Alternative Energy Source Development


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Alternative Energy Source Development

  1. 1. Alternative Energy Source Development Andrea Larson Darden Business School, University of Virginia July 17-19, 2003 Florida Atlantic University’s Fort Lauderdale Campus
  2. 3. The Ingenuity Project Approach: INNOVATION AT THE NEXUS OF BUSINESS AND NATURAL SYSTEMS <ul><li>Methods: Interdisciplinary/Collaborative </li></ul><ul><li>Research </li></ul><ul><li>Publications </li></ul><ul><li>Curriculum development </li></ul><ul><li>Workshops, conferences </li></ul><ul><li>MBA program </li></ul><ul><li>Executive program </li></ul><ul><li>Distribution of teaching materials </li></ul>Purpose: Integration of Sustainability Issues Into Management Education
  3. 4. Innovation, Entrepreneurship and Natural Systems FUEL CELLS ENERGY MODULE COURSE CONTENT
  4. 6. Fuel Cell Material Useful in Courses On … <ul><li>Strategy </li></ul><ul><li>Environment </li></ul><ul><li>Innovation </li></ul><ul><li>Entrepreneurship </li></ul>
  5. 7. Perceptions and/or Assumptions Environment is “out there” – separate Social Responsibility Ethics Costs and Compliance Altruism Externality Luxury for Good Times Only Big Companies Can Afford Only Small Companies Can Do Risk Liability Regulation
  6. 8. Course Topics <ul><li>Entrepreneurship (Schumpeterian) </li></ul><ul><li>Innovators and innovations </li></ul><ul><li>Future products and services </li></ul><ul><li>Opportunity </li></ul><ul><li>Competitive Advantage </li></ul><ul><li>Business and individual leadership </li></ul>
  7. 9. Sustainable Business: Opportunity and Value Creation <ul><li>The search for sustainability can lead to innovation that yields cost savings, new designs, and competitive advantage. Like the quality gurus who called for zero defects, the early adopters of the sustainability perspective may seem extreme in calling for waste-free businesses in which the nonproduct outputs become inputs for other products or services. But sustainability’s zero-waste goal offers a critical, underlying insight: environmental and social issues offer opportunities for businesses. </li></ul>
  8. 10. Sustainable Business: Opportunity and Value Creation <ul><li>Sustainable business is environmentally and socially aware business strategies and operating practices that guide firms to a cleaner, healthier, more equitable (and hence more stable world) - AND offer an avenue to profitability and competitive advantage. </li></ul><ul><li>Sustainable business entrepreneurs understand that sustainability (or “triple bottom line”) opportunities represent a wide open frontier for creativity, innovation, and the creation of value. </li></ul>
  9. 11. Evolution of the Sustainability Focus in the late 1990s Parallels the Evolution of Quality Programs in the early 1980s <ul><li>Resistance and lack of understanding at the outset </li></ul><ul><li>Seemingly unrealistic goals (zero defects, now zero waste/emissions) become standard operating practices </li></ul><ul><li>Initiatives lead to product and process innovations (not just incremental improvements) </li></ul><ul><li>Both movements require – leadership and an educated and engaged workforce </li></ul><ul><li>Success extends efforts into value chain management and further improvements and innovation </li></ul>Sustainable business movement is best understood in relation to the quality movement and sustainability builds logically from the platform of successful quality programs. Parallels to quality include:
  10. 12. The Evolution of Corporate Response to Environmental Concerns: 1980s, 1990s and Beyond Peripheral to strategy Focus on the firm Pursuing incremental change Returns to stockholders Integrated into strategy Wider focus on networks of firms across the value chain Positioned for breakthrough innovation Triple bottom line Waste streams to landfills (linear) Piecemeal analysis Waste is inevitable and costly Opportunities in product recovery and remanufacturing (cyclical) Systems thinking Waste can be minimized Waste is a resource Cost burden Altruism Focus on compliance End-of-pipe filters and treatment Side issue Reactive management Isolated activity Profit or Environment Innovative, anticipatory, entrepreneurial management Organization-wide frameworks, tools, and programs Profit and Environment and Equity Opportunity for efficiency Operational excellence and strong financial performance Focus on competitiveness and strategic advantage Product and process design criteria include the environment Quality initiatives encompass environment Managerial Mindset Definition of the Issues Perception of Waste Strategic Orientation 1980 2000
  11. 13. The Change in Perspective on Environmental/Social Issues <ul><li>Innovative, anticipatory, entrepreneurial </li></ul><ul><li>Reactive </li></ul><ul><li>Yes, but only with frameworks, tools, and programs </li></ul><ul><li>Technology solutions </li></ul><ul><li>Core </li></ul><ul><li>Peripheral </li></ul><ul><li>Strong financial performance </li></ul><ul><li>Doing good </li></ul><ul><li>Cost competitiveness and strategic advantage </li></ul><ul><li>Compliance </li></ul><ul><li>Efficiencies </li></ul><ul><li>Cost burden </li></ul><ul><li>Operational excellence </li></ul><ul><li>Rhetoric </li></ul>Sustainability View Traditional Thinking
  12. 14. Key Questions to Be Addressed in the Course <ul><li>WHY the Concern? </li></ul><ul><li>WHAT Does It Mean? </li></ul><ul><li>HOW Are Firms Implementing? </li></ul>
  13. 15. Student Learning Objectives: <ul><li>Gain perspective and insight into a rapidly expanding arena of entrepreneurship and innovation </li></ul><ul><li>Explore the why, what, and how of “sustainable” business </li></ul><ul><li>Understand the history and context for sustainability ideas and practices </li></ul><ul><li>Comprehend and apply frameworks, concepts, and terms </li></ul><ul><li>Learn from multiple examples of firms integrating sustainability principles into strategy/operations </li></ul>
  14. 16. Methods: <ul><li>Discussion and analysis </li></ul><ul><li>Articles, book chapters </li></ul><ul><li>Case studies </li></ul><ul><li>Technical notes </li></ul><ul><li>Mini-lectures </li></ul><ul><li>Guest speakers </li></ul><ul><li>Videos </li></ul><ul><li>Student reports </li></ul><ul><li>Final Papers </li></ul>
  15. 17. Frameworks and Concepts <ul><li>Schumpeterian innovation </li></ul><ul><li>Entrepreneurship </li></ul><ul><li>Environmental management and sustainable innovation </li></ul><ul><li>EI=P x A x T </li></ul><ul><li>Earth Systems Engineering and Management </li></ul><ul><li>Industrial Ecology </li></ul><ul><li>The Natural Step </li></ul><ul><li>Natural capitalism </li></ul><ul><li>Cradle to cradle </li></ul><ul><li>Green chemistry </li></ul><ul><li>Nature’s services </li></ul><ul><li>Biomimicry </li></ul><ul><li>Precautionary principle </li></ul>
  16. 18. 5 Schumpeterian Forces of Creative Destruction <ul><li>Discovery of… </li></ul><ul><ul><li>New technologies </li></ul></ul><ul><ul><li>New products </li></ul></ul><ul><ul><li>New markets </li></ul></ul><ul><ul><li>New processes </li></ul></ul><ul><ul><li>New organizational forms </li></ul></ul>
