal. There was none of the hedging about the usual concerns, no hint of upcoming deliberation, etc. There will be more nukes.
  • Public lands will be used for renewables. Similar to the discussion on nukes, Sec'y Salazar spoke with a confident certainty about opening up public lands for renewables, including solar in the southwest and wind farms on the continental shelf off of the Carolinas. Again, not even a nod to the expected concerns.

Finally, when one talks about "comprehensive climate policy", the scope of what we heard in DC and what's in the proposed legislation is certainly comprehensive in the sense that there are lots and lots of programs there. But listening to two days of discussions it is still very hard to see how the decarbonization math adds up in order to meet the goals that people are proposing. As someone commented "it's a mosaic, but there's no picture".

I remain particularly concerned about the lack of an R&D plan to support the innovation that is required to meet these goals. Lots of faith is being put into "the market" and the effects of a cap and trade system, but so far that faith eludes me.

Monday Sep 21, 2009

OpenEco Revisited

We haven't made a ton of noise about openeco.org in the last couple of quarters, but that was probably a mistake.

One of the most frequent questions I get as Sun's Chief Sustainability Officer is how other organizations can get started on GHG reductions. The first step is to calculate your current emissions, and to get a feel for what parts of your activities (business or otherwise) are causing those emissions. This leads to one of two follow-on questions: 1) how hard can that be? or 2) that sounds really hard - I bet I need to hire a high-priced consultant.

The combined answer is that it is not trivial, but for most organizations you don't need a consultant. The math involved is not hard, but finding the right equations and coefficients isn't easy. Also, to track and measure over time you need to keep lots of data around, which can get cumbersome.

This is why we created openeco.org. It is a free, online tool that lets organizations calculate and track their emissions over time. We needed a tool for ourselves, but found that our solution was applicable to schools, churches, companies and other organizations. It knows about different locations and sources of emissions, and follows the standard, accepted protocols for doing the GHG calculations. It also lets you set goals and track your progress against them.

As you can see above, it has a good user base, with over 700 participating organizations. Whether you're working as part of a big company, small company, town government, private residence, church, or school, openeco.org can get you on the right track quickly and (very!) cheaply.

For a quick demo and tour, check out the videos below.

Kudos to Lori Duvall, who has been the main driver behind this from the beginning, to the team at CodeMagi, who have been Java programmers extraordinaire on the project, and to the Sun Eco marketing team, who has been involved since the earliest concepts.

Take a video tour of
OpenEco.org 2.0

Thursday Sep 17, 2009

Sun's 2009 CSR Report: Another Breakthrough

Under the leadership of Marcy Lynn, Sun's Corporate Social Responsibility (CSR) reports have always broken new ground. We've pushed the envelope in publishing on the web, what type of data is reported, and how data is reported. Last year we changed how stakeholders interact with that data by allowing comments. And this year we've pushed the envelope again. suncsr2009-emissions.jpg

Yesterday we announced the release of Sun's 2009 CSR report. With the pending acquisition of Sun by Oracle, the focus this year turned to reporting on the key metrics we were tracking for our fiscal 2009. We also focused on how to cut the production cost of the report, and to continue to minimize the impact of printed copies. suncsr2009-water.jpg

So you'll see that this year's report is a fairly radical departure. The first half aims to present the data in a way that gets the key points across quickly and easily. The back half fills in the key details and boilerplate to adequately document the summary.

You'll notice a big drop in the narrative flow and commentary. This was one of the biggest changes: we stopped trying to write it as a coherent document. I believe people will find the data that they're interested in much more quickly, and will find they don't miss the color commentary, but we'll see!

suncsr2009-energy.jpgFinally, I'd like to recognize the groups and folks who contributed to this (this is always dangerous - I apologize ahead of time for anyone I missed). First, in addition to Marcy, other key partners in this project were Terri Bedel, Jim Mize, and Anna Eyre from the Corp Marketing team, and the gang at Celery Designs, who've worked with us for the past few years.

Second, we got strong support from groups across the company this year, including: WE (including the JLL team), HR, EH&S, Business Conduct Office, Investor Relations, Global Communities, WWOPs, Legal, Education, Employee Volunteer and Gift Matching program, Privacy office, Product takeback team, Software team, Sustainability team, and Brand marketing. Thanks to everyone who helped out this year, it was another great team effort.

