Sustainable Electricity: What are we really talking about? Jessica Fox Senior Program Manager Electric Power Research Institute Morgan Scott Sustainability Technical Lead and Project Manager August 2016
Webcast Logistics Please note today s webcast will be recorded. Your participation in this webcast provides your consent to the recording. The recording of today s webcast, along with a PDF of the slide deck will be uploaded to our website www.epri.com/sustainability 2
EPRI Sustainability Research Team Anda Ray Senior VP and CSO Morgan Scott Technical Leader and Project Manager Bill Gould Director Jessica Fox Senior Program Manager Becca Madsen Project Manager Sydney Bloom Project Operations Coordinator With Support from 100+ EPRI Subject Matter Experts 3
Environment Sector Six Roadmap Areas Generation and Environmental Sciences Energy Delivery & Utilization Environmental Sciences Occupational Health and Safety Strategy Analysis & Technology Assessments Renewables Sustainability 4
2016 Energy Sustainability Interest Group Members 5
What is Sustainability? 6
Federal Sustainability Executive Order 13693 March 19, 2015 Requirements: 1. Reduce Energy Costs 2. Clean Energy 3. Purchasing Policies 4. Reduce Water Use 5. Federal Environmental Executive is now Federal CSO 6. All reporting agencies need to establish CSO 7
Millennials will Driving Change By 2045, $30 Trillion will pass to Millennials in North America alone. Millennials are demanding more integration of their money and values by seeking personal fulfillment in their careers, applying a global consciousness to their purchases and investing in sustainable, impactful business models. The Millennial Perspective: Impact Assets Issue Brief #13. 8
Voluntary Sustainability Reporting 9
Sustainability Issues for the Electric Power Industry 10
The Business Case for Sustainability (3002005759) Published July 2015 75% of the 18 studies reviewed showed a statistically significant correlation between sustainability and financial performance Target Rock Advisors Sustainable Utility Leaders Index performance back-cast from 2002-2014 Source: http://www.targetrockadvisors.com/sustainable-utility-leadersindex/performance/ Saving Money. Making Money. Managing Risk. 11
Drivers Financial Corporate responsibility commitment lower regulatory risk lower cost of capital 0.07%- 0.56% better loan rate based on ESG performance (Goss and Roberts, 2011; Ghoul et al., 2011) the power sector needs $2 trillion for capital expansion over the next 20 years. Forbes 3/23/2013 12 This finding alone should put the issue of Sustainability squarely into the office of the Chief Financial Officer of every company. (DB Climate Change Advisors, 2012)
Employee Retention & Productivity Replacement Costs Replacing an employee can cost 20% of an employee s salary 67% prefer to work for a socially responsible company Highly engaged employees Lower turnover 26% higher productivity More likely to attract and retain top talent Reduce employee turnover 1% x 20% Cost to Replace Salary - $75k 1000 Engaged Employees x 26% Higher Productivity (Salary - $75k) (10,000 employees) = $1,500,000 avoided/year Towers Watson, 2012 Global Workforce Study, http://www.towerswatson.com/assets/pdf/2012-towers-watson-global-workforce-study.pdf = $19,500,000 business value/year 13
Electric Power Company Shareholder Resolution Trend 370 environmental, social, governance resolutions in 2016 43 for electric power companies Shareholder resolutions tracked by Source: http://www.ceres.org/investor-network/resolutions#!/subject=&year=2014&company=&filer=§or=electric%20power&status=&memo=&all= 14
Electric Power Company Shareholder Resolution Trend Source: http://www.ceres.org/investornetwork/resolutions#!/subject=&year=&company=&filer=§or=electric%20power&status=&memo=&all= 15
EPRI Sustainability Research Portfolio Identify Issues Materiality Study Determine Maturity and Goals Electric Power Sustainability Maturity Model Measure Performance Metrics Benchmark Sustainability Benchmarking for Utilities Communicate Voluntary Disclosure and Stakeholder Engagement 16
Benchmark Research: Materiality Study EPRI Report 3002000920 Identifies 15 Material Issues Provides Industry and Stakeholder Perspectives Discusses Expected Trends in Importance of Issues Industry Motivations for Prioritizing Sustainability There is a tight-wire act between environmental concerns, customers, employees, and financial obligations. -Utility Interview 17
Primary Study Results Sustainability Pillar Environmental Social Economic Issues Greenhouse gas emissions Reduction of other air emissions Water quality Water availability Habitat protection and biodiversity Waste management Public safety and health Employee safety and health Job satisfaction Community support and economic development Engagement and collaboration Energy reliability Energy affordability Skilled workforce availability Economic viability of electric utilities 18
Electric Power Sustainability Maturity Model (EPSMM) Where are you? Where do you want to be? How will you get there? This model converts nebulous ideas around sustainability into specific actions and targets. 19