  17. 19. Schumpeter Entrepreneurship as “New Combinations” <ul><li>Existing technology + new processes </li></ul><ul><li>New technology applications + new organizational forms </li></ul><ul><li>Enhanced products + new processes + expanded markets </li></ul><ul><li>New technology + new markets </li></ul>
  18. 20. Entrepreneurship: A Frontier of Innovation Time Orientation – Past & Present Time Orientation – Present & Future The Traditional Economy The Entrepreneurial Economy New Paradigm… <ul><li>Schumpeter’s “creative </li></ul><ul><li>destruction” </li></ul><ul><li>New technologies, products, markets, processes, organizational forms </li></ul>
  19. 21. PAST PRESENT FUTURE Conventional Products, Services (power, transportation, materials, food, shelter) Wind turbines Fuel cells Hybrid cars Biodegradable plastic Organic food Buy function, not product Reverse logistics Zero waste Zero emissions Markets in nature’s services Creating the Future Through Innovation New Products
  20. 22. Sustainable Business Innovation and the Traditional Economy Traditional Economy Entrepreneurial Sector Sustainable Business Subsector
  21. 23. The Impact of the Entrepreneurial Sector <ul><li>The force of one period’s entrepreneurs becomes the next generation’s business paradigm, therefore entrepreneurship trends can be seen as a leading indictor of business change </li></ul>
  22. 24. Entrepreneurship <ul><li>“ At the core of entrepreneurship is the question of why and under what conditions opportunities for [Schumpeterian] innovation and creativity exist.” </li></ul><ul><li>– Venkataraman, 1997 </li></ul>
  23. 25. Population Growth Source: Living in the Environment, Tenth Edition, G. Tyler Miller, Jr., 1998 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 Billions of people Black Death - the Plague Hunting and Gathering Agricultural Revolution Industrial Revolution 2-5 million years 8000 6000 4000 2000 2000 2100 Time B.C. A.D.
  24. 27. UNLIKE NATURAL SYSTEMS, MODERN HUMAN SOCIETIES PROCESS RESOURCES IN A LINEAR FASHION, CREATING WASTES FASTER THAN THEY CAN BE RECONSTITUTED INTO USABLE RESOURCES. On average 94% of the raw materials used in creating a product ends up as waste; only 6% ends up in the final product. 6% Product 94% Waste Source: National Academy of Engineering
  25. 28. Changing Character of Natural Resource Challenges in the Last 25 Years Local Specific Short Delay Low Complexity Society Impact Low Global Diffuse Long Delay High Complexity Societal Impact High
  26. 29. Major Environmental and Resource Problems <ul><li>Air Pollution </li></ul><ul><li>Global climate change </li></ul><ul><li>Stratospheric ozone depletion </li></ul><ul><li>Urban air pollution </li></ul><ul><li>Acid deposition </li></ul><ul><li>Outdoor pollutants </li></ul><ul><li>Indoor pollutants </li></ul><ul><li>Noise </li></ul><ul><li>Water Pollution </li></ul><ul><li>Sediment </li></ul><ul><li>Nutrient overload </li></ul><ul><li>Toxic chemicals </li></ul><ul><li>Infectious agents </li></ul><ul><li>Oxygen depletion </li></ul><ul><li>Pesticides </li></ul><ul><li>Oil spills </li></ul><ul><li>Excess heat </li></ul><ul><li>Biodiversity Depletion </li></ul><ul><li>Habitat destruction </li></ul><ul><li>Habitat degradation </li></ul><ul><li>Extinction </li></ul><ul><li>Food Supply Problems </li></ul><ul><li>Overgrazing </li></ul><ul><li>Farmland loss and degradation </li></ul><ul><li>Wetlands loss and degradation </li></ul><ul><li>Overfishing </li></ul><ul><li>Coastal pollution </li></ul><ul><li>Soil erosion </li></ul><ul><li>Soil salinization </li></ul><ul><li>Water shortages </li></ul><ul><li>Groundwater depletion </li></ul><ul><li>Loss of biodiversity </li></ul><ul><li>Waste Production </li></ul><ul><li>Solid waste </li></ul><ul><li>Hazardous waste </li></ul>Major Environmental Problems Source: Living in the Environment, Tenth Edition, G. Tyler Miller, Jr., 1998 <ul><li>Human Health </li></ul><ul><li>Childhood diseases </li></ul><ul><li>Cancer </li></ul><ul><li>Asthma </li></ul><ul><li>Immune system deficiencies </li></ul><ul><li>Reproductive system problems </li></ul><ul><li>Endocrine system disruptions </li></ul>
