CERAWeek 2014 - Customer Needs and Wants

IHS CERA Vice Chairman Daniel Yergin opened the Thursday afternoon plenary on "Customer Needs and Wants" by welcoming Jean-Pascal Tricoire, the Chairman and CEO of Schneider Electric. Mr. Tricoire noted that producers and users of energy have common preferences, which are, in order of priority, that energy has to be cheap; has to be safe; and ideally should be green. He saw these commonalities as an opportunity to maximize efficiency through automated control. Mr. Tricoire also said that massive cost cuts in renewable technologies will help provide cheap energy that is also safe and green. Mr. Tricoire also emphasized the importance of training customers in the use of new innovations-or, better yet, making those innovations very simple to use.

Dr. Yergin then asked Sharon Burke, Assistant Secretary for Operational Energy Planning and Programs at the US Department of Defense, to describe the importance of her department as an energy consumer. In response, Ms. Burke provided some remarkable facts: the Department of Defense, with more than half a million installations around the world, has an annual electricity bill of around $4 billion and an annual petroleum products bill of around $17 billion. These statistics underpin the Department of Defense's drive for energy efficiency improvements, as low-cost energy is a very important department objective. Ms. Burke offered several examples of how energy efficiency improvements and innovations have increased military effectiveness. For example, a recently trialed solar-powered aircraft was able to stay airborne for two weeks without landing and was harder to detect than a conventional aircraft. She noted that the department's large energy requirements create operational and logistics challenges. These can create vulnerabilities, such as the risk to supply lines posed by bombings in Afghanistan. Improvements in energy efficiency reduced this exposure, she said. Another example is the testing of hyperelectric drives on ships, which drastically cut energy costs and reduce the time between refuelings. Ms. Burke noted that energy efficiency targets have been legislated for the Department of Defense, and she said she expects petroleum products to be the primary energy source used by the defense forces for years to come. Therefore, ensuring the availability of this resource is of paramount importance, she noted.

Badar Khan, President and CEO of Direct Energy, detailed how his company has been engaging end users in state-of-the-art ways. Direct Energy customers, he noted, can opt to receive a text message every day detailing their energy usage and what they paid for that energy. Access to this frequent data, he said, has driven an 18% reduction in energy usage by those customers. Mr. Khan also discussed Direct Energy's "free electricity day," which encourages customers to use power on certain days of their choice, resulting in energy usage cuts. In response to Dr. Yergin's question on who owns the customer data collected by Direct Energy. Mr. Khan said that this has not been a major issue to date, but that it would become more important in the future. He noted that certain customers have expressed concern, and that it is absolutely their right to decline involvement in the program.

The session also included a group discussion on cyber security issues. All the panelists agreed that thorough identification of areas of vulnerability to cyber attack is crucial, and that extensive research and development is the best way to counter the threat.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.