Friday Sep 11, 2009

Citizen Engineer: The Book is Out!

This week our book, Citizen Engineer, made it out the online bookstores and is supposed to hit the bricks-and-mortar stores next week. The book was written by myself and Sun's CTO Greg Papadopoulos, with tons of help from John Boutelle. Of course its also important to recognize our publisher, Greg Doench, at Prentice Hall.

The website for the book is citizenengineer.org, and there are links there for buying the book at Amazon (paper or Kindle), from the publisher, and other book sellers. PDF's of the book are also available there under a Creative Commons license.

CEFinal_cover_crop_2.5in.jpg

We also plan to use the website to publish further content, publicize events related to the book, and provide forums for discussion of the book's topics (some of this is there today, and the rest will be very soon).

So why did we write this book?

After the turn of the century, Greg and I began to notice some recurring themes in our work with the engineers at Sun Microsystems and elsewhere.

First, an increasing number of engineers, especially those right out of school, were expressing a desire to "make a difference". Some had a hobby or activity they were already invested in outside of the office, while others were searching for something that would make them more fulfilled. Many were also bringing that sense into the office, and trying to see how they could use their job to make a difference beyond the bottom line of Sun.

Second, the world at large was asking more of engineers. Public knowledge about topics like recycling, copyright, privacy, and climate change translated into new demands on manufacturers of products and services, which, in turn, required new ways of thinking in engineering.

Generally this was good news: we have engineers who want to make a difference, and a public which has rising expectations of them. In 2006 Greg wrote the first blog post about this entitled Charting a Course from Recent Grad to “Citizen Engineer”, which launched a more focused discussion of Citizen Engineers and their role in the coming years.

However, as we began to discuss this more, it quickly became clear that engineers, including ourselves, had missed out on some important topics during our educations. In particular, engineers were being asked to make increasingly complex decisions about environmental impact and intellectual property, but had never had any formal training in either area.

So we set out to write Citizen Engineer with a couple of goals in mind. First, we wanted to promote the idea that engineers could, and should, take a more visible role in shaping our future world. Second, we wanted to fill in some of the basic knowledge gaps that we found to be widespread through the engineering community. Finally, we had a point of view about the role of engineering and how to approach these complex issues which we wanted to get across.

While we feel like the book does a great job of meeting these goals, engineers are in a rapidly changing environment. We hope to use the website, along with updates to the book, to try to move the discussion along and keep it current.

Friday Jul 31, 2009

A Good Customer for Clean Energy

[Note: I jointly authored this with Dan Sarewitz of ASU]

The House of Representatives has passed a massive climate change bill aimed at legislating a new, climate-friendly energy supply into existence through emissions caps, technology standards, and incentives. The bill’s champions assume that, in response to an array of mandated carrots and sticks, nimble startup firms will be motivated to develop new clean-energy technologies that will ultimately revolutionize our use of energy, while investors smelling early profits will line up to fund these activities.

Unfortunately, a crucial question remains embarrassingly unasked: Who is going to buy enough of these new technologies to establish a market that's large enough to meet our carbon reduction goals? This question is particularly vexing because, in the energy sector, existing business models are deeply entrenched, huge capital investments are at stake, and new technologies often require changes in consumer behavior that inhibit adoption.

Large, reliable, early-adopter customers are essential to new markets—to bring in revenue that helps scale up operations, and to foster confidence that attracts more customers and new investments. Real-world customer feedback also promotes rapid innovation and improves the chances that new products will succeed in the market.

What would the ideal clean-energy customer look like? Imagine an organization big enough to have energy systems that mirror the real world’s, rich enough that its purchasing power could command the attention of innovators, sophisticated enough to assess and deploy the latest technologies, and disciplined enough to push those new technologies relentlessly in the direction of greater efficiency and lower cost, year after year.

Something akin to this ideal customer exists: The Department of Defense, funded annually at about $500 billion (roughly the GDP of Sweden). DoD owns a huge infrastructure, including 570,000 buildings at more than 5,000 facilities and bases (many of which are the equivalent of small cities), hundreds of thousands of vehicles and tens of thousands of aircraft, and annual energy costs of about $20 billion.

