Transformation—Future-Proofing Energy Infrastructure

Transcript

Narrator

The future of project management is changing fast. On Projectified™ with PMI, we’ll help you stay on top of the trends and see what’s really ahead for the profession—and your career.

For an easy way to stay up to date on Projectified™ with PMI, go to iTunes, Stitcher, Google Play Music or PMI.org/podcast.

Stephen W. Maye

Hello. I’m Stephen Maye, and this is Projectified™ with PMI. I’m here with my co-host, Tegan Jones, and today we’re exploring what’s on the horizon for the energy sector. Specifically, we’re looking at the trends influencing energy projects—and the emerging opportunities for project professionals. 

Several significant global trends are contributing to shifts in demand in this sector. Global population growth, development booms in urban areas, increased wealth in larger markets, such as China and India, and even recent increases in the number of hot and cold days, have all contributed to greater energy demand. In fact, a 2018 report from the International Energy Agency predicts this demand will increase by more than a quarter by 2040. 

Tegan Jones

So organizations are definitely going to need new energy strategies in order to meet this increased demand. Right now, oil, coal and natural gas provide roughly 80 percent of the global energy supply. But that’s not going to be what things look like in the future.  

Renewable energy is on the rise, and by 2050 McKinsey predicts that 73 percent of the global power supply will be provided by renewables. In this scenario, wind and solar projects will be the ones leading the way. 

Stephen W. Maye 

And personally, I’m curious to see how the race between solar and wind plays out. Currently, wind’s way ahead in terms of global energy production, but Spencer Dale, group chief economist at BP, predicts those two sources will actually run neck and neck by 2040. I guess we shall see.

Either way, this boom is leading companies like Schneider Electric to think differently about how they produce and distribute electricity. I recently spoke with Dominic Barbato, director of strategy for Schneider Electric in Louisville, Kentucky, about how the company is future-proofing its operations. He talked about how the three D’s—digitization, decentralization and decarbonization—are transforming Schneider’s project portfolio. So we’ll hear from him a little later in the episode.

Tegan Jones

We’re also going to take a look at how these trends are affecting oil and gas companies. And this is something we’re going to learn more about from Longzhen Hu, the innovation lead at Maersk Drilling, in Copenhagen, Denmark. She’ll share how Maersk is using new technologies—so the internet of things, big data—to drill more safely and efficiently. 

Stephen W. Maye

But first, we’re going to take a closer look at the renewable market. Currently, hydropower leads the pack in terms of renewable electricity generation. But wind and solar power combined are expected to provide nearly half of global electricity by 2035. And this has huge implications for solar and wind projects that are being planned today.

Tegan Jones

And we’re going to hear a bit more about what this looks like for people working on the ground from our first guest. Jean-Baptiste Casedevant is a project and portfolio manager at EDF Renewables North America in San Diego, California. He’s been working in the renewable energy sector for 15 years, and he has seen a lot of big shifts in the landscape as the market has matured.

Stephen W. Maye

I’m sure his projects today are very different from what he was working on when he started out. I mean, if you exclude hydro, renewables were almost nonexistent 15 years ago as an overall percentage of power production. 

I’m looking forward to hearing his take on these trends. Let’s go to him now. 

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Jean-Baptiste Casedevant

The major trends since I’m working on projects for the last 15 years, it’s mostly where the complexity of the project is. So we started with project management, which is really focused on the technical aspects of an infrastructure project, to something which is more related to how we can sell properly at the right price and integrate properly the project into a grid that became more and more complicated with integration of more and more renewables.

I mean the resource is mostly geographical. For instance, for the sun you will have a lot of projects that are going to go in the same place because the resource is good. And you have the same with wind. The resource is geographical as well. So you create a point of congestion on the grid because all this project we produce at the same time. So you have to add this risk in your project risk management that was not there before. 

At the beginning you cannot really predict what’s going to be the valid price of the turbine price or the performance you will have in three years, so we just have to acknowledge and accept that. What you want to make sure of is when the project advances you have to reduce some of the risk. So you have to know when you need to know things.

You have to make decision, make choices that will reduce uncertainties, and it can come by contracting with suppliers in advance to hedge the technology advantage, but this has a limit because you cannot contract two or three years in advance. Let’s say the most efficient way to do it is really to know what you don’t know and to make sure you are not making a decision that puts your project at risk considering the uncertainty you have in the decision.

