Renewable Energy

Last week, I attended a panel on renewable energy. I found it interesting that government policy, a topic that was noticeably absent during Hunter Lovins’ address on natural capitalism, was a key theme during the panelists’ overview of the energy industry. For better or worse, government policy is a strong factor shaping the renewable energy industry. For example, the federal government currently offers tax credits for wind power. Each time the tax credit is renewed, investment in wind technology surges. However, when credits near expiration, investment plummets to nearly nothing. Given the focus on energy policy by both Barack Obama and John McCain in the upcoming election, I believe that our government’s influence on the development of alternative energy will only increase.

The following three panelists spoke during the two hour session:

• Will Coleman, Partner at Mohr Davidow Ventures and MBA/MS (ERG) from UC Berkeley
• Drew Isaacs, Adjunct Professor, and Co-Director of the Center for Energy and Environmental Innovation at Haas
• Steve Weissman, Associate Director of the California Center for Environmental Law and Policy, and Lecturer in Residence at the UC Berkeley School of Law

According to the panelists, current government policy is based almost entirely on the potential for job creation. However, for energy policy to be successful, our government needs to define all of our society’s goals for renewable energy, with job creation being just one of those goals. I believe our country’s objectives should include reducing the environmental impact of our growing energy needs and increasing independence from foreign oil. Once key goals are established, the panelists emphasized that government policy should to be aligned to those goals. Finally, success of each government policy must to be quantifiable so that policy can be updated strategically as needed.

Steve Weissman also mentioned something during his overview on the industry that struck me as critical for government policy. Different renewable energy technologies are poised for success in different geographic regions of our country. Here are some notes I jotted down from Professor Weissman’s graph of the country:

• Wind: Midwest
• Solar: Southwest
• Hydro: Northeast and Northwest
• Geothermal: Southwest
• Biomass: Northeast, Southeast, Midwest, Northwest

Based on this information, I believe that there will need to be a local focus to alternative energy policy. Any federal policy should keep the unique needs of each region in mind. Alternatively, states should be empowered to tailor their energy policy to their own geographic realities.

Finally, while government could be a powerful force in the successful establishment of renewable energy in the U.S. there is potential that government actions could be detrimental to the growth of this industry. I would have loved to hear the panelists talk more about the potential pitfalls of government policy. The farm bill is an example of failed government policy that entered my mind throughout the talk. The initial goals of this bill, no doubt, were good. I imagine that when it was created, the bill's purpose was to help protect farmers from price changes of commoditized farm products as a way to guarantee the nation’s food supply. However, as it was implemented, the bill heavily subsidizes corn. Because corn is subsidized, the market equilibrium price of corn and corn-derived products is lower than would otherwise occur. As a result, it is significantly cheaper to buy 2,000 calories worth of Doritos than the same calories worth of vegetables or other food alternatives. Our country pays an enormous price for this policy. Obesity has become an epidemic on which Americans spend $75 Billion a year, half of which is covered by tax payers. By subsidizing the unhealthiest of foods, couldn’t you say the farm bill has failed us? I would hate to see a similar fate for our national energy policy.

A New Generation of Capitalism

Last week I wrote an entry on the blog of the Net Impact Club. Net Impact is a club for students interested in promoting social and environmental responsibility in business organizations. I am helping to plan a speaker series called Capitalism Next, which is exploring how capitalism as a system can evolve toward true sustainability. I would like to share that post with you below.

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On Wednesday, I had the opportunity to hear Hunter Lovins speak to a group of students from Haas and other UC Berkeley schools, including the schools of law, natural resources, and public policy. Lovins was the first speaker in a series of speakers, titled Capitalism Next, exploring how for-profit businesses can become truly sustainable. She proposes that because our world’s natural resources are becoming scarce, a new type of environmentally conscience capitalism is emerging, dubbed natural capitalism. During the industrial revolution, Lovins told us, human capital was in limited supply, and successful companies used machines and plentiful natural resources to create more value with less people. Today, in contrast, human capital is plentiful but our world’s natural resources are becoming scare. Consequently, we are experiencing a new capitalist revolution. Recognizing the value of natural resources, companies are now growing their bottom lines by minimizing their environmental impact. This is the capitalism of the future.

