Fuel Cell Technology: Innovation Transforming Markets
By Vesela Veleva, Sc.D., Co-Director SERC
While fuel cells have been around for decades the technology has experienced rapid development in recent years. According to a recent industry report, in 2013 global fuel cell industry sales reached $1.3 billion with consistent annual growth of over 30 percent. Fuel cells offer clean, cool, quiet, efficient and reliable energy generation and are seen by the U.S. Department of Energy as important energy source for a wide range of markets including defense, electric power, and automobiles. What is behind this growing investment and how is industry working with policy makers and other stakeholders to overcome current challenges and ensure future growth?
On March 2, 2015 the Center for Sustainable Enterprise and Regional Competitiveness (SERC) hosted a panel presentation and discussion on current developments and future opportunities for fuel cell technology. The event was comprised of a presentation by Charlie Myers, President of the Massachusetts Hydrogen Association and Expert, Fuel Cell & Hydrogen Technologies, SRA International, and Dr. Gami Maislin, Lead of the Power Enterprise Campaign at Raytheon. Prof. Vesela Veleva, Lecturer in Management and Marketing and SERC Co-Director, moderated the event.
Charlie Myers kicked off the event by explaining the technology and its current state. Fuel cells are electrochemical devices that combine hydrogen and oxygen to produce electricity, water and heat. Since they don’t burn fuel, they are quiet, reliable and can be two to three times more efficient than combustion. The three main markets for fuel cell technology are a) stationary power, b) transportation, and c) portable power. In the U.S. fuel cell technology has more patents filed than any other clean energy technology (over 1,000 in 2012 alone) with GM, Honda, Toyota, Samsung, Nissan, and Ballard submitting most patents. Among the early adopters Sysco and Wal-Mart purchased fuel cell powered fork lifts which provide significant time and labor savings. Verizon was among the early adopters investing in a fuel cell and solar energy project to power critical data centers, central offices and other buildings across several states. All major car manufacturers are rolling out fuel cell cars, some by the end of this year, including Hyundai, Toyota, Daimler, Honda, Nissan, GM, Audi, BMW and Volkswagen. Toyota Mirai FCEV, for example, has a range of about 300 miles and a tank that can be filled in a few minutes. In Japan demand is “outstripping supply” and there is a three-year wait list for the car, according to BBC news.
Two main challenges facing future fuel cell technology growth include building refueling infrastructure and reducing fuel cell costs. A single fueling station, for example, can cost as much as $1.5 million. Several recent initiatives in the U.S. aim to address the above challenges. H2USA is a public-private partnership including over 30 organizations and focused on advancing the hydrogen infrastructure in the U.S. H2FIRST is another U.S. initiative serving as a national lab and including industry. The governors of eight states (California, Connecticut, Massachusetts, Maryland, New York, Oregon, Rhode Island and Vermont) signed a Memorandum of Understanding (MOU) to coordinate actions in order to build infrastructure to achieve 3.3 million Zero Emission Vehicles by 2025. California is spending $50 million to build 28 stations that will be operational by the end of this year and has committed $20 million annually to build 100 hydrogen-fueling stations in order to meet the state goal of 1.5 million ZEVs by 2025. As part of its strategy to get away from oil, Hawaii has agreement signed by 12 stakeholders, including GM, utilities, hydrogen providers, Department of Defense and Department of Energy, to establish hydrogen as a major part of its future energy mix. With more players entering the market it is expected that fuel cells cost will go down. Department of Energy Hydrogens and Fuel Cells Program has committed funding to achieve its 2020 goals including fuel cell cost of $40/kWh, hydrogen cost less than $4/gge and fuel cell durability of at least 5,000 hours.
Fuel cell technology provides additional benefits for defense applications as explained by Gami Maislin, who discussed a number of possible mission areas for fuel cells. Since there are no moving parts in the power-producing system, fuel cell applications mean very quiet operations. Additionally, Raytheon is considering fuel cells for applications that require high reliability, enhanced mission duration and minimal maintenance. For long duration missions, fuel cell systems can be much smaller and lighter than batteries. For example, a soldier currently may carry more than 20 pounds of batteries depending on their mission, as explained by Dr. Maislin; and the Department of Defense is looking for better ways to support 72-hour missions. Fuel cells are also being investigated for use in anaerobic environments, in which the high pressure and hot exhaust of combustion is not tolerated. Remote and island environments are particularly expensive and often involve fuel convoys that risk solders’ lives. Fuel cells are more efficient and thus use less fuel than an engine would, and may be operated in reverse to provide hydrogen fuel from tap water and electricity (regenerative fuel cell). The Department of Defense is also embracing the technology as a way to ensure energy security and protection against grid outages at their facilities. In stationary or mobile applications with high peak demand, fuel cells can provide the base load power with energy storage providing the peak power. Some of the current challenges in the above applications include the need for fuel cell systems that can run on military logistics fuels (e.g., diesel, JP8), the system cost, the physical robustness of system to operate in various shock and vibration environments, and good fuel and power system management.
In the discussion that followed, the audience raised questions about moving away from natural gas as main source of hydrogen, the role of airlines in adopting fuel cells, and the cost of FCEVs. To be truly zero emission, fuel cell technology must use hydrogen produced through electrolysis (splitting water into hydrogen and oxygen) where electricity has come from renewable sources such as wind and solar, or the reformation of biogas. The lease on Toyota Mirai is expected to be $499 per month and include both fuel and maintenance. Both Boeing (787) and Airbus (A320) have been working on incorporating fuel cells in their airplanes as a way to reduce emissions but have not announced any timelines. Clearly, future opportunities for market and technological innovation are significant. Among the attendees were representatives of two companies working to develop more efficient and cost-competitive fuel cells - Acumentrics and Proton OnSite who shared their insights. The event concluded with discussion about the best career strategy for students interested in the clean energy field and the importance of seeking internships with local companies leveraging the opportunities provided by the Massachusetts Clean Energy Center Internship Program.