I think the readiness to change and to evolve as much as the sector is evolving is really a mindset that is important. What can make a difference is really to understand the business case of a project and what parameters matter the most when it comes to the project value. 

And this depends on every market, so it’s very important on the project now to know to whom you are going to sell the energy and what is the value of the energy you sell. Not only the cost of the energy, which was the main focus before, but now the value of energy matters. The energy California could use between 4 and 9 p.m. we now value a lot more than the energy produced in the middle of the day, for instance.

So be able to understand what a business model is and to read into it and to be able to identify what makes a difference in the project. Then the project manager can really work on his priorities. I think the technical project management skills and the business skills are the two set of skills a project manager should develop if they want to be successful in the renewable energy industry.

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Stephen W. Maye

We’re always talking about how important it is for project professionals to understand the industry and the market that they work in. And this is particularly important when you’re talking about renewable energy, because adoption and maturity levels vary so much country by country.

Tegan Jones

That’s true. And right now, we’re actually seeing a lot of opportunities in developing economies, including Brazil, India and China. So, of the world’s largest energy consumers, Brazil right now has the greenest energy mix.

And by 2023, the IEA says renewables will provide 45 percent of the energy the country consumes.

But China is the leader in terms of absolute growth. By 2023, China will surpass the European Union to become the world’s largest consumer of renewable energy. 

Stephen W. Maye

And that is significant. Because of course, China is the largest consumer of energy period, according to Enerdata’s Global Energy Statistical Yearbook. 

But the renewable sector isn’t the only place we’re seeing interesting opportunities. 

Long-established oil and gas producers are also exploring ways to innovate—and to minimize their environmental footprint. We’re going to hear a bit more from our next guest. Longzhen Hu, based in Copenhagen, Denmark, is the innovation lead at Maersk Drilling. 

Tegan Jones

So, Maersk recently made a big commitment to reducing emissions from its offshore oil rigs. In May the company announced plans to launch the first-ever hybrid-power drilling rig off the coast of Norway. And Maersk is also tapping into its vast stores of data to improve efficiency and reduce costs. 

Our contributing editor Hannah Schmidt has the full story. So, let’s go to her now.

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Hannah Schmidt

The price slump in the oil and gas sector has subsided—but market volatility is here to stay. Deposits are dwindling, environmental regulations are tightening and competition from renewable energy is increasing every day. 

Longzhen Hu says these disruptive forces are pushing oil and gas companies to find new ways to meet their customers’ changing needs.

Longzhen Hu

The oil companies, they’re now focused a lot on producing from their assets, lowering project breakeven and keeping the cost down compared to the past. So this drives us to look for new approaches that can help our customers to reduce risks and improve efficiency. 

So we use, for example, a big data and digital tools and AI to drill safer, and make the drilling process automated, and be more efficient. And at Maersk Drilling, we are already using data from thousands of sensors on our rigs that we expect to help us to reduce our maintenance downtime and the cost, say, up to 20 percent.

Hannah Schmidt

This type of cutting-edge technology also helps increase safety on offshore rigs—which are some of the world’s harshest working environments.

Longzhen Hu

At this moment, we are testing several solutions. So one example is using augmented reality to optimize maintenance through data. And with this solution, the glasses or the holo lenses direct a user to each inspection point and provide detailed directions for inspection and allow the users to accept the inspection results on the spot, or register anything that needs to be fixed, with simply a photo or voice note via the glasses. So this will ease the administrative burden of inspections and enhance safety by making both inspections and documentation more consistent. 

Hannah Schmidt

But innovation and efficiency are often at odds. To make sure new tech investments pay off in the long term, Maersk is taking an iterative approach.\

Longzhen Hu

We have our innovation projects going on for some years, but the innovation department is still new. So another challenge is to embed the innovation muscle in the whole organization. And innovation is an agile process. So it is different as doing a traditional engineering project that our organization is very used to. And since we always need cross-functional teams and participants outside innovation department, it is necessary to communicate and train the other parts of the organization about how we do innovation.

Hannah Schmidt

Making innovation part of the company’s DNA helps project teams work smarter—and deliver more value. Longzhen says this mindset shift will be a key success factor as global governments—and competitors—continue to set ambitious carbon reduction targets.

Longzhen Hu

So we see already, a few oil majors have announced their ambition to slash carbon footprint. I believe that someday, carbon-neutral drilling will likely not be an advantage, but become a prerequisite to operate. So therefore I think that we need to include green in our portfolio. 

So, all in all, there are a lot of changes going on. The market