Lovins’ examples of companies “doing well by doing good” provides true hope for our planet. For example, Dow Chemical saved $3 Billion dollars over 3 years through their energy saving and waste reduction programs. Tesco, a leading international grocery retailer, has pledged to cut carbon emissions from all existing and new stores by 50%. Tesco has also launched a program to begin labeling foods sold in their stores with their carbon footprints. Companies are even voluntarily trading carbon on the Chicago Carbon Exchange. Participant companies include Dupont, Motorola, and Ford Motor Company. I was impressed that so many leading companies are taking steps toward environmentally responsible business.

I also came to Lovins’ speech with a unique framework. The same morning I had the privilege of touring Arterra, a new condo development which is positioned to become San Francisco’s first LEED certified residential high rise. For those who don’t know, LEED is a green building rating system that provides a set of standards for environmentally sustainable construction. The developers of Arterra are also proving that environmentally friendly business practices can lead to profitability. In this tough real estate market, Arterra has roughly five times the foot traffic of non-sustainable condo developments and is selling well. Arterra’s developers told the tour group that while green development projects do not sell for more money, the extra expense of sustainable building projects has become minimal. On this $90 Million dollar project, the extra cost of sustainability was only $300,000, approximately 1/3 of 1 percent of the total cost!

However, as exciting as I find the idea of natural capitalism to be, Lovins’ speech left me with many un-answered questions, some of which I hope will be addressed during future Capitalism Next sessions. First, I would like to understand more about the role of government in moving industry toward environmentally conscience business. My background is supply chain consulting. While I had the privilege to work with some companies that were cognizant of their environmental impact and actively addressing it, I saw many that were not. In addition, not every change toward corporate sustainability is going to have a positive ROI. Government has played a significant role in shaping and regulating our current capitalist system. For those organizations that are not voluntarily moving toward natural capitalism or taking sufficient steps in that direction, what role will government play?

In addition, I perceive an educational gap in the ability of our nation and the world to rapidly adopt more sustainable business practices. Classmate Ari Frankel pointed this gap out to me on the Arterra tour. While most real estate development companies recognize that green building is the future of development, and while they know green projects are sound business, many companies currently lack architects, developers, and interior designers with the knowledge and skills needed to bring an environmentally friendly project to fruition. What change in education will be needed to support natural capitalism and on what scale? How will existing educational institutions manage this?

I hope to find many opportunities at Haas to continue exploring the role of business in addressing the world’s social and environmental issues. I am definitely looking forward to future sessions of Capitalism Next.

My First Blog

Two months ago, after five years of full-time work, I returned to school to pursue my MBA. I am thrilled to be learning in an academic environment once again, and school is definitely keeping me on my toes! Unfortunately, despite the best of intentions, I have not been able to stay in touch with all of my friends in family as often as I would like. By writing a blog, I hope to share a bit of my MBA with you.

I think the best way to explain my goal for my MBA experience is to start with a book I read over the summer, "Eat Pray Love," by Elizabeth Gilbert. In one part of the book, the author becomes friendly with an Italian who likes to identify the one verb that describes the energy of a city. He inspires Elizabeth to evaluate her favorite American cities to do the same. After some thought, she describes New York with the word "Achieve" and L.A. with the word "Succeed." After reading this chapter in the book, I challenged myself to identify the verb that to me represented San Francisco, the city where I lived in at the time. The word I choose was "Explore." Over the years, San Francisco has been a city where people have come to explore themselves. You can still find interest in yoga, eastern religions, and counter-cultural movements in San Francisco as its residents look to explore themselves. San Franciscans also enjoy experiencing other cultures, especially through their food. In addition, San Francisco is a city where people explore the world around them. As a group, residents of the bay area tend to enjoy the outdoors, through hiking, camping, biking, surfing, and many other activities. Explore.

Now 8 weeks into my MBA experience, I have decided that exploration should also be the theme underlying these next two years of my life. I want to expose myself to as many new ideas, industries, and potential careers as possible. I have joined a number of clubs, and have attended a wide range of speakers. One day I might attend a speaker on private equity, and the next I could choose a speaker on corporate social responsibility. So while some of my classmates have very clear career goals, I am keeping my mind open to exploring new possibilities. I know I want to have a post-MBA role that is strategic and challenges me, but aside from that, I have much exploration to do.

I am so grateful to have friends and family supporting me on this journey. I hope that the impressions I will share here during my MBA experience will add something to your life as well.