How Investors Incorporate ESG Factors
By Sandeep Gummadi, Master in Finance Candidate, UMass Boston
Sustainable, responsible and impact investing (SRI) assets increased 76 percent over the past two years for a total of $6.57 trillion, according to a 2014 industry report. What is driving this trend and the growing importance of environmental, social and governance (ESG) factors in investment decisions more broadly, beyond SRI? How are these factors incorporated into mainstream decision-making? On Dec. 2nd, 2014, the Center for Sustainable Enterprise and Regional Competitiveness (SERC) at UMass Boston hosted a panel presentation and discussion on how investors integrate ESG factors in investment decisions. The event comprised a presentation by Matt Moscardi of MSCI, who introduced ESG research, ratings and MSCI’s perspective of ESG investing, and Elizabeth Levy of Trillium Assets Management, who elaborated on how they actually use ESG factors and information to make investment decisions. Prof. Lucia Silva-Gao, Associate Professor in Finance at UMass Boston, provided an academic perspective and moderated the event.
Matt Moscardi, who is currently leading the ‘Financials’ sector ESG research at MSCI, kicked off the discussion by explaining what ESG integration is, i.e., how investors can understand an externality that is beyond the balance sheets and financial statements of a company. “Understanding ESG risk in a portfolio is basically about estimating the cost of these externalities, and knowing how much they weigh in a portfolio,” explained Matt.
Since this creates the need to build metrics and tools, which could be used in estimating the costs of externalities, one of the key underlying aspects of ESG integration is rating the companies. ESG ratings, one of the flagship ESG research products of MSCI, aim to convey what ESG risks a company faces, and to what extent does the company manage them. “The utility of these ratings is that they help you adjust your position according to the risks they capture, and prevent you from paying an extra premium,” said Matt.
Matt also emphasized how ‘measuring ESG performance has become a barometer of the management quality of a company’. Recent research on ‘Activist Investors’ by MSCI brought up an interesting observation, where almost all of the companies which were targeted by the activist investors belonged to the poorly performing group of MSCI’s ESG research. Matt then also took everyone through a few examples of how better ESG performance was correlated with higher financial returns. One of the examples showed how banks who addressed their employees’ needs through better human capital management practices, performed consistently better than their peers over the past few years.
The discussion then moved to one of the key aspects of ESG integration – ‘materiality’. “Despite largely being an outcome of the SRI revolution, ESG factors and their integration in investing is largely driven by materiality, and not just by the virtue of moral obligation,” said Matt while pointing to the evolution of ESG investing from the traditional socially responsible investing. Hence, the process of ESG integration begins with defining materiality, followed by measuring the level of risk in each of the material factors, and finally by measuring the extent to which the companies are managing these risks.
Matt also claimed “in a broader context, ESG factors integration is also big-data manipulation. MSCI and several other similar players are trying to pull together a large number of data points together, and create a relative risk framework across companies and industry verticals”. This was further explained using a banking sector example. MSCI started measuring the performance of several banks and researched their individual loan portfolios, their nature and the inherent risks involved. The findings revealed that the banks were charging 4.5 basis points premium from risky borrowers compared to their peers.
After seeing how MSCI viewed ESG factors and their materiality from a risk vs. return perspective, the discussion moved to examine how large customers use such data. Elizabeth Levy, Senior VP and Portfolio Manager at Trillium Asset Management, elaborated further on how they used the ESG research provided by MSCI.
Trillium Asset Management is one of the oldest SRI funds with $1.7 billion assets under management. They serve clients with specific ESG focus, both individual and institutional, although the share of institutional clients has seen an increase over the past few years. Trillium has a team of both traditional finance experts and sustainability experts. Like Matt from MSCI, Elizabeth from Trillium also spoke about the evolution of ESG factors from a traditional SRI movement and how Trillium, which originally started with its reactive social screens based investment criteria, went on to including a more proactive ESG investment criteria.
Elizabeth explained, “Trillium takes an integrated approach towards ESG investing right at the fundamental level, where our analysts are responsible for both financial as well as ESG information. Our process begins with a larger list of companies, which we are interested in. This list is then split sector-wise among analysts. While the foremost things to start with is the financial attractiveness of the company in terms of their valuations, we then start looking at factors beyond the financial information”.
“ESG factors and their materiality now start coming into picture, and that is how MSCI’s research helps us identify the material factors and their weights in defining the overall risk,” explained Elizabeth. Through an example looking at the Capital Goods industry, Elizabeth elaborated on how analysts at Trillium would ideally start looking at companies with high revenue growth rate in energy efficiency exposed products, for them to make it to their investing list. The ESG factor integration starts coming into picture at the revenue estimation level. For example, a company with less energy efficient product offerings would command a lower revenue growth estimate. Similarly, a company with sub-par governance practices could have its discount adjusted by about 25 basis points to reflect the governance risk; or a company that doesn’t have a great management system in place for its health and safety risks could have its the EBIDTA margin level estimates adjusted accordingly.
Trillium’s other important strategy involves ‘Shareholder Advocacy’, which the company believes is an effective way to bring positive impact on company policies and performance. Trillium’s advocacy team engages directly with the companies they own, to take environmentally and socially positive actions which are in line with the stakeholders’ and company’s interests. Climate change and fracking are two of the areas taken up by the shareholder advocacy team. Elizabeth concluded the discussion with a number of examples of shareholder resolutions filed by Trillium in the best interest of the companies and their stakeholders.
Next Professor Gao outlined the growing body of academic research which has linked ESG performance and financial performance. Her own research has demonstrated that firms with high levels of chemical emissions in the electric utility industry have high cost of equity capital (in the electric utility industry. A 2012 award winning study showed that successful shareholder engagement is associated with higher one-year abnormal return (also known as the excess or “alpha” return). A 2013 study demonstrated that Global Compact Sustainability Index beat the overall market over the one and two-year periods. In her Environmental Accounting class (MBA AF 631) Prof. Gao introduces students to ESG investing and how they can use the Bloomberg ESG data to construct metrics and track the performance of a sample portfolio.
