How are businesses rethinking energy and sustainability? COP30 starts in Belem as climate action falters

0:01Demand acceleration, I don't think it was anticipated. it. So you have so many different parties working on how do you solve for that? You've got utilities saying, you know what, I really can't anticipate the demand and the curve that I need to produce. You've got businesses saying, well, how should we solve for the challenge of getting power in the future? And then you've got customers saying, you know what, I want my operation to be not interrupted. So all these perspectives are colliding and getting to equations that perhaps we didn't think about before. We've got data centers in the basement of residential high rises and the heating is used for the people in the building.

0:39Even the Paris Olympics, like the aquatic pools, were heated by heat from a data center.

0:52Hello and welcome to The Energy Gang, a discussion show from Wood Mackenzie about the fast-changing world of energy. I'm Ed Crooks and this show is being published on Monday the 10th of November, which is the first day of COP30, the international climate talks in Belém, Brazil. We're going to be bringing you a series of special episodes covering all the news from the conference starting tomorrow. But first, what we're doing on this show to set the scene for COP30 is taking a look back to Climate Week back in September to talk about one of the crucial issues in the talks, which is the role of business and the attitude that businesses have to climate action.

1:27I think it's fair to say that something we hear about quite a lot nowadays of businesses have given up on climate action, they are no longer pursuing a transition to low-carbon energy, ESG considerations, environmental, social and governance issues have been de-emphasized in corporate strategies and so on. That's something that is very much out there in terms of the discussion about energy and climate and definitely contributes to the sense that the global effort to address climate change at the governmental level and in the private sector is faltering. So to explore perspectives on that question, we spoke to two businesses in two very different industries about the same challenge, which is how to deliver growth, have a successful business, while also making progress towards ambitious climate goals.

2:19First of all, I'm going to be speaking to Susan Vakumar, who is the Chief Energy and Sustainability Officer at Prologis, which is the world's largest logistics real estate company. They move about 3 % of the world's GDP through their facilities. And then later on, we're going to be hearing from Holly Paper, who is the president of commercial HVAC for the Americas at Train Technologies, which is a company that plays a critical role in shaping demand for energy, as we'll hear. But let's hear from Susan, first of all. Susan, welcome to the Energy Gang. Well, thank you very much for having me today.

2:54So before we get into the topics that you're talking about here at Climate Week, I wondered if you could just tell us a little bit about Prologis for the benefit perhaps of some of our listeners who may not be familiar with the company. What do you do? So Prologis is the world's largest logistics real estate company. And what that is, is we have 1.3 billion of real estate in 20 countries. So we really move commerce across the world. And to share with you some things that will make you think about Prologis, we move 3 % of the world's GDP through our logistics centers. So we are sizable and we are in the crux of supply chain and in the crux of moving commerce.

3:36Thank you. Apologies to listeners. You can probably hear the sirens and the horns going in the background. We're recording this in midtown New York in the middle of climate week, which is also when the UN General Assembly is meeting. All the world leaders are in town. This is notoriously a terrible time to be in New York City. OK, so that's Prologis. Thanks very much for that. Your job title, I think, is very interesting. Chief Energy and Sustainability Officer. What does that mean? And what does that mean your role is? That's a very interesting question. So you're wondering, what is a person that has come from the energy space doing at a logistics real estate company?

4:11So I mentioned that we move goods around the world. And if you think about supply chain, resiliency of supply chain is top of mind for a lot of people these days. And when you think about Prologis, we've got 6 ,500 customers in our premises. And so these are the Fortune 100, Fortune 500 companies. And they all think about not just, you know, how do we move goods, but also do we have the power, right? Power and energy is becoming very much a topic of discussion these days. So I would say the people that asked me to come and join Prologis, the founder and CEO, was able to see around the corners and say, you know, energy will be relevant.

