As a global specialist in energy management with operations in more than 100 countries, Schneider Electric offers integrated solutions across multiple market segments, including energy and infrastructure, industrial processes, building automation, and data centres/networks as well as a broad presence in residential applications. Jean Pascal Tricoire, the President and Chief Executive Officer of Schneider Electric, spoke to Anoop K Menon on the broad trends in energy management, and how the introduction of renewable energy is changing the power sector.
As the head of Schneider Electric, you interact with business and political leadership in different countries. Is there a strong awareness of concepts like energy efficiency and smart grids at those levels?
Not always. The good news is that compared to five years ago, the awareness on climate change and the need to make the world of energy far more efficient has changed dramatically. People may always quibble about Copenhagen and Cancun, but at the end of the day, there has been a real change in the state of affairs with some parts of the solution really taking off. For example, most governments today have a plan for renewable energy. At the same time, they have not given sufficient attention to energy efficiency and everything related to it. I believe that the greenest way to generate energy is to save energy. The reason this very simple equation has not taken off is that energy efficiency is very diffused; it is not a big project which you can finance and inaugurate for political mileage. Rather, it is a day-to-day discipline. It is also the most promising one, because fundamentally, you could save at least 30% everywhere in terms of energy, which in turn, would save billions in terms of investments in energy production.
Has the industry been more responsive than the government with regard to energy efficiency?
Industry has been the first one to embark on the path to energy efficiency for several reasons. Of course, one cannot discount image and sustainability as drivers, but the main driver is the growing cost and/or scarcity of energy. The cost of energy – whether it is oil, coal – has skyrocketed in many places. Further, many countries have imposed limits on the energy you can draw from the grid. Introduction of renewable energy is definitely ‘greener,’ but raises the price of electricity on the financial side.
Further, industry has also realised that payback period is relatively short between three to seven years.
However, 70% of the energy consumption is outside the industry, like for example, buildings where things haven’t really improved, because the investors and actual users are more often than not different. I think the solution likes in changing the existing approach towards management of buildings so that the aspects like lifecycle costs, Total Cost of Ownership (TCO) are taken into consideration right at the beginning. Governments can play a major role here by putting in place appropriate regulations.
Could you name the trend setting countries in this regard?
Europe has been ahead of the curve in terms of putting into place energy efficiency standards that are more demanding, both on the building and the industry sides. I also see China making determined efforts in this direction, though they haven’t played it up internationally. Schneider Electric is working in China to those standards.
Coming back to the first question, where you also mentioned the smart grid, a key reason the concept has caught on is the introduction of renewable energy everywhere and its growing share of the installed base of power generation. However, renewable energy is also scattered, volatile and, therefore, introduces instability on the entire network. For example, we have seen problems in Europe in the peak of summer when there is no wind and during winter storms when the windmills are stuck because there is too much wind. Also, there isn’t much you can do with renewable energy; in a traditional grid system you have to dispose the ‘green’ energy when the grid doesn’t need it.
Therefore, the only way to derive benefit from renewable energy is to adapt consumption downstream to the characteristics of generation. To do that, you have to make every point of use – plant, building, home or data centre – intelligent. Once you have done that, you can connect them to the smart grid. Conversely, there is no smart grid if there is no smart building or smart home, or smart plant.
Electric vehicles, which will be a big market by 2010, are another factor. They will be an integrated part of the smart grid. They represent a point of consumption, which, for the first time in the history of electricity, is massively mobile and is also a point of storage.
Does this holistic equation of energy figure on top of the governments’ agenda? The answer is negative. I think the debate has been far too narrow and far too focused on the grid. There is more equipment that goes beyond the grid than inside the grid.
Will the smart grid transform the power utility business the way the telecommunications business was transformed?
The smart grid is going change many things. The first would be our relationship to energy. Today, energy is a pretty fixed stuff, where you receive energy, pay for it and don’t debate anything. Tomorrow, if your power utility is going to ask you to peak shave, you will have to enter into contracts. What will be your commitment to do that, what will be the benefits you get from such a contract? The relationship will be in terms of understanding what you can do and the benefits you get in your energy bill. The net effect is that my relationship to energy, because it is a significant part of my spending, would become far more personal and far more detailed. Once you save energy, it means there will be a possibility between users to aggregate energy and organise demand so that you get a better supply.
Are there technologies or developments within the renewable energy sector that could be termed as ‘disruptive’?
My best guess is that in the renewable energy sector, there will be a parallel improvement of technologies that will lower costs. The disruption I see in the future is the real emergence of the smart grid. It is easy to connect some electrons to the grid, but here we are talking about complete transformation of the grid, which is far more complicated. The spread of intelligence everywhere is something that will need a lot of consistency. We are one of the unique companies in the world able to organise this consistency. We don’t pretend to want to do everything; we live in a world of competition and customer choice. However, people who will choose our systems will benefit from that consistency.
The merger of power technologies, together with automation and IT technologies is something that we are driving. We are one of the few companies able to put the control of high-power electronics together with information systems. And again, this raises the bar to a new level. Before you could only do by doing medium voltage or low voltage systems, but now you have to make sure that those systems are directly communicating or reporting their status on the web.
So these are probably the two biggest disruptions I see – the building of holistic smart grid and convergence of IT and electrical technology to form what we at Schneider call the era of intelligent energy.
What are your thoughts on MASDAR?
MASDAR is an encouraging sign, because while this region sits on massive energy resources, its rulers have understood that they have a responsibility towards the planet, the environment and the future. I must also add that MASDAR is unlike anything we know in this region or in the world. The willingness to set up a science and technology institute in the middle of the city and bring the best ‘green’ technologies into the region is something great and unique.
We have a very good partnership with Masdar, from the Masdar Institute of Science and Technology (MIST) aspect as well as from the construction of Masdar City. We are working across the whole portfolio of MASDAR as well as other operations in the region associated with MASDAR. For example, we are working with Abu Dhabi Municipality (ADM) on solar rooftop pilot projects and energy audits for buildings. Our association with MASDAR is part of the whole commitment this region has to the global challenge of conserving energy.