  27. 30. Changing Conditions Natural Resource Services (amount, quality, assimilative capacity) Public opinion NGOs Media International protocol 1900 Demand for Natural Resources (population, consumption, technology) The Economy 1970 Innovation and Opportunity Innovation: Creating New Competitive Space The Economy Customer demand Recruitment and retention Material cost, availability Waste disposal Regulation Health issues Fines Liabilities Insurance Bank credit Risk Corporation
  28. 33. 66% (or 2/3rds) of U.S. oil imports are used for transportation 80% of global warming pollution is from use of fossil fuels 10% of global carbon dioxide pollution is from the U.S. 99% of total U.S. oil use is U.S. oil imports
  29. 34. &quot;Only few megatrends exist that are of special importance to the future of the automotive industry. Sustainable mobility is one of them, and fuel cells are a key technology for it.&quot; Prof. Klaus-Dieter Voehringer, President of the Shareholder Committee of XCELLSIS and President of Research and Technology of DaimlerChrysler
  30. 35. <ul><li>Fuel Cells </li></ul><ul><li>“UTC Fuel Cells: Innovation Inside a Large Firm” </li></ul><ul><li>“Fuel Cell Technology and Market Opportunity” </li></ul><ul><li>Case Teaching Note </li></ul>Earth Systems Engineering and Management Climate Systems FUEL CELLS ENERGY MODULE COURSE CONTENT
  31. 36. Energy Module Corporate Response Earth Systems Engineering & Management <ul><li>Teaching Materials </li></ul><ul><li>Articles on ESEM, video </li></ul><ul><li>Telework at AT&T </li></ul><ul><li>Atlantic Energy </li></ul><ul><li>Fuel Cell Technology and Market Opportunity </li></ul><ul><li>UTC Fuel Cells – Innovation Inside a Large Firm </li></ul><ul><li>Teaching Note </li></ul><ul><li>Telework </li></ul><ul><li>Emissions trading systems </li></ul><ul><li>Fuel cells </li></ul>Corporate Transparency Regulation Efficiency Bank Credit & Insurance Health National Security Risk Management Competition Fiduciary Responsibility <ul><li>Climate Changes </li></ul><ul><li>Glaciers melting </li></ul><ul><li>Extreme weather </li></ul><ul><li>Flooding </li></ul><ul><li>Drought </li></ul><ul><li>Warming </li></ul>2004 HYBRID VEHICLES Multimedia Case
  32. 37. Expected U.S. Fuel Cell Market Growth Source: Freedonia Group 2002 U.S. Fuel Cell Market Size 2006 2010 $3.3 billion $23 billion
  33. 38. Case Discussion <ul><li>Entrepreneurship Framework Analysis </li></ul><ul><ul><li>Team </li></ul></ul><ul><ul><li>Opportunity </li></ul></ul><ul><ul><li>Product </li></ul></ul><ul><ul><li>Resources </li></ul></ul><ul><ul><li>Strategy </li></ul></ul><ul><li>UTCFC Evaluation </li></ul><ul><ul><li>Pre-1997 and 2002 </li></ul></ul><ul><li>Corporate Environmental Policy: Beyond Compliance to Innovation </li></ul>
  34. 41. Conversion Efficiency of ICE (Internal Combustion) Vehicles is 20-25% (with CO 2 emissions) compared to 55% Conversion Efficiency of FC (Fuel Cell) vehicles (with water and heat as the only emissions)
  35. 42. Total Relative Emissions from Vehicles Sulfur Dioxide Nitrogen-Oxygen Compounds Volatile Organic Compounds Source: 1.2 1.0 0.8 0.6 0.4 0.2 Gasoline Engine Natural Gas Engine Hydrogen Fuel Cell Electric Methonol Fuel Cell Electric