4:55So it makes sense to have someone with that background in our company. So give us some examples of what that means. And as you say, resilience is absolutely paramount for people that are managing these very complex global interconnected supply chains. The point is what that if you lose energy at one particular node at one particular storage facility, whatever it might be, in that complex interconnected supply chain, then the whole thing gets thrown out. Yeah. So if you think about where the world is moving to, things are getting electrified. Automation is coming into play in logistic centers. You've got electrification of fleets.

5:36So all of that means that the demand for energy is increasing. And we know that generation is really hard to bring within the timeframe of when you need it. So this is the energy paradox, right? Demand is going to outpace supply. And when you think about the roots of a logistics real estate facility, it's anywhere from 100 ,000 square feet to larger. And it's an amazing facility to generate on-site power, which is the cheapest and the fastest way of getting power into the consumption that you need. So it's for me, and I think when you think about it, it's a no-brainer. You want to generate the energy that is going to be harder and harder to get.

6:18So that's a big priority for you, is it? Rooftop solar? Absolutely. We focus on on-site generation of rooftop solar. We're the number two generator of on-site renewables in the United States. We also provide battery storage because when you think about the grid, you know, the sun doesn't always shine. So you need to be able to store that energy and provide flexibility to the grid. We also provide charging infrastructure because fleet electrification is going to happen and is happening. So our customers need us to be able to provide that infrastructure for them. You mentioned providing flexibility to the grid.

6:56So your facilities then would always be typically grid connected. I'm sure you're taking part in this debate. But as you know, the big debate about offsite power, behind the meter resources and so on. but your position is what the always that you want to be integrated with a grid but also have your own supply absolutely so so you know most of what you will do when you generate power you will have to interact with the grid one way or the other because ultimately you know that the grid that we have was designed so many years ago to produce energy in one place transmitted over our transmission lines and then to be consumed but even when you generate something on site you do have to interact with the grid.

7:38But that's a great question that you ask, which is, what about an islanded solution or reliability solution? So they're not mutually exclusive topics, right? So for example, if you need power augmentation, or if you need to have resiliency solutions, so you can have a microgrid, and we do develop microgrid solutions, but that is for a very specific purpose of power augmentation and for resiliency versus just for the self-consumption needs of our building. Right. So to be clear what that means, then, you're saying an islanded solution is actually relatively rare or a microgrid that is not connected to the broader grid is not going to be your first choice.

8:21You would always typically choose to be on grid. Absolutely. So a microgrid or an islanded solution is typically more expensive than producing solar. So whenever we do something, we always have the economics of what we're doing in mind. Now, as the demand for power increases, the economics are going to work more and more because you just ultimately don't have the right level of power that you need. So I would say to you that the energy world is very dynamic. It's changing. And what didn't make sense yesterday may make sense tomorrow. What do you mean by that? Well, you know, if you think about the energy landscape today, the demand acceleration, I don't think was anticipated.

9:05So you have so many different parties working on how do you solve for that? You've got utilities saying, you know what, I really can't anticipate the demand and the curve that I need to produce. You've got businesses saying, well, how should we solve for the challenge of getting power in the future? And then you've got customers saying, you know what, I want my operation to be not interrupted. So all these perspectives are colliding and getting to equations that perhaps we didn't think about before. That's very interesting. And all the time, the technology is changing and evolving and making new things possible and making it possible to solve some of these challenges in different ways, I guess.

9:45Absolutely. So on that point of technology coming in, there's new generation technology that's coming in. It could be linear generators, fuel cells, they are not really new, but there's all forms of generation that people are now taking stock of, as well that the cost curve of these technologies are changing. They are reducing, so they are becoming more and more viable. How have you been perceiving things at Climate Week and what conversations are still going on about emissions and how does that factor into your thinking? So what I've observed this week is there's a lot of practical discussion on what are the risk companies and countries should address.