In the discussion which followed, the audience raised questions about the degree of ESG adoption among the investor community, the process of adjusting cash flow forecast and discount rates based on ESG risks, and the way companies with insufficient disclosure are presently screened. The event concluded with a discussion about the growing career opportunities in the field as well as the importance of having an analytic mindset and passion for sustainability.
The Smart Grid and Clean Energy
By Andrew Bishop, MBA Candidate, UMass Boston
What are the challenges and opportunities of upgrading the power grid to cope with growing supplies of distributed, renewable, and intermittent power from solar, wind, and other clean energy sources? On October 28, 2014, the Center for Sustainable Enterprise and Regional Competitiveness (SERC) at UMass Boston hosted a panel presentation and discussion on the Smart Grid and Clean Energy. The event featured Chris Ashley, Senior Director of EnerNOC’s Utility Solutions, and Peter Zschokke, Director Regulatory Strategy for National Grid, and was facilitated by Tal Levy, a consultant and graduate of the Technology and Policy Master’s program at MIT. Over 100 students, faculty and local business representatives attended this event,
Peter Zschokke began the event discussing the need to upgrade the U.S. electricity grid to incorporate information technology and meet 21st century needs for clean, reliable, yet affordable power. Rapid change is being driven by technological and societal change, including concerns about climate change and power reliability. Society presently is more than ever dependent on energy, yet it is not a priority in the minds of consumers. Zschoke explained, “A major issue today, is the type of energy grid we face. We have a one way flow of energy from generation to consumers… This is slowly but surely changing. As distributed generation rises in popularity, it’s no longer a one-way flow, but actually a two-way flow and the grid has got to change dramatically.” A major challenge facing utilities such as National Grid is the peak demand during the day (typically between morning and evening) as well as during the year. During these peak times utilities must have the capacity to produce additional energy, which is very expensive. The current energy grid does not allow for efficiencies and often results in an over generation of energy in order to be prepared to meet peak demand. The problem of matching load demand with supply is exacerbated as renewables penetrate the grid.
“The Smart Grid on the other hand has the potential to manage loads, manage renewable generation, through that period of time from about 8am in the morning to 9pm at night - to actually lower the overall demand in New England and save costs at the wholesale level,” explained Zschokke. He described the ultimate goal of the Smart Grid or Integrated Grid - to manage how renewable generation can be utilized in a way that integrates the demand and production relationship. Real time pricing and a decentralized, network architecture are key. The Smart Grid can produce a number of benefits both to consumers and producers of energy such as increased reliability, improved demand response, increased utilization of generation capacity, increased utilization of renewable and customer-generated energy (wind/solar power), and the ultimate benefit of overall increase in power grid efficiencies and cost savings.
National Grid is working on a $44 million smart grid pilot in Worcester, which was approved by the Department of Public Utilities in 2012. The project aims to achieve 5% savings, install 15,000 smart meters and introduce dynamic pricing options and innovative communications to customers. Yet the pilot has taken a long time to pass regulatory approval and is expected to finally launch in 2015, more than 5 years after it was proposed. Zschokke concluded by stressing the importance of a) changing the process of regulatory review and approval, b) increasing consumer participation, and c) ensuring availability of trained workforce. Meeting the needs of the 21st century grid requires a new set of workforce skills, and thus re-training field workforce, engineers, and other support staff in data analytics, advanced network architecture, computer systems and software capabilities. Businesses would also need new business models and product offerings. To drive the necessary investment, regulation has to align cost recovery to this vision and provide pricing incentives to reflect value from the grid to all connectors.
Chris Ashley, Senior Director of EnerNOC’s Utility Solutions first introduced his company as a leader in smart grid and renewables. EnerNOC is a Boston-based company, established in 2001, that provides energy management software and services to utilities and enterprises. There are three drivers of energy costs that EnerNOC has identified over the years: how energy is bought, how much is used, and when it is used. These drivers serve as the premise on which EnerNOC has built their business model. One of EnerNOC’s primary services is providing intelligence software to a variety of players in the energy grid. Major services include analytic trends on spending and consumption, as well as demand software that enables customers to shed load when the grid is under stress during peak demand. The classic peak-shaving demand response ability is one of the key values that EnerNOC provides to customers. The top 10% of peak demand occurs during 1% of the hours – so if you can shave peak during that small number of hours, 10% less infrastructure would be needed to produce energy and fixed costs could be lowered dramatically. This leads to substantial savings for both utilities and commercial customers.
As EnerNOC looks to the future, the company hopes to position itself beyond peak shaving to focus on how it can better serve overall demand response. Ashley gave the example of Bonneville Power Agency (BPA), a federal utility that reports to the Department of Energy. BPA markets and sells all of the hydropower that comes out of the federal system to about 150 local power distribution utilities; manages the transmission system in the Northwest (about ¾ of the total transmission in the region); and serves as the balancing area authority for parts of the region representing 10,000 megawatts of peak (ensuring supply and demand are always in balance). As the balancing area authority BPA has recently come into some interesting challenges around wind power. Since 2005, 5,000 megawatts of wind-power have been built in this area, which means at maximum capacity volatile wind power can meet 50% of total demand. BPA has traditionally used hydro to balance the system, but the flexibility in the hydro system is reaching its limit. EnerNOC has been involved in pilot programs that allow BPA to use demand response resources to balance the wind intermittency. These pilots involved refrigerated warehouse facilities across Oregon and Washington, allowing customers to control the load in both directions (shedding load and adding load, effectively using refrigerated storage as batteries), while maintaining temperature parameters. Ashley also discussed solar energy as another factor for the changing dynamic on the grid, coming back to how customers buy and use it. For example, businesses taking advantage of solar generation by signing contracts with SolarCity can sell their more solar power at high prices during those periods and lower their costs. EnerNOC sees the Smart Grid as a way to enable customers to make better-informed decisions on how to use their electricity and where to source their electricity.