  36. 43. Fuel Cells <ul><li>Advantages </li></ul><ul><li>Smaller engine unit size </li></ul><ul><li>More interior space, better visibility </li></ul><ul><li>Improved ride, handling, stability </li></ul><ul><li>Quiet </li></ul><ul><li>Skateboard chassis </li></ul><ul><li>Twice the efficiency of ICE </li></ul><ul><li>Pure hydrogen fuel -> zero emissions </li></ul><ul><li>Integration of fuel cell with electronics (steering, braking, etc) </li></ul><ul><li>Reduced reliance on oil imports </li></ul><ul><li>Competition in energy, pricing </li></ul><ul><li>Obstacles </li></ul><ul><li>Durable on-board hydrogen storage technology (300 miles) </li></ul><ul><li>Interim fuels </li></ul><ul><li>Refueling infrastructure </li></ul><ul><li>Chicken-egg challenge </li></ul>
  37. 44. Small R&D Shop Cost Center Market-facing High-growth Profit Center Challenge to UTC
  38. 45. Two Separate but Interlinked Corporate Arenas of Activity <ul><li>Environmental Management </li></ul><ul><li>Sustainability Innovation </li></ul>
  39. 46. Sustainability as a Next Step in Total Quality Management <ul><li>Safety = zero injuries </li></ul><ul><li>JIT = zero inventory </li></ul><ul><li>TQM = zero defects </li></ul><ul><li>Sustainability = zero waste and zero emissions </li></ul>
  40. 47. A Framework for the Process of Entrepreneurship Entrepreneur Opportunity Product Concept Resources Strategy
  41. 48. Environmental Impact Model Number of people (P) Number of units of resources used per person (A) Environmental degradation and pollution per unit of resource used (T) Environmental impact of population (I)  =  Source: Living in the Environment, Tenth Edition, G. Tyler Miller, Jr., 1998
  42. 49. Sustainable Business: Opportunity and Value Creation <ul><li>Sidestepping the need for sustainability may prove difficult. Population growth rates and related higher levels of waste guarantee environmental concerns will grow in importance. The government and the public are increasingly concerned with the extent and severity of air, water, and soil contamination and the implications of natural resource consumption and pollution for food production, drinking water availability, and public health. As environmental and social problems increase, public health concerns are likely to drive new approaches to pollution prevention and new regulations encompassing previously unregulated activities. As concerns and regulations increase, so will the market power of sustainable businesses. </li></ul>
  43. 50. From Patagonia, Tom’s of Maine, Ben and Jerry’s, The Body Shop to … <ul><li>Interface </li></ul><ul><li>Mitsubishi Electric </li></ul><ul><li>Scandic </li></ul><ul><li>Electrolux (Frigidaire) </li></ul><ul><li>IKEA </li></ul><ul><li>Xerox </li></ul><ul><li>AT&T </li></ul><ul><li>Weyerhauser </li></ul><ul><li>Alcoa </li></ul><ul><li>Ford </li></ul><ul><li>UTC </li></ul><ul><li>Allied Signal </li></ul><ul><li>3M </li></ul><ul><li>Collins Pine </li></ul><ul><li>Visteon Automotive Systems </li></ul><ul><li>Suncor </li></ul><ul><li>Harley-Davidson </li></ul><ul><li>Johnson & Johnson </li></ul><ul><li>Royal Dutch/Shell </li></ul><ul><li>Conoco </li></ul><ul><li>BP </li></ul><ul><li>Shaw </li></ul>
  44. 51. Lens Adjustment <ul><li>Engineered world </li></ul><ul><li>Systems: Cells to atmosphere/biosphere </li></ul>
  45. 53. Sustainable Business: Opportunity and Value Creation <ul><li>The ideas of sustainable business are positive, visionary, and strategic. Companies that do not develop capabilities in sustainability will risk becoming less competitive as the more innovative firms committed to sustainability forge ahead. </li></ul>