For more than 60 years, DoD has been by far the world’s most important customer for driving high-tech innovation. In aviation, telecommunications, advanced materials, semiconductors, and many other fields, the dual role of DoD as investor and major customer has stimulated rapid technological improvements, allowed scale-up of high-tech systems so they became both practical and affordable, and catalyzed the growth of the private sector so technologies could flourish in the broader marketplace. The Internet may be the DoD's crowning achievement. First conceived at DoD’s Advanced Projects Agency, this early computer network eventually created a market for equipment and service providers that soon spilled over into the private sector as the Internet, an unparalleled platform for innovation and wealth creation.

Yet policymakers have, amazingly, ignored the critical role of government as a strategic customer for energy technology. DoD, with its hunger for energy, huge size, and sophisticated technical capabilities and needs, could quickly become the world’s most important consumer and catalyst for clean energy innovation—even as it vastly improves its operational efficiency and flexibility in providing for the nation’s defense. We can see the latent capacity for this role in the early adoption of solar energy cells by the military for use on satellites (in the 1950s!); in the ever-increasing demand for better batteries to support troops in remote locations; in the nation’s largest solar energy farm on Nellis Air Force Base in Nevada.

Congress or the President should ask the Department of Defense develop a plan for committing to a path of progressively increasing efficiency and clean energy across all aspects of its operations, from tanks in the desert to the supermarkets on its bases. This plan should include a DoD commitment to purchase prescribed amounts of increasingly efficient clean energy capability in 2015-2030 time period. Such a commitment would send an immediate, strong economic signal to innovators and investors, and would decisively put the nation, and the world, on a path to a clean energy future.

Monday Jul 27, 2009

Making the Price of Carbon Real

Like many, I'm divided by the passage of Waxman-Markey (aka ACES) in the US House of Representatives. While its passage is a historic event, the bill has so many issues that I find myself as worried as I am excited by it. As Tom Friedman recently wrote (sorry, free registration required to see the whole article):

It is too weak in key areas and way too complicated in others. A simple, straightforward carbon tax would have made much more sense than this Rube Goldberg contraption. It is pathetic that we couldn’t do better. It is appalling that so much had to be given away to polluters. It stinks. It’s a mess. I detest it.
But he immediately turns the tables, saying "Now let’s get it passed in the Senate and make it law.". His main point is that a getting a price on carbon will result in fundamental changes in decision making, which will put us on the right path:

Henceforth, every investment decision made in America — about how homes are built, products manufactured or electricity generated — will look for the least-cost low-carbon option. And weaving carbon emissions into every business decision will drive innovation and deployment of clean technologies to a whole new level and make energy efficiency much more affordable.

At Sun, we've been a strong advocate for establishing a price for carbon, because Tom is correct that it is a basic requirement for "weaving carbon emissions into every business decision". For example, we'd like to be able to use the current cost of carbon along with scenarios of future costs to make the business case for switching our datacenter backup systems to something less carbon intensive than diesel generators. Unfortunately, Waxman-Markey doesn't provide a clear price of carbon for America's energy consumers - business or individual.

Here's why.

Most homes and businesses, including large ones like Sun, don't emit GHG in ways that require them to directly participate in the cap and trade system. When we purchase electricity the corresponding emissions will have been covered by our electric utility, and when we buy fuel and burn it in vehicles, generators, furnaces, etc, the emissions will have been covered by a party somewhere in the refining and distribution process (ACES smartly avoids forcing each of us individually to participate in the cap and trade system every time we drive somewhere or turn on a lightbulb). In both cases the emissions costs will have been passed along and will show up as increases in our electricity or fuel bill.

The challenge is to figure out what part of our bill went to paying for GHG emissions, since that's the number we need to do a standard return on investment (ROI) analysis like the one described above. Assuming we know the amount of emissions (which you can usually get today), then the number we need is the price per ton that was paid for those emissions.