At the end Ashley discussed the importance of new policy initiatives in the area of smart grid and clean energy. The first is around the notion of decoupling and getting the incentives right. Utilities are in the business of selling electricity, but they are also supposed to help customers use less electricity, which results in an inherent conflict that is being resolved in some jurisdictions, but not all. Similarly, Ashley brought up the point that vertically integrated utilities typically can earn a regulated rate of return that they make on fixed assets. Utility companies can opt not to invest in fixed assets and pay for an energy efficiency programs or demand response program, but they earn nothing on that investment. Therefore, policy makers, energy companies and utilities must work together to level the playing field and offer equal incentives for both investing in fixed assets and efficiency programs. Two other important policy areas that need to be addressed to advance smart grid include “certainty” and “access to data”.
Finally, Tal Levy summarized and brought together the idea from both presentations that the electricity industry is in a rapid state of change. The vast quantities of renewable energies that are coming into the market are allowing consumers to interact with the grid in newer and more dynamic ways than ever before. Yet Levy also emphasized the need to address the increase in price volatility as result of incorporating more renewable into the grid (a key finding from his MIT research). Solar and wind are zero marginal cost, so when the wind is blowing and the sun is shining, grid prices fall close to zero, but prices rocket when renewables fall short. Surprisingly, demand response does not seem to have reduced this volatility. One big change that was highlighted was how renewable resources are coming into the market and yet, the energy markets are slow to adapt to meet the needs of individual consumers. The regulatory environment and pricing structure are just not set up for the new grid architecture.
In the discussion that followed, event attendees raised questions around the rising cost of energy for consumers, the need for business and policy innovations and education of consumers in order to advance smart grid technologies. Zschokke shared his long-term vision of consumers paying for service rather than for electricity use, similar to the way they pay for their smart phones today. Such an approach could help change the incentives for utilities and allow them to deliver energy in a more efficient and sustainable way, while encouraging conservation and participation by consumers.
2014 Green Careers Forum
By Vesela Veleva, Sc.D., SERC Co-Director
In collaboration with The Office of Career Services and Internships, The Center for Sustainable Enterprise and Regional Competitiveness (SERC) at UMass Boston held its annual Green Careers Forum on April 16, 2014, to inform students about career opportunities in the environmental and sustainability fields, and provide them with the opportunity to network with prospective employers. Over 120 students from a range of majors attended the event, as well as some external students and alumni seeking opportunities in the growing green economy.
In the first part of the event, a panel of experts from the industry shared their personal journeys in finding a path to a job in the sustainability and clean energy field, and provided some advice for students. The panel was facilitated by Kevin Doyle of the New England Clean Energy Council, who presented some key findings from the 2013 Massachusetts Clean Energy Industry Report. In the second part of the event, students engaged in more intimate roundtable discussions about career opportunities with the 15 participating organizations.
Some of the main themes that emerged from the panel and the roundtable discussions included:
• There is a wide variety of jobs today that require knowledge and expertise related to sustainability and clean energy, ranging across sectors and functions. The Boston area has a strong clean energy-clean tech sector which has been growing over 11% annually over the past 3 years. Solar is the largest renewable energy sector, representing 59.7% of all clean energy employees in the state.
• Nationwide and globally, green jobs are also growing, particularly in sectors such as energy efficiency, transportation, and recycling. Countries in Europe as well as China will increasingly seek people with expertise in clean energy and sustainability.
• One cannot over-estimate the importance of networking – according to the Massachusetts Clean Energy Industry report, 42% of hiring is a result of the word of mouth or referral. Students should be actively attending a variety of events and using platforms such as LinkedIn to network.
• Employers are looking for people with advanced degrees and experience. According to the Massachusetts Clean Energy Industry report, 65.8% of available positions required previous work experience, and 60.5% required a bachelor’s degree as a minimum. Doing an internship or volunteering are the best ways to gain experience.
• In the sustainability field where things change so fast, ongoing education is very important. Taking additional classes, obtaining a certificate or any other educational opportunity can improve job prospects.
• People arrive to sustainability jobs from a range of majors and occupations; having the passion, determination and pursuing additional training/education related to sustainability are the best way to enter the field.
Participating organizations in the 2014 Green Careers Forum included Battelle, EnerNOC, Ernst & Young, Biogen Idec, EMC, Massachusetts Department of Environmental Protection, Raytheon, Next Step Living, and Systainalytics, among others. A complete list participating companies and panelists can be found in the event flyer.
Hydraulic Fracturing: Understanding the Intersection of Water and Energy
By Vesela Veleva, Sc.D., Lecturer and SERC Co-Director
On March 31, 2014, the Center for Sustainable Enterprise and Regional Competitiveness (SERC) hosted an event on hydraulic fracturing (known also as “fracking”). This event featured a panel of experts who discussed current challenges and opportunities for reducing the environmental impacts of fracking with focus on the water-energy nexus. The panelists included Jim Matheson, President and CEO of Oasys Water, a clean-tech company, and Richard Liroff, PhD, founder and Executive Director of the Investor Environmental Health Network (IEHN), a group of investors concerned with the financial and public health risks of corporate toxic chemicals policies.
Dr. Liroff began the event’s discussion by providing background information on “fracking” and how investors have been engaging with companies to reduce the environmental and financial risks associated with it. While the oil and gas industry has been doing fracking for 65 years, the process really took off when technological innovations made it possible to connect hydraulic fracturing and horizontal drilling. Fracking usually involves injecting several million gallons of water, sand and chemicals under pressure down and then horizontally at about 7,000 - 13,000 feet below the surface. This pressure causes the rocks to crack and release natural gas, which is then captured in the wells. The fracking revolution has dramatically brought down the prices of natural gas in the U.S. and led to “reshoring” – bringing back manufacturing to the U.S.