10:24So when we think about emissions, you know, the more resources that you use, the greater the emissions that you have. It really comes down to common sense. So there's been a lot of discussions on how do you introduce efficiency for the reduction of cost material as well as emissions. And then there is a really clear discussion on, you know, to meet the demand that we're facing, we need all forms of generation. So it is not just going from gray to green. it's also reducing that gray emissions to what is palatable. And then, of course, you have to factor in the economics, right? So when you think about any technology, any service, you want to be able to be standalone, not necessarily reliant on subsidies per se.

11:12You want the economics to work. So at Prologis, we're always focused on what makes common sense, what makes business sense, What are our investors and customers asking us for? And they're not necessarily different perspectives. They do collide. And what about the economics of energy for the company then? Is energy actually a revenue stream for you, as well as just being a way to support the resiliency of your operations? Absolutely. So energy for us is a revenue stream because, you know, we live in a world where you need to make sure that the capital that you deploy does make sense from a return standpoint and does generate a revenue.

11:49And really, it behooves us to think about it that way in order to be able to scale what we're doing. Not only is it a generation of revenue, but it also helps to decarbonize our buildings. So it's really a beautiful thing of doing something that makes business sense, that also ultimately achieves the goal of what we're trying to do. And in the industry, it seems like there's been a clear shift away from sustainability and focus on climate over the past year. Would you say that's been true of Prologis as well? I mean, do you think you're approaching some of these issues a bit differently now? Or is it the same for you?

12:27We always believed at Prologis that the initiatives that we're going to drive were based on common sense. And that thinking has not shifted. So when you look at our portfolio, the emissions that come from energy consumption by deploying solar, we are reducing them. And that makes sense from an economic standpoint. It makes sense from a decarbonization standpoint. And it also fulfills the need of our customers whose journey hasn't necessarily shifted, right? We have all types of different customers in our facility. So we're really there to meet their needs and make sure that as we do them, it brings resiliency into our portfolio and that we're future-proofing our portfolio.

13:09That's the approach that we take. So let's talk about the future and being future-proof. What do you think the key future developments are going to be? I mean, when you think about technology or anything else, to be honest, what is it you think is going to change ProLogis and the logistics industry in the next 10 years? You know, when you think about logistics, you need to move goods closer to where the people are because e-commerce is something that is going to increase. When you think about logistics, the fact that automation is going to come into play, it's real. And when you think about logistics, the fact that you are going to have fleet electrification is very real.

13:52And Prologis is a global company. So not only do we need to meet the demands of one country, we need to meet the demands of 20 different countries. So when I look at that future, I think the role that we're playing in the center of commerce and supply chain is going to become more and more relevant. And we think about, so as we become more and more relevant, what are the skill set that we need to have within the company? So energy is definitely one, as well as how we are building our buildings, you know, with design efficiencies in play is very important. So we think about all of those things.

14:30And we also realize that we are part of an infrastructure play. Right. And we want that resilience of infrastructure to increase. And that's what we're focused on. And any particular technologies that you've really got your eye on? What are you most excited about? You know, I'm really excited about the different generations of energy. So you can generate energy through solar. You can generate energy through a linear generator, which is a chemical reaction. you can generate energy through fuel cells. And all of that is very important because it's speed to time in terms of getting that electron moving.

15:07So I'm super excited. And that shouldn't surprise you. I've spent 20 years in the space of energy and that's what I really think about. Susan Othea Kumar, thank you very much indeed. My pleasure to be here. Thank you for joining us on the Energy Game. Now let's hear from Holly Paper at Trane. Trane is one of the world's largest air conditioning companies And it's right at the heart of the debate over the future of energy because of the critical importance of cooling for data centers. First thing I think we need to do probably is talk a little bit about Trane. Some of our listeners may not be familiar with the company.