The obvious answer is to use the current price of carbon in the market where utilities and oil companies trade emissions allowances. But in Waxman-Markey that "market price" may be very different from what your utility or oil company paid. In fact they will have gotten emissions allowances from many different sources, including free allowances from the government, auctioned allowances from the government, domestic offsets, cheaper foreign offsets, "banked" allowances from previous years. Note that these will all usually be cheaper (or much cheaper) than the current "market price", and are not publicly visible. I've verified with folks at utilities and who've worked directly on the bill that there is no provision to make the actual "cost of carbon" available to the consumer, and no utility I've talked to plans to voluntarily provide it.

Since the actual carbon price is lower than the publicly visible price, it makes ROI calculations especially problematic. Using the market price will overestimate the savings of going to a lower-carbon solution, but using any number lower than the market price is pretty much of a guess. This isn't exactly reassuring when you're the one who has to justify a major clean energy investment to your CEO and CFO.

Others have argued that the actual price of carbon will be reflected in the consumer prices of the respective energy options, so that decisions can be based off of that. For example, the ACES-adjusted price of coal-based electricity will go up relative to cleaner options, so people will make different decisions. There's two problems with this approach, especially in a business scenario. First, commercial clean energy commitments are almost always multi-year, and extremely so in the case of deploying solar or wind where a 20-year commitment is not uncommon. But it is obviously difficult to do a multi-year ROI analysis without even knowing what the recent carbon costs are as a baseline to project future carbon costs.

The second problem is that the financial advantages of many clean energy options won't show up until the later years of a multi-year analysis. Initial carbon prices will not be high enough to spur a move to cleaner energy, but future carbon prices might. However, to do the financial analysis we again need a combination of recent prices plus a projection of future ones. So while using today's energy prices may work perfectly well for decisions at home, it is inadequate for the type of financial decisions that businesses need to make.

Fortunately this is easy to fix: the cap and trade participants need to make the data available. Here's three possible mechanisms:

  1. Print the included price of carbon on everyone's bill (or at the pump, in the case of gas, diesel, propane, etc)
  2. Same as above, but assume that this is mostly useful to businesses, so print this data for them only
  3. Each utility or major emitter will publish a monthly or quarterly report of their average price of carbon for the preceding period
I believe that any of these would work for us at Sun. The last leaves more to the reader, but makes the data widely available and seems like low effort for the reporting companies. The first and third options make the information available to all US citizens and organizations that will be paying into this system. Personally this form of basic transparency seems like an important ingredient for people to build trust in this complex systems.

If the final version of ACES can establish a visible price for carbon in the US, its value to companies like Sun will rise. But as it exists right now, it does not provide a price for carbon that Sun, or any other company, can use to justify serious efforts to decarbonize our businesses. Addressing this has got to be a top priority as the bill evolves through the Senate and conference.

Tuesday Jul 07, 2009

The Cost of a Patchwork Quilt of Legislation

I've always thought that one of the most interesting and powerful aspects of the US system of government is that individual states can act as test beds for emerging areas of legislation. This is especially important to high tech, where rapid change creates new legal opportunities and issues on a regular basis. As the understanding of the new area occurs, states can enact legislation which explores the space of possible responses. At some appropriate point the federal government can then pick from the 'winners' and enact a consistent federal approach.

The problem is that this system can break down, and when it does it can be a big mess for businesses. That's the case with eWaste (i.e. the trash from end-of-life electronics), where there is a wide range of state and even local legislation springing up. Last week the WSJ documented the situation, with a good summary by Environmental Leader.

The article highlights two problems: 1) the cost of mandatory takeback and recycling, and 2) the cost of the disparate and inconsistent laws. In my case I actually think that mandatory takeback and recycling is the right answer (with appropriate details), but as I've regularly argued in DC, at some point the cost of inconsistent state and local laws far outweighs the benefits of having a mixture. And in the case of eWaste, where a reasonable and consistent regulation already exists in the EU, there's no excuse for not addressing this at a federal level today in the US.

Why is this important? The big reason is that it is a drain on innovation in this country, especially innovation driven by startups and small companies. Imagine being a small electronics company and having to deal with 50+ takeback and recycling laws and processes. We're feeling the pinch of the administrative overhead here at Sun - I can only imagine what it feels like at a smaller company.

I know that eWaste legislation isn't as appealing as GHG reductions right now, but the states aren't slowing down. So next week when I'm in DC I'm going to keep up my pitch: please pass reasonable federal eWaste legislation!

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