At the same time, fracking is associated with some significant environmental and health risks –water and air pollution from the injected chemicals and diesel exhaust from trucks, climate change impacts from methane leakages, damage to roads, increased traffic and noise, as well as some earthquakes in the areas of drilling. Fracking is most common in the eastern portion of United States, with Marcellus Shale considered the most productive area presently (it is located in Pennsylvania, Ohio, and West Virginia). Today fracking is taking place in 28 different U.S. states and about three to five new wells are drilled every day.
Since 2009 institutional investors in the U.S. and Canada have been pressing oil and gas companies to become more transparent and report how they are managing the environmental and community related impacts of fracking. In March 2013 IEHN, in collaboration with the Interfaith Center on Corporate Responsibility (ICCR), published a report entitled “Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations.” The report provides guidance for the industry, including 12 core management goals to reduce risks and 32 indicators for companies to measure and report publicly. Two of the management goals include reducing the use of fresh water in fracking and reducing and disclosing all toxic chemicals used. Such impacts could be minimized by implementing green chemistry and water reuse. The investor group also conducted a study of 24 companies involved in fracking and found poor disclosure practices even among leading companies such as Encana and Apache. Key findings from the study as well as recommendations for the oil and gas industry can be found in the follow up report, published in November 2013 - “Disclosing Facts: Transparency and Risk in Hydraulic Fracturing Operations.”
Securing water for fracking operations is a significant challenge for companies involved in drilling. On average, a well requires between 2 million and 5 million gallons of water over its life. With fresh water becoming increasingly scarce in some parts of the U.S. and globally, there is a growing pressure on drilling companies to purify and reuse the process water. The latter, however, requires a significant amount of energy, hence the problem of the water-energy nexus.
Companies like Oasys Water are at the forefront of clean-tech innovations focused on providing practical solutions to this problem. Launched in 2008, the company’s mission is “to transform the world’s most difficult waters into valuable resources.” According to Mr. Matheson, water and greenhouse gases are the two major issues facing the oil and gas industry. It takes about 5 million gallons of water to frack a well; on average globally, for every barrel of oil companies extract, there are 3-5 barrels of waste water. Much of this water has very high salt and mineral content (5-15% total dissolved solids as compared to 2-3% TDS for seawater). In Texas for example, where ~3% of the state’s fresh water resources are being used for fracking, this creates competition with the farming industry and increases the pressure on the oil and gas industry to find ways to purify and reuse the wastewater. Conventional technology for purification does not work well and it is not economical. The cost of sourcing, treating, and disposing of wastewater ranges from 10-25% of the total cost of oil and gas production.
This is where Oasys Water’s innovation technology provides a practical and economical solution. At the core of its solution is a forward osmosis (FO) process which applies membrane technology at ambient temperature and pressure. The technology makes it possible to achieve high quality water purification using much less energy. One of the challenges faced by Oasys Water was to design a moveable, skid mounted platform as the oil & gas industry desires transportable oilfield equipment. While doing the right thing is important for all businesses, it is hard economics which are the most compelling reason for oil & gas players to adopt new technologies. According to Mr. Matheson, there are several key factors that determine the value of water purification solutions: a) the cost to source freshwater, b) the cost to treat and dispose of wastewater, and c) stakeholder impact (e.g. brand value, regulation, managing social contract to operate, etc.). For example, if an area has plenty of water, disposal is not an issue and nobody cares about what you are doing, then there is not much value that the company can provide. However, there are increasingly few contexts like that left in the world which is what is creating the need, and opportunity for new innovations pointed out Mr. Matheson. To this end, Oasys Water is always monitoring developments in the area of fracking, both in terms of resources availability and local policies, to best understand where its solutions can be most valuable and impactful.
As one looks outside the US for the adoption of hydraulic fracturing, the situation becomes both very interesting and uncertain. Shale gas is potentially located in many regions around the world, but the cost to access them as well as the public policy and mindset in these different regions can be quite varied. For example, some countries in Europe have current bans on fracking.
As fracking becomes more of a global activity, Oasys expects to also open up more global operations. The company already has commercial activities in China, and Australia, and is spending time in places like the UK, Mexico and Latin America to help shape the understanding and policy frameworks in those regions. To support these global ambitions and activities, Oasys Water partners with large companies such as National Oilwell Varco (NOV) to deliver products and services which treat the very difficult waters resulting from fracking, and produce clean, drinking water much more economically than using any other technology. Oasys’ activities in the water – energy nexus extend beyond fracking and includes treating effluent from coal fired power plants, refineries and other industrial processes.
Oasys, led by Mr. Matheson, formerly a venture capitalist and a Department of Energy Entrepreneur-in-Residence, has raised $35 million in venture and strategic capital. So far the company has nearly 50 employees and over 200 granted or pending patents. Oasys’ target market of treating these difficult waste waters to fresh water is today nearly $10B, and growing rapidly providing ample opportunity for Oasys to become a very large company.
Following the presentations, the audience engaged in Q&A with the panelists focusing on issues such as how do we educate the industry and various stakeholders about the technological solutions; what are the best policies to mitigate the impacts of fracking; and what is the role of investors and educational institutions like UMass Boston in this process.
The Sustainability/ IT Nexus
By Andrew Bishop, MBA Candidate, UMass Boston
On December 5th 2013 the Center for Sustainable Enterprise and Regional Competitiveness at UMass Boston hosted the Sustainability and IT/Nexus event featuring Kathrin Winkler, Senior VP and Chief Sustainability Officer at EMC Corp., and facilitated by Pratyush Bharati, Chair and Associate Professor, Management Information Systems Dept. at UMass Boston.