15:41So we are a global company traded on the New York Stock Exchange. And we go to market with strategic brands like Trane and Thermal King. So I lead our trained commercial business. And what that means is essentially a business focused on buildings, data centers, industry, essentially everything that's not a home. What it means to be a global climate innovator for us is that sustainability is the strategy. It's not an offshoot to the strategy. And it's been something that we've focused on as an organization for the last couple of decades. and, you know, the way that we see it is our responsibility with the industries that we're in.

16:19We could either be a detractor from the environment or we could be the company to lead the way to create more sustainable solutions for building owners, homeowners and transportation companies. Right, so you talk about sustainability being kind of at the heart of the business. One of the things I was very struck by is that you've set these very ambitious goals for emissions reduction, science-based targets, initiative approved and so on. Why did you do that? It's a good question. I mean, I think there's an underlying philosophy at the company of this idea of challenging possible for a more sustainable world.

16:51And many times that means setting audacious goals that maybe you don't exactly know how you're going to get to when you initially set them. And then you create a roadmap over time. And as an innovation company, an engineering company, that's how we operate in everything that we do. And so we, our first climate commitment was over a decade ago. We achieved that early. And then this last round, we put some new targets in place, both in terms of what we call our gigaton challenge, which is essentially to reduce the greenhouse gas footprint and carbon emissions footprint by 1 billion metric tons, which is essentially the equivalent, the annual equivalent to France and Italy combined.

17:27And the reason that we put an ambitious target out there is that the kinds of things we do, heating and cooling of buildings, in my case, we have a tremendous opportunity to impact our customers, businesses, in ways that can literally change the world. And we always believe that one company can change an industry and the industry can change the world. Is that feeling like an increasingly lonely position now? It feels like two years ago, every business was announcing a new set of emissions goals and investors were very much kind of pushing businesses towards aligning with the Paris Agreement and so on.

18:03Now it feels like that investor pressure has very much subsided. We've had a whole kind of backlash against ESG investing. We've had a change of administration in the United States, withdrawing from the Paris Agreement, turning away from climate action and so on. Does that mean that, as I say, you're kind of now a bit out on your own? I mean, not kind of exclusively out on your own, you know what I mean? in a kind of a smaller group of companies that are still committed to emissions reduction? Yeah, I mean, I think the way that we see it is a little bit different in that, you know, if I think about just the United States, for instance, probably a million commercial buildings, 75 % of those buildings have infrastructure more than 25 years old.

18:45And so the infrastructure, the thermal infrastructure, the heating and cooling will be upgraded, right? And so we lead first, as most companies do, in terms of the return on the investment of the systems we put in place. However, decarbonization and sustainability is an enhancer to that. There's no reason that you can't have a return on the investment on the decision you make and make it good for the planet. And so the way we look at this in terms of the spirit of who we've always been is very much around how do we solve our customer problems in a way that helps them, helps us, and helps the planet.

19:19Now, you mentioned data centers earlier. Amai is pricked up with that. Everyone always do at the moment, clearly. That's been a big topic of conversation here at Climate Week. Everyone's talking about AI and data centers and increasing power demand. What's Train's role there? Yeah, so I think the data center role for us in the situation is one of a paradox, per se. First and foremost, for years now, we've had many data centers as our customers and really work with them around the cooling systems for their mission-critical applications for the data centers. And cooling is typically a very large proportion of the total running cost of a data center, right?

20:01It is. I mean, historically in a traditional data center, yes. And then now you have these new era AI data centers, which is really what's driving the topic here and generally speaking around all the headlines. And what's happening is with the density of chips and the change of what the computer infrastructure looks like, the cooling solutions become more important. And so we have been doing a lot of co-innovation with our customers much earlier in the process because cooling continues to be a really critical piece there. And so we've worked for many years now on more efficient cooling systems.

20:35Now they're just taking another twist in terms of the types of cooling systems required for these new data centers. So part of what we're solving for as we think about data centers is bringing the most efficient solutions to our customers and even innovative solutions like we've got thermal battery storage, so ice batteries, you know, to do things like peak shaving. So if a data center, you know, maybe only needs peak load at certain times, right, how do you make them a better contributor? I think there's other places that we're working with data center companies on heat reuse. If you think about the idea, you can think about that two ways.

