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Succeeding with Sustainability

On March 17, 2009, CEOs and world leaders-including The Prince of Asturias, Felipe de Borbón y Grecia-gathered in New York …

On March 17, 2009, CEOs and world leaders-including The Prince of Asturias, Felipe de Borbón y Grecia-gathered in New York for the Spain/U.S. Business Sustainability Conference. At the event Chief Executive Editor-in-Chief J.P. Donlon moderated two panel discussions in which political and industry thought leaders from the U.S. and Spain discussed opportunities posed by greater investment in renewable energy, transportation and infrastructure. The following are highlights from those discussions.

Energy & the Environment
With investment in renewable energy, transportation and infrastructure serving as a cornerstone of the Obama Administration’s economy recovery plan, it’s clear that the U.S. is at a critical juncture in planning for the nation’s energy needs, agreed panelists participating in the discussion on Energy & the Environment at the Spain/U.S. Business Sustainability Conference.

“We are right at a crossroads,” noted Ralph Curry, president and CEO of Iberdrola Renewables. “The collision of three important forces—the desire for energy independence, sustainable jobs and environmental stewardships— will influence our future energy decisions. I’ve been in the energy business for more than 25 years and that’s something I’ve never seen before.”

“The best guess is that approximately $90 billion of the funding provided in the stimulus bill is focused on renewables and clean technology, which is an extraordinary amount,” added Chris Groobey, a partner of Baker & McKenzie’s energy, infrastructure and project finance practice. What’s more, the Administration is currently pushing forward on capand- trade legislation; a national renewable portfolio standard (RPS) requiring that 20 percent of American electricity be derived from renewable sources by 2025; and an energy bill that will, among other things, mandate a level of efficiency for government buildings.

State governments have also been raising the bar by setting ambitious energy policy goals. New York State Governor James A. Paterson has announced that “45 percent of New York State’s electricity needs will be met through improved energy efficiency and greater use of clean renewable energy by 2015.” The “45 by 15” proposal calls for increasing the state’s mix of renewable electric energy resources-now about 20 percent-to 30 percent, and decreasing electricity usage by 15 percent.

That initiative is already having a ripple effect. “In response, we have set a renewable energy business plan to invest $21 million in things like solar, wind and fuel cells over the next five years,” said Victoria Simon, chief of staff, director of energy policy for the New York Power Authority (NYPA). That $21 million supplements the organization’s existing plan to invest $1.3 billion between 2008 and 2015 in energy efficiency programs, she noted.

But like the rest of the country, New York City faces an accessibility challenge. “Renewable energy, particularly wind, is plentiful but not located near load centers,” Simon explained. “The power authority is studying transmission expansion and looking to connect more wind and other renewables to the grid.”

Wind and solar power are often viewed as the renewable energy sources with the most potential. Both are intermittent sources (the wind doesn’t always blow, the sun doesn’t always shine) and are most efficiently collected in areas far from where power is most heavily consumed.

Despite these similarities, their merits are hotly debated. “We believe that, while there are all kinds of exciting new technology that can be developed over the long term, wind is the only economical, feasible option with scale and scope in the short term,” noted Curry. “To supply 20 percent of the nation’s energy needs by 2030 we have to generate 300 gigawatts. Right now, we’re 25 gigawatts in the U.S.-and that will take a tremendous investment in the smart grid.”

German Bejarano Garcia, assistant CEO, international institutional relations at Abengoa, countered that thermo solar energy is “a technology- proven, mature high-potential course of action” that is both commercially viable and competitive. “You can store heat, which is a great advantage of thermo solar as compared to other renewables,” he pointed out. “Nonetheless, there are still obstacles in the development of solar technologies in the U.S. regarding the transmission lines, land permits and [the lack of a cap on carbon dioxide emissions].”

But the biggest obstacle may be the paradigm shift that a U.S. transition to renewable energy sources will demand across the board. “Sustainability requires the alignment of public, private and user perspectives and interests,” asserted Silvia Iranzo, Spain’s Secretary of State for Commerce. “Spain ranks second in solar energy and third in wind power. We have gotten there by combining three forces: production, industry and a stable regulatory framework.”