Close to 120 students, faculty and local business representatives attended this event. EMC is global business-to-business company with operations in 80 countries, 60,000 employees and sales of $22 billion; it is a leading producer of both software and hardware emphasizing data storage, security, protection and analytics. Ms. Winkler used this presentation as an opportunity to examine both the positive and the negative impacts of the IT sector, and detailed specific initiatives EMC has undertaken to lead the industry towards “sustainable business best practices.”
She started by explaining how Sustainability and IT interact with one another: “There is a special synergy between sustainability and the IT industry.” Sustainability drives the IT industry forward towards new innovation and business practices, claimed Ms. Winkler.
In early 2008 EMC developed an ad d the various areas of the company where sustainability could play a role in lowering energy consumption, reducing waste and saving money by implementing eco-efficiency strategies. Initially part of the product management, Ms. Winkler was named Senior Director of the newly formed Office of Sustainability and was charged with looking strategically across the company to examine the business opportunities of sustainability strategies at EMC.
EMC Corp. operates around the framework of People-Planet-Profits. As Ms. Winkler explained, “we make conscious decisions that the value we are making, and sometimes destroying, can affect each of these three pillars.” The key is to integrate the three aspects and not “categorize them as people in the industry tend to do”, explained Ms. Winkler. One specific internal initiative is EMC’s Sustainability Leadership Council’s updating their system of core beliefs. Some of the most fundamental beliefs to understanding sustainability in the IT industry include:
• Sustainability Makes Us Better: looking at and understanding sustainability is not only good for the planet and society; it can also be good for business. She provided the example of EMC’s reusable shipping containers. A major cost for EMC previously was the large containers that data servers were shipping in and the waste that came from them. Ms. Winkler explained that EMC recently developed collapsible shipping containers that can be reused many times. At the onset, the containers would have been too costly to ship back once the product had arrived at the customer’s offices. However, through strategic thinking and innovation, EMC developed containers that could also collapse flat allowing them to easily be shipped back for reuse.
• Companies Must Be Held Accountable: stakeholders must hold companies accountable for their externalities whether these are good or bad. Stakeholders need to ask companies about their impacts on the environment and society, and as Ms. Winkler said, “need to ask companies the tough questions. She cited EMC’s previous lack of measurement of their water footprint the first year the organization joined the Carbon Disclosure Project (CDP). The water footprint is an industry standard that examines a company’s water consumption and what is being done at the organizational-level to offset negative externalities on water consumption and carbon emissions. At EMC’s annual meeting shareholders came forward to specifically ask whether they planned to respond to the request for a water disclosure. Partly as result of this stakeholder engagement, the company now publishes an annual report that specifically details their opportunities and risks as they relate to water consumption. EMC does the same for Carbon Emission, Energy Consumption and Water Quality.
• Believe in Change at an Industry Scale: It can be very complex and complicated to achieve a scale of change that can resonate throughout the economy and an industry, Ms. Winkler shared. In the IT industry companies are each other’s competitors, partners, customers and suppliers, making it more susceptible to progressive collaboration on industry-wide concerns and opportunities. The IT industry, more so than others, has come together in innovative ways to address the top sustainability challenges for this sector.
Ms. Winkler went on to cite two specific examples of how she feels the IT industry is leading the charge toward “sustainability best practices.” Reiterating that there is a unique synergy between sustainability and the IT sector.
• First, Ms. Winkler spoke of an interaction she had at her first sustainability conference with Joel Makower, Chairman and Executive Editor of the GreenBiz Group. She asked how he felt the IT sector was fairing when it came to sustainability, to which he responded, “… the IT industry is in a race to the top, they [companies] are competing with each other to outdo one another. And this is a great thing.”
• Second, Ms. Winkler was engaged in a multi-stakeholder meeting surrounding sustainability and responsibility of “conflict minerals”. These minerals are often harvested in insurgent-run mines in Africa, specifically in the Democratic Republic of Congo. The purpose of meeting across several relevant industries was to track the profits and ensure the purchase of these minerals (which are also used in EMC’s products) are not going to fund insurgent and militant groups that exploit and harm the native people and the environment in the Democratic Republic of the Congo, while also avoiding the destabilization a primary driver of economic growth in the region. Advocacy groups pressured the IT industry the hardest because they have been the most prevalent listeners and most action-oriented when it comes to solving sustainability problems.
• The third example came from one of Ms. Winkler’s contacts in the government sector, where “government agencies look to the IT industry for best practices in sustainability because of IT innovation and the fast movement in nature.”
Ms. Winkler went on to examine the unique aspects of the IT industry that drives innovation and change surrounding sustainability. She chiefly accredited two foremost factors as the drivers of success: culture and business-mindedness. The IT sector has a culture of innovation; people look for problems to solve and then take action. At EMC engineers who do not have a background in sustainability often help the Office of Sustainability because they simply enjoy solving problems. On the business-side, the IT industry has been particularly successful at coming together to develop supply change standards (e.g., the Electronic Industry Citizenship Coalition).
Ms. Winkler also discussed the ways in which sustainability practices help IT companies achieve their strategic goals:
• Sustainability helps the bottom line. By reducing unnecessary waste and enhancing efficiencies across the company it ultimately affects the bottom line.
• Sustainability helps customers. Recently EMC has developed reusable packaging that has reduced waste and is easy and convenient for customers. The collapsible crates can be shipped to customers then easily collapsed down and shipped back to EMC for reuse. Customers don’t have to discard of the massive packaging from products and EMC has reduced packaging costs dramatically.
• Customers care a lot. Customers frequently want to know that EMC is a sustainability-focused company. Through surveys and questionnaires, customers hold EMC accountable by inquiring as to the suitability of their products and services. “This changes the nature of our relationship with customers from transactional to a real relationship, and that in itself drives revenues,” explained Ms. Winkler.
