This post combines Parts 1-3 of the series, “Why I Went Into Energy”, first published in February 2015
Like most journeys in life, my path to the energy sector happened through a combination of curiosity of the issues, overcoming challenges facing our community, finding the right opportunities and above all else, luck. My path has not been linear – from an engineer to a salesperson to an energy entrepreneur and educator. Yet each stage was good preparation and training for the subsequent role.
My academic introduction to energy was via the laws governing the conservation of energy. As a material scientist, I had a strong grounding in physics and chemistry. Virtually all of our analyses started with an energy balance which consists of four components: (1) energy in (2) energy transformation, (3) waste energy out and (4) useful energy out. The conservation of energy states that energy in equals waste energy out plus useful energy out. One can understand any system by either analyzing all of the energy inputs or the energy outputs. With this approach, we studied a diverse range of topics, from 2,000 year old roman concrete to hip implants to nano robots. It demonstrated the power of using an energy balance framework to easily explain complicated and seemingly unrelated phenomena. At Panasonic, where I was an associate engineer, energy balances were used frequently to describe the research we performed on laser / matter interactions.
After Panasonic, I was unsure what career to pursue and knew that I wanted to learn about business. My mentors told me to become a salesperson. Bringing in money for a business, they advised, is the pillar of any successful company. Furthermore, as a salesperson, one also gets to interact with all aspects of a business. Even if sales was not to be my chosen career, I could be exposed to the job I would want in the future. I found this to be incredibly good advice. As a territory manager for Olympus, I sold microscopes and other industrial inspection equipment to engineers and technicians who used the instruments. Yet I also had to work with accounting and finance to pay for it, CFOs and CEOs to allocate capital budgets, receptionists and assistants to gain access to calendars. Internal to Olympus, I had to collaborate with product managers to develop new solutions, warehouse workers to inspect delivery, technical support for troubleshooting, and so on. The role gave me an appreciation of the functionality of different departments and how companies are structured. It also showed me how money flowed through a company too. In essence, money also needs to be in balance – revenue equals expenses plus profit.
After a few years, I was ready for another change. I felt like I understood the bookends of a business, namely basic research and outside sales. However, I was missing the “middle bits” of how a company worked. Thus I applied to MBA programs, looking for a program that could help synthesize my experiences.
These experiences started coming together almost immediately. First, I landed an internship opportunity analyzing the energy patent portfolio for MIT. I combed through dozens of patents to better quantify the impact that MIT’s technology in the sector. It gave me a very quick and deep knowledge of the frontier of energy. Second, my favorite classes during the MBA program were financial and managerial accounting. As an engineer, I enjoyed the numerical documentation of how money flowed through the income statement, balance sheet and cash flow statements. I was further fascinated by how one can use very simple accounting metrics to influence business goals and execution strategies. Third, the stock market crashed the first week of my MBA program, making the job hunt all the more difficult. It was a mixed blessing – since jobs didn’t exist, it removed the need to apply for them in the first place. Instead, I focused on my studies and figuring out a new career path.
The last ingredient was meeting Jason Crabtree, my future co-founder. We were both members of Magdalen College Oxford and met during the matriculation panoramic photograph for the incoming class. Over the next few months, we discussed our mutual interest in energy and our approaches. Philosophically, I was committed to consumption issues. As a society, we will always find new ways of consuming whatever new energy resource we discover. Without more attention paid to consumption, we will never alleviate our energy problem. Jason was committed to generation issues; he was interested in hydro kinetics and tidal power generation for the state through some studies of the Puget Sound. He was an engineering research student creating simulations and models of new forms of turbines. As we talked, we realized that the problem was neither consumption nor generation but that the two sides don’t communicate very well with each other. Although most sectors spoke used the terms kilowatt (kW) and kilowatt-hours (kWh), the sectors interacted with the values differently. For instance, a consumer would be concerned with the energy consumed based on a kWh metric while the utility would be concerned about the power stability based on a kW metric. This seemingly minor discrepancy in terms was creating huge economic lost opportunity. We realized that converting energy metrics into a monetary metric could help solve the problem of communicating between supply and demand.
Along with Jason, we gathered several realizations:
- First, as a material scientist, I was basically an energy accountant. The energy balances analyses we did in college was simply an accounting method for balancing energy in to energy out.
- Second, one can understand the energy system by analyzing consumption just as much as analyzing generation. In fact, the two issues are two sides of the same coin.
- Third, a utility is a system that has to balance both energy and money. Any discrepancy of either has to be reconciled using accounting and engineering methods.
- Finally, any and every business also has to balance both energy and money. A commercial business balances money regarding revenue and expenses. A commercial business also is in balance of energy. Energy consumed equals energy used for business purposes plus wasted energy. Minimizing wasted energy helps increase value in the company.
These insights became the foundation of our company, Distributed Energy Management. Jason and I are committed to helping businesses take control of their utilities and make better decisions. Our financial platform helps clients reduce wasted expenses, streamline utility processes and manage long-term energy risks. By managing utility costs and expenses in a transparent manner, we have been successful at reducing energy consumption in spite of clients growing their revenue and business bottom line.
These insights also became the basis of the Sustainable Energy Solutions Certificate at Pinchot University, where I’m on the faculty. The year-long program is an MBA elective or a stand-alone Certificate. We use the framework of an energy balance to examine how energy enables society. As per the energy balance, energy in describes the fuels we use, from coal to petroleum to solar to geothermal. Energy transformations describes the machines we use, such as hybrid electric vehicles to energy efficient air conditioners. Waste energy out describes pollution, emissions and carbon issues. These are the common topics of discussion in any energy curriculum. However, the attributes of useful energy out is frequently unexplored. These values describe our end-user benefits of consuming energy, such as mobility, comfort, convenience and security. These are the demands that society values which energy enables us to enjoy. These are the drivers that maintain a thriving economy. Only through understanding consumer demand will we be able to create a truly sustainable energy system.
Along with Jason, I authored Driven by Demand: How Energy Gets its Power, a book that described end-user energy demands through stories and case studies. Our energy infrastructure was built to solve critical societal problems and to bring economic and social benefits to a community. By understanding historical energy demand, one can describe and understand many of the idiosyncrasies of the physical electric grid, the regulatory regime, utility business model, policy positions and other issues related to energy. Our book examines how energy works at the intersection of infrastructures, such as transportation and taxes, waste management and embodied energy recovery, physical and cyber security. As our demands and needs change, the energy infrastructure will evolve as well and we can anticipate future business opportunities.
Our ecosystem of activity – entrepreneurial, academic and research – revolve around a notion of a “virtual chief utility officer” for businesses. After all, energy can be viewed as another resource consumed to meet business demands. These business demands constantly change – from needing capital improvements to reducing operational expenses. Too frequently, the management of utility bills (an operational expense) and equipment purchases (a capital expense) are managed through separate budgets, separate responsibilities and separate departments. The Chief Utility Officer is a role of authority and responsibility who understands business demands, helps align utility strategy to corporate strategy and brings cost certainty to an uncontrolled expense.
On the surface, my training as a semiconductor engineer and laser physicist has very little to do with energy management for commercial properties. At the same time the material science department at MIT has become a hotbed for energy innovation. It turns out that many of the techniques we studied are applicable for the manufacturing of batteries, ultracapacitors, solar panels, and other energy-enabling technologies. Many of my professors and laboratory groups are now spinning out energy applications and energy startups. Material science gave me a strong fundamental knowledge of how energy systems work. Thus I find myself strangely back where I began – applying the analytical framework of energy balances to large systems in order to find opportunities and create efficiencies. I am sure that these skills will continue to come in handy in the future as well.