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| Last year, Calpine Corp. (CPN
), an energy company headquartered in San Jose, Calif., decided to go after the ``high-nines'' electricity market. That's the high-reliability electricity needed by technology customers such as its neighbors in Silicon Valley. At present, the U.S. power grid provides ``three-nines'' reliability--that is, the power is on 99.9% of the time. But that means the power is out about nine hours per year--an unacceptable rate for computer servers running corporate Web operations, where even a few seconds' disruption can be disastrous. They need 99.9999% reliability, or better. Calpine found it could offer high-nines reliability by using so-called distributed power. In this approach, the customer is taken partly or entirely off the power grid and serviced through generators installed on company premises. As a bonus, the arrangement earns Calpine praise from environmentalists, because distributed power can be more efficient and environmentally friendly than conventional power. Amory Lovins, a leading alternative-energy advocate and the founder of the Rocky Mountain Institute in Snowmass, Colo., says distributed power avoids losses associated with transmission along the grid and can be tailored precisely to meet demand.
Efficiency and reliability have become front-burner considerations for energy companies in the top ranks of the
BusinessWeek 50. Calpine, No. 3 on the list with annual revenues of $2.3 billion in 2000, has made its mark in energy
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Where Green Technology Soups Up Performance
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| COMPANY | LOCATION | BW 50 RANK |
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| CALPINE CORP. | SAN JOSE, CALIF. | 3 |
| Subsidiary c*Power builds gas-fired generators at customers' facilities, increasing reliability and efficiency |
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| CHEVRON CORP. | SAN FRANCISCO | 35 |
| Helps customers analyze their energy use and uncover ways to save on energy costs |
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| DUKE ENERGY | CHARLOTTE, N.C. | 19 |
| Consulting service helps customers find ways to save on energy costs, and Duke and the customer split the savings |
reliability. It is also a leader in the geothermal-power industry. But Calpine isn't alone: Alternative energy programs are becoming an important point of differentiation throughout the power industry.
Calpine's approach focuses on a package of energy products and services, including capturing waste heat from onsite generators and directing it to ``chillers'' to produce cold water for cooling. ``We're selling you kilowatts. We're selling you the reliable energy. We're selling you the cooling. And we're selling you an insurance policy,'' says Jeffrey D. Byron, director of business development at Calpine subsidiary c*Power Inc., which handles such services. The package typically costs corporate customers less over the 20-year lifetime of the deal than buying conventional power and using generators and battery-backup for emergencies. And extra power generated on the corporate customer's premises can be sold by Calpine back to the grid.
DIM SOME. Chevron Corp. (CHV
), too, is finding that the energy business these days is about more than merely pumping out BTUs. In 2000, the company started a subsidiary, Chevron Energy Solutions, to make money by helping customers save money. For example, ``we look for customers that are really lacking information on their energy use,'' says the subsidiary's President, James C. Davis. The Chevron unit does an analysis of a client's power usage, then develops money-saving strategies.
The company has found that one size does not fit all. Convenience stores, for example, can often save power and money simply by installing new lighting. ``In many cases, those stores are overlit,'' Davis says. Replacing the lighting does two things, he says: It saves energy and ``upgrades the stores' image so they look safe, and the products on the shelves look appealing.'' Refrigeration presents another opportunity to reduce energy use, for both small and large customers. Large energy users can take advantage of more elaborate energy-saving schemes, Davis says, because the potential for saving money is so much greater.
Interest in conservation has spiked recently with the arrival of the California energy crisis, Davis says. That expands the marketing opportunities--with regard to both energy-savings and environmental image-making. ``We have customers who say, `energy isn't really a high cost of my operations,''' but their environmental reputation matters to them, Davis explains.
The financial benefits of energy efficiency can go beyond electricity savings. Cadillac Fairview Corp., a Canadian real estate company, has been working for two years with Duke Solutions, a subsidiary of Charlotte (N.C.)-based Duke Energy Corp. (DUK
), to reduce power consumption at the Toronto Dominion Center. More efficient lighting, new ventilation systems, and other improvements have cut energy costs at one of the center's towers from $3 per square foot to $2.32, says Michael A. Miceli, the center's general manager. And because people like the new lighting and ventilation, Miceli expects it will be easier to find and keep tenants. ``You get this spillover [benefit] of comfort that is hard to measure,'' he says.
Customers can hand off all of their energy management needs to Duke. The process may begin with Duke assuming the capital costs when a company upgrades its energy system. Duke then shares the savings the company gets from improved lighting, heating, and cooling. For each customer, Duke will also explore the feasibility of distributed power for mission-critical facilities, and it sometimes owns and operates such facilities on behalf of its customers.
Duke is paid on the basis of its performance. ``If there are no savings, we don't get paid,'' says James A. Josephson, a Duke Solutions vice-president. For a project that doesn't require much of Duke's capital, the company might take only 5% of a customer's energy savings. But in some large industrial projects, Duke will take all of the savings in return for building and running a more reliable energy system that frees a customer from energy worries.
The strategies employed by Calpine, Duke, and Chevron go far beyond the old Reddy Kilowatt billboards urging people to use less energy. And when top-performing energy companies demonstrate that green strategies are good business, the results are likely to get more attention than any billboard. |
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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