21:13One, a data center generates a lot of heat. Or two, can you be an active contributor to the community by using that heat in a different way? So we solve both within the walls of a data center, but we've also been working on this idea of energy circularity in the community. And how do you make sure that one business or data center is not just an isolated energy user, but instead an active contributor to the community? And is any of that actually operational yet, or are these kind of ideas that are in development? Operational, for sure. We have several examples in places where we've got data centers in the basement of residential high rises and the heating is used for the people in the building.

21:48We've got an example that even the Paris Olympics, like the aquatic pools, were heated by heat from a data center. That's amazing. It is amazing. It's pretty cool. Yeah, we've got examples where the heat is used for district heating for nurseries and government buildings, et cetera. So we're seeing some of that. We've got a lot of customers talking about new models around desalinization, but just trying to find a way to, again, partner with a different and a broader ecosystem to solve some of the challenges that we know bring. I think the other side of data centers that we see is a place where we can make a dramatic difference in buildings.

22:24So a commercial building like the one we're sitting in now, in a historic version, yesterday's version, we would work with a customer to put heating and cooling infrastructure in this building. And then we have service technicians over time that, you know, help make sure it's optimized and runs the right way over time. And what's happening now, we actually acquired a company, Brainbox AI, and we've got a solution where we've fallen in love with a problem, right? The use case of HVAC management. And it's using AI essentially to sit on top of building controls and looking at weather patterns, looking at occupant load, meter prices, and continuously optimizing the building to drive efficiency.

23:07And we're seeing examples like a Dollar Tree, for instance, right, a retail footprint in the U.S., 2 ,600 stores, 40 % less energy used by putting these kind of solutions in place. We've got a commercial building in Dubai that, you know, is a few hundred thousand square feet. And, you know, same thing, 45 percent energy savings by using solutions like this. So we're finding a way, you know, we're working with the data center companies to be more responsible, but we're also using the technology, the very technology they enable to help building owners be more responsible users of energy. and the spirit of what that looks like can be very dramatic in terms of the grid, the infrastructure, and our whole ecosystem.

23:48Yeah, that must be very interesting for hyperscalers, data center operators, and others. All those companies that are looking to add new data center capacity very, very quickly, and the thing they're very often finding when they go to communities and say, hey, we want to put a data center in your area, they get a lot of pushback because people were worried about the electricity demand what's that going to mean in terms of new investment that's going to be needed is that going to drive up their bills is that going to make the grid less reliable is there going to be a risk of blackouts because there's too many data centers drawing from the grid and so on and so presumably anything you can do to both reduce data center power demand and also make it more flexible must be very very They welcome.

24:35Yeah, I mean, absolutely. And, you know, whether it's this idea of heat reuse and kind of the community give back piece of it. I think the other side of it is, you know, we believe that commercial buildings play a huge role in this as well, as always. I mean, in the U.S., 20 percent of electricity today and most many parts of the world is used for commercial buildings. And a third of that is wasted. And so if we can get the whole ecosystem to be more responsible about how they're using power and energy, The reality is that we have sufficient energy. If we can level load it, if we can use it in a responsible way, if we take advantage of the free energy that's being created here and kind of work together in ways maybe we haven't worked together in the past.

25:16You know, it's super interesting. We're seeing in many communities a lot of public-private partnership, even here in the U.S., where in the past that's been focused largely on economic development and skill building. We're starting to see the scope of that increase to think about infrastructure and like, okay, what about the utilities? And so we're seeing and really inspired by the kind of collaboration and creativity that's happening to try to solve this at the local levels too. And presumably if you're doing that kind of thing, if you're making data centers more efficient, cutting their electricity use, that's something that doesn't really rely on policy at all.