Schneider Electric: Transitioning from Transistors to Smart Grids

For a company that started out — 170 years ago — making weapons, Schneider Electric knows a bit about changing business strategy.

Last century, the company gained first a foothold and then a comprehensive presence in the electrical market: One of Schneider Electric’s vice presidents said the firm has power devices in 70 percent of the world’s buildings. But a combination of the collapsing economy and the rise sustainability has led the company to undertake a similarly fundamental shift, this time to being an end-to-end energy efficiency solutions provider.

At the company’s 15th annual Editors’ Day, I got a chance to talk with a number of Schneider executives and customers to see how this transition is taking shape, and how it aims, among many other aims, to bring IT and facilities management in close sync, and bring building energy efficiency to the cloud. (Disclosure: Schneider Electric covered my travel costs to Chicago for the day-long event.)

Redefining Energy Management

During the opening discussion, Jeff Drees, the U.S. Country President for Schneider Electric, spelled out how a company that has been known primarily as a conglomerate — “a circuit breaker business,” is how he described it — is changing how it operates.

“We have a dynamic business we’re trying to address through the energy management space,” Drees said. “Fifteen percent of all power in the U.S. goes through a load center that we have in your home, and we’re going to change those to make you an active participant in your energy management.”

As Schneider defines energy management, it’s not just about power, it’s about efficiency. The company has long been focused on efficiency, and it was a thread throughout the event this week. But sustainability is an increasing part of its focus as well, although Drees put a qualifier on the impact of sustainability.

“Green is a great concept,” he said. “But green has never sold a project. You’ve got to make sure it translates to a financial model that works for the client. The fundamental issue of energy management is ROI.”

Schneider, of course, is well suited to make energy efficiency work for its clients’ bottom lines: Throughout the course of the event, executives explained that 20 percent reductions in energy use had become commonplace, a result of gathering up the low-hanging fruit.

“[Twenty percent reductions are] no problem — it’s bread and butter for us,” said Barry Coflan, Senior Vice President of Buildings Business. “Getting to 30 percent is more work, though we want to make that our bread and butter.”

Getting clients to ever-higher levels of energy efficiency is a key element both of Schneider’s new vision for energy management and of its larger, company-wide shift to selling solutions — managing energy use for their customers, rather than simply selling products and moving on.

Drees laid out how the shift from products to solutions kept the company afloat and growing throughout the Great Recession. “In 2009, if you were just tied to capex [capital expenditures], your business would have shrunk about 30 percent, Drees explained. “Because we also migrated to addressing customers’ opex [operating expenditures] through energy efficiency, we weathered the storm very well, by having a solutions and services offer, not just a product offer.”

Coflan put it more simply: “The opex piece far exceeds the capex savings. “You only get capex once, opex goes on forever.”

Smart Grids and IT Convergence

The drivers behind Schneider Electric’s shift to energy management are many, but it can be summed up by one number: $700 billion. That’s how large the smart grid market is projected to grow by 2030, up from $300 billion in 2004. And Schneider, like so many other companies, wants to grab hold of a big part of that market.

With its long history in electrifying buildings, its substantial presence in structures of all types all around the world, and a number of significant acquisitions — in building energy management, data center management, and renewable energy — over the last decade, Schneider is well positioned already.

Last year, the company launched EcoStruxure, a holistic platform for managing an entire enterprise, from facilities to data centers to security. This week brought a cascade of additions and expansions to the various building blocks of EcoStruxure, including its InfraStruxure data center management tool.

With its new additions, laid out in more depth in this article, Schneider has expanded its offerings to meet the growing demand for smart buildings and smart grids. And the need is getting more urgent: Drees said that the tipping point for smart grids will come when a large swath of the country is left without power for several days — and that the summer of 2010 saw a record number of demand response events from utilities needing to reduce their load due to heat waves.

“At the end of the day you need to be able to control everything — to shut down an elevator, to pause a chiller, etc.,” Coflan said of the soon-to-be-standard technology companies will need to employ. “And to be able to do that you need building systems.”

Painting the Big Picture

If smart grids and holistic building management weren’t big-picture enough, Schneider Electric’s Chief Marketing Officer (the company’s first-ever marketing executive), Aaron Davis, spelled out the stakes and why the opportunity is ripe.

Davis said that the rate and severity of climate change means that there is just one decade to fix four critical problems:

• Getting renewable energy generation at or below cost-parity with carbon-based fuels;
• Upgrading the transmission grid to bring renewable energy to where people live;
• Improving energy efficiency in buildings and processes; and
• Improving energy efficiency at the point of use, in offices and homes.

“The biggest wins are in those last two,” Davis said, noting that the generation and transmission challenges are more than a decade in the works. “They can be fixed pretty quickly, and when you make a fix there, it automatically improves the upstream.”

Davis also laid out how Schneider put its EcoStruxure tools to work at its new headquarters in Paris (pictured above). Dubbed “The Hive,” the 35,000 square meter (375,000 square foot) building uses just 80 kilowatt-hours per square meter per year, compared with an average of 250 kwh for other similar buildings, and four times less than the company’s previous headquarters.

Given the urgency of the need to reduce emissions by gathering first the low-hanging fruit of energy efficiency, the rise in demand from businesses and end-users alike, and the existence of tools to meet both the need and demand, Davis said the opportunities to expand Schneider’s impact were unprecedented.

“For the first time, different leaders in business — facility managers, IT managers, plant engineers and supervisors all have a common business imperative: Efficiency,” Davis said. “They also now have a common internal focus: Sustainability.”