• E-Waste. The EMC Office of Sustainability examines and takes special care in recognizing that most IT products are made of non-renewable resources which can be reused while at the same time, their decomposition, if not handled properly, can create human health and environmental problems.
• Employees want to be proud of their company. EMC employees take pride in knowing that their company cares about more than just profit. Employee ideas and suggestions are collected from various departments and units across the company. “Collaboration is the key to innovation,” concluded Ms. Winkler.
Ms. Winkler also discussed some of the negative impacts of the IT sector and how companies like EMC are aiming to address them:
• Energy. It takes energy to run a company like EMC. Datacenters for example consume roughly 2% of the global energy use. EMC has realized the importance of creating energy efficient products and conserving energy by turning down some equipment when not in use.
• E-Waste. With its fast rate of obsolescence the IT industry creates a significant amount of e-waste. EMC specifically has looked at ways of regionally processing E-Waste to ensure that it’s being disposed of in ways that is not harmful to the environment. Ms. Winkler believes that with the move to cloud computing there will be changes in the business model and companies will have the incentive to use equipment longer (e.g., similar to Zipcar and selling a services vs. product).
• Water. EMC uses water at many of its datacenters as a method of cooling the hardware that is used to store data. However, as energy consumption is lowered and less cooling functionality is needed the result is a decrease in the amount of water consumed to properly run products. Equipment is also being designed that can use outside air to cool systems rather than using water.
• Supply-chain social and environmental responsibility. EMC is engaged with suppliers that are safely and sustainably using labor and resources to produce the necessary components. The company works to ensure that child-labor and indentured labor is not used, that fare wages are being paid to workers at supplier based facilities and the suppliers are getting their materials from sources that are not harming or depriving local communities of necessary natural resources.
• STEM education. Every technology company is heavily investing in Science, Technology, Engineering and Math (STEM) because of the concerns of future shortages.
• One of the largest challenges facing the IT industry in regards to sustainability is the growing cloud-based computing revolution. As companies begin to store more data in cloud based datacenters the line is starting to blur on who is responsible for the energy and resources consumed to maintain those datacenters. Furthermore, the issues of privacy and data security as well as potential misuse of products, is emerging as a key challenge for the industry.
In the following discussion, Ms. Winkler addressed many questions regarding the sustainability challenges and opportunities of the IT industry. She also offered advice to students looking to gain employment in the sustainability field. While there are few sustainability positions, there are opportunities in almost all organizations to do sustainability work and even create your own position. Ms. Winkler stressed the importance of due diligence before accepting a position with a company.
By educating the future employees and residents of Boston and Massachusetts, UMass Boston can further support the IT and other sectors’ need for sustainability innovation to solve the problems that our society faces – from climate change, water and toxic chemicals, to worker practices and communities disruptions. The Center for Sustainable Enterprise and Regional Competitiveness has five programs in Clean Energy and Sustainability and a Green Internship Program helping advance workforce development for the clean, sustainable economy.
Are Low Wages Sustainable?
By Andrew Bishop, MBA Candidate Umass Boston, and Vesela Veleva, Sc.D., Lecturer and Co-Director SERC
The Center for Sustainable Enterprise and Regional Competitiveness (SERC) at the University of Massachusetts Boston, held a dynamic panel discussion on Thursday November 7th 2013. This event, attended by over 100 students and faculty, centered on poverty wages and the impact on sustainability for business, families and society. The panelists came from the philanthropic, business and academic realms, each bringing a unique and diverse perspective.
Mark Popovich, Senior Program Officer at the Hitachi Foundation, began the discussion by introducing the work of the foundation and their Business and Work Program, which focuses on exemplary employers as they create pathways to greater prosperity and career advancement for lower-wage workers. Popovich started his presentation by saying, “Good jobs are hard to find. When the economy and job growth lag, good jobs become even scarcer. As a result, around 27 million people, one in six American workers, are unemployed or underemployed.” Popovich explained that the nature of work is changing and Low-Wage Workers (LWW) bear greater risks citing seven key influences: 1) Job Volatility and Employment Tenure 2) Temporary & Contingent Work 3) Health Insurance 4) Retirement Plans 5) Unemployment Eligibility 6) Influence of Unions, and 7) Technology Advances. Given these factors, since the mid-1970s the wages/GDP ratio has continued to fall, resulting in a loss of five percentage points between 1975 and 2010.
According to a 2013 survey supported by the Joyce and Hitachi Foundations and conducted by Association Press/National Opinion Research Center (AP/NORC), 50% of LWW families indicated that their financial status was somewhat/much worse than it was four years ago. These families cited bills, mortgage payments and medical expenses as their primary concerns. Over 62% of Low-Wage Workers have a perception that their employer values the work they do. According to the survey, over 38% of LWW have remained with their current employer for 6 or more years (21% of all LWW have been with the same employer for over 11 years). “Is this a good or a bad news?” asked Popovich. Probably both, as many employees have been unable to move to a better paid job.
Education and development of skills valued in the labor market are typically seen as the best way to move ahead and Popovich discussed some of the challenges and opportunities for workers and employers in this area. While employers are spending about $156 billion annually on learning and development, compared to $1.7 billion by the Department of Education, most of the funds go to train the highly skilled employees. About 64% of the LWW report participating in some type of employer-provided training and 59% feel prepared upon first starting their job tenures, according to the latest Hitachi Foundation/AP Survey. The main drivers for employers to offer such training include improving quality (69%), retaining workers (61%), meeting skill needs (61%), and reducing turnover (52%). Employee training has significant business benefits and the Hitachi Foundation has supported development of a compendium of “Pioneer Employer” case studies.