5 Levels - of sustainability maturity Electric Power Sustainability Maturity Model EPRI Report 3002002302 M A T U R I T Y L E V E L S Domains - logical groupings of sustainability characteristics by issue Water Model Framework GHGs Affordability Reliability Availability 5 4 3 2 1 Achieving sustainability Optimizing for sustainability Managing toward sustainability Initiating sustainability Awareness of the issue Strategy is continuously improved and re-imagined Developing innovative solutions to new and future challenges Measured progress of metrics suggests sustainability is achieved Achieving benefits of shared value both internally and externally Strategy is implemented and optimized, as necessary Actions and solutions now integrated across the business units Measuring widespread results Realizing early benefits of shared value Implementation of strategy is well underway Actions and solutions are deployed in relevant business units Beginning to achieve measurable results e Initiating specific shared value activities 200+ sustainability characteristics Developing vision, strategy and setting objectives Researching and testing possible actions or solutions Establishing metrics for measuring progress Planning for shared value Acknowledgment that there is an issue deserving a strategy Compiling possible actions & solutions Collecting data to understand current performance Considering opportunities for shared value 20
Metrics: How are you measuring progress? EPRI Report 3002004255 2014 Research Identified 400+ sustainability metrics Metric Uses: learning, communicating, benchmarking, etc. Types: leading, lagging, quantitative, qualitative, etc. 2015 & 2016 Research Consider the burden vs value of reporting Identify refined list of metrics for each material issue Select metrics appropriate for BENCHMARKING EPRI Metrics Database filters based on need/purpose. 400+ 78 Metrics Determine the right metrics for the purpose. 21
Sustainability Benchmarking Web Database 22
Key Findings 83% of responding energy companies perform some level of sustainability reporting. Sustainability Reporting Trends for the Electric Power Industry (3002006996) 57% of respondents stated that there is "definitely" or "mostly" strong corporate value in their public sustainability disclosures. Top three values: Improved stakeholder relations (80%); Improved reputation (46%); and Improved shareholder, investor, and/or board of director relations (37%). 23
Sustainable Electricity Making decisions that satisfy regulators, meet shareholders demands, respond to cost-conscious customers, and balance conflicting demands from environmental groups is no easy task. It is not surprising that the need to respond effectively to all these perspectives has paralyzed many companies. What will move us along then? Books like this that get to the heart of the real challenges associated with sustainability. Stakeholder Engagement * Employees * Culture * Demand Management * Distributed Generation * Water * Climate Resiliency * Energy Efficiency * Renewable Energy * Species * Customer Demands * Tradeoffs Janet Ranganathan, Vice President for Science and Research, World Resources Institute. 24
Vision of Sustainable Electricity 2050 What does sustainable electricity look like in 2050? 2040 2030 2020 2025 2017 Today 25
Yesterday s Power System Bulk Power System Distribution System Residential Commercial One Way Power Flow Industrial 26
Today and Tomorrow - The Integrated Energy Network Generation Becomes More Flexible Consumers Become Energy Producers Two-way Flow T & D Becomes More Controllable and Resilient Loads Become More Interactive and Dynamic 27
We will never be able to agree on who gets to win the fish, the CEO, or the parent. Everyone needs to win, and it will require innovative scenarios and the development of scientifically-based tools that companies can use. (Chapter 15. Sustainable Electricity, 2016) 28
2016 ENV-Vision Sustainability Track In this session, participants: Shared perspectives on what Sustainable Electricity means How do we measure success? Research and tools needed to meet the 2050 vision? Honored speaker included Christine Harada Chief Sustainability Officer, White House Council on Environmental Quality Summary document postedwww.epri.com/sustainability 29
Join us! We hope you ll join us again as we continue this conversation on what sustainable electricity means for the electric power industry and its stakeholders. Part II: Thursday, September 29 th @ 11am PT The Reality of Realizing Change: Case Studies from Industry Leaders Part III: Thursday, December 1 st @ 11am PT The Right Metrics to Benchmark Sustainability for the Electric Power Industry 30
Interested in learning more? Join mailing list: sustainability@epri.com to be added Visit: www.epri.com/sustainability 31
Together Shaping the Future of Electricity Jessica Fox Sr. Program Manager jfox@epri.com Morgan Scott Sustainability Project Manager mmscott@epri.com 32