The U.S. will need to advance in all three areas, noted Garcia. “To make this transition faster and efficient we will need the support of public policies, as well as public and private sectors working efficiently and thoughtfully.”

“After a checkered past, we’re moving in the right direction with the passage of the recent stimulus bill,” summed up Curry, who cited President Obama’s pledge to end U.S. dependence on Middle East oil as a reason for optimism. “We have a lot of work to continue, but the vision for the future has been set.”

Transportation & Infrastructure
The recent stimulus package-which earmarked some $150 billion for public works projects for transportation, energy and technology-suggests that investment in renewable energy, transportation and infrastructure is serving as a cornerstone of the Obama Administration’s economy recovery plan. And for good reason.

Each year the average American living in an urban area spends nearly 38 hours, close to a full work week, stuck in traffic delays. In fact, transportation is now the second-biggest expense for most American households. What’s more, reliance on a transportation system that is increasingly outdated contributes to a national dependency on oil.

In addition to a production-fueling necessity, updating transportation and other elements of the infrastructure on which productivity and the general well-being of the population rely-such as water supply, sewers, power grids and telecommunications-is also viewed as a way to help dig the nation out of an economic slump. “Infrastructure development is at the top of the agenda of many governments in these days of economic distress and downturn,” Iranzo told attendees of the panel on Transportation & Infrastructure at the Spain/U.S. Business Sustainability Conference. “Infrastructure development allows for job creation. And building infrastructures fosters innovation and technological progress.”

But viable solutions to fixing an inadequate infrastructure require strategic investing-taking a hard look at what projects have the best prospects for efficiently reducing congestion, carbon footprints and foreign oil dependency, and allocating funds accordingly. “Roads have been the single most important statewide infrastructure focus,” reported Susan Combs, the comptroller of public accounts for the state of Texas. “That’s partly because roads are what people see. You go someplace and get stuck or your child’s school bus is forced off the road. So that’s very present in people’s minds.”

Yet plans to invest heavily in building new roads are often contested by those who won’t benefit from the improvement or by vocal opponents of the toll hikes that such improvements generally bring. “We’ve found that a regional plan works much better,” Combs reported. “In Houston, Dallas and some other areas, traffic is so awful that people are willing to pay almost anything for speed. But rural dwellers don’t see the value-why should they pay for somebody else’s quality of life to improve?” To address the dilemma, she suggests a legislative policy shift that allocates toll road revenues to places with the most traffic and where “you see an immediate tangible effect.”

There are significant enhanced capabilities to be had by upgrading to “smart” infrastructure. Current technology allows for highways that will warn drivers about traffic jams ahead, bridges that will transmit an alert when in danger of collapsing and electric power grids that can heal themselves in the event of a blackout. Already, radio receivers installed on several freeways in the San Francisco Bay area read the electronic toll tags in passing cars and use that information to track the speed of individual vehicles and determine travel times that can be posted on electronic road signs. But would the enhanced productivity and potential for eased-or possibly saved-lives justify the considerable expense of upgrading?

Probably, suggests Richard Chang, principal of The Carlyle Group, who notes that in addition to improving capacity, technology enhancements can also mitigate the need for costly road construction. “To the extent you can improve capacity of the road because you have free-flowing traffic, you can defer-not completely eliminate, but defer-some capital expenditure that would be required to widen the road, improve it or put in reversible lanes.”

“We invest more money [in building and operating highways], but we supply more options, more alternatives, more facilities to the driver,” asserted Juan Miguel Villar Mir, vice chairman of Spain’s OHL Group, an engineering and construction firm. “Obviously, we get more paying cars each day. In Brazil [where OHL operates highways], we hire doctors, ambulances, and even teach kids from the small towns through which the toll road passes lessons of traffic, of driving experiences. We are sure that we get a return in excess of the amount of investment. No doubt about it.”

Furthermore, in some cases the need by far outweighs any potential new or increased toll, he added. “My private perspective echoes what governors from Korea to Texas usually say: Free roads are better than toll roads, but toll roads are better than no roads-and that is the true alternative.”

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.