Holly Sklar, Director of Business for a Fair Minimum Wage, continued the discussion by representing the viewpoint of many businesses on a minimum wage increase. Holly engaged the crowd by asking if they felt a majority of small business owners would support raising the minimum wage. She shared the findings from a recent national poll that found “67 % of small business owners support increasing the federal minimum wage and adjusting it yearly to keep up with the cost of living”. “And this was a heavily Republican sample”, continued Sklar. Forty-six percent of respondents identified themselves as Republican, 35 percent as Democrat and 11 percent as independent. Small business owners across the political spectrum believe a minimum wage increase would strengthen consumer demand, boost business and help the economy. They think it will increase job growth, not hurt it. In fact, numerous studies have demonstrated that increasing the minimum wage does not cause job loss. Large companies such as Costco are also supporting the minimum wage increase. The retailer is currently paying a starting wage of $11.50/hour to its employees and has very strong business performance.
Sklar shared some little known statistics surrounding minimum wages in the U.S. over the past fifty years:
• The federal minimum wage was last increased in 2009 to $7.25 an hour – just $15,080 a year for full-time workers. The Massachusetts minimum wage has been $8.00/hour - $16,640 a year – since 2008.
• Adjusted for inflation in 2013 dollars, the minimum wage was $8.59 an hour back in 1956. At its inflation-adjusted high point in 1968, the minimum wage was worth $10.74.
• The minimum wage today is below the living wage which is estimated at $12.83/hour for a single adult with no children in Massachusetts.
Overall, today’s minimum wage workers are paid much less than their counterparts decades ago. Sklar concluded by saying, “We can’t build a strong economy on a falling wage floor. The minimum wage would be over $10 if it had kept up with the rising cost of living since the 1960s instead of falling behind.” Momentum is building nationwide as New Jersey, New York and California enacted state minimum wage increases this year and the Massachusetts Senate passed legislation to gradually increase the state minimum wage to $11. Campaigns to raise the minimum wage are underway in states such as Arkansas, Idaho, Illinois, Maryland, Hawaii and Minnesota. The Fair Minimum Wage Act introduced earlier this year in Congress would also gradually raise the federal minimum wage to $10.10 and then adjust it annually for the rising cost of living.
Randy Albelda, Professor of Economics and Senior Research Fellow at the Center for Social Policy at UMass Boston, wrapped up the conversation focusing on low wages from an economic theory perspective. Albelda started by re-defining the problem through the questions, “Are low wages sustainable when a substantial number of workers receive them? What do low wages mean in the context of high levels of income and wealth inequality?” From the perspective of Orthodox/ mainstream/ neoclassical theory low-wages are not only sustainable, they are desirable. This theory treats wages as any other commodity, so when wages are low, demand will be greater which will lead to creation of more jobs. Keynesian theory, in contrast, sees low-wages as destabilizing if they are part of a deflationary cycle, in which the economy becomes mired in recession. Boosting wages for low-income people can help stimulate spending and spark growth. According to Marxist theory, low-wages are inevitable, destabilizing and subject to change as workers get organized and demand better pay. Finally, Feminist and Institutionalist economic theories considers low-wages unethical and costly for society, leading to increased social program spending and welfare systems.
We are presently in a new era of low wages where we have a larger number of low wage workers, concluded Prof. Albelda. For instance, there were 27.5 million such workers in 1980 representing 24.8% of the workforce; in 2011 their number increased to 42.9 million, representing 28.1% of the workforce. We also see changes in who is a low wage worker – more “breadwinners” such as married fathers (an increase from 7.7% to 14.1%) and single mothers (an increase from 32.7% to 39.5%) have entered the low-wage workforce. In addition, such workers often lack employer-based benefits (health insurance, retirement plans, paid time off), flexibility over work time, and are increasingly more vulnerable than the rest of the population due to the lack of “safety net”.
“Low-wages are tolerated, but certainly not healthy,” noted Albelda:
• Low wage parents see worse health and educational outcomes for children, even after adjusting for low income
• There is a larger group of vulnerable elders
• There is a disproportionate representation among women and people of color which perpetuates institutional forms of racial and gender inequality
• The high costs of low wages at individual, community, and society levels may harm economic growth
• Concentrated wealth subverts democracy.
“While low-wages are not yet totally destabilizing, they have generated social responses, such as the Occupy movements and fast-food worker walkouts”, summed up Prof. Albelda. It will take two large societal shifts to correct the low-wage injustice: 1) Organized/collective labor responses that not only bargain around wages and benefits, but also around work hours; and 2) Reweaving of the social welfare system that takes into account variation in household forms and care work (progressive taxation, human infrastructure, and revamped social policies).
In an engaging discussion, the panelists addressed many questions from the audience around minimum wages, inequality and the way forward.
The mission of the Center for Sustainable Enterprise and Regional Competitiveness at UMass Boston is to foster a transition to a clean, sustainable, and prosperous economy. It applies its unique interdisciplinary expertise to engage in collaborations among businesses, universities, and policymakers to advance research, education, and innovative solutions for business sustainability and regional competitiveness.
“Greenovation” – The City of Boston’s New Initiative
An evening with Brian Swett, Chief for Energy and Environment, City of Boston
By Vesela Veleva, Sc.D., Lecturer and Associate Director, SERC
This interactive event on May 14, 2013, organized by SERC and the Boston Alumni Club of the University of Michigan’s Ross School of Business, featured a presentation by Brian Swett, Chief of Energy and Environment for the City of Boston. Mr Swett, who reports directly to Mayor Menino, presented “Greenovate Boston" – the City of Boston’s efforts to demonstrate leadership in addressing climate change and making Boston the greenest city in the United States (www.greenovateboston.org).
Mr. Swett began his presentation with some striking statistics: 2012 was the warmest year on record globally; July 2012 was the warmest month ever in the U.S.; there are projections for substantial sea level rise in Boston, over 12 inches in the next 100 years; Boston dodged disaster from superstorm Sandy by 8 hours - had it hit at high tide, much of Boston would have been flooded making it a 100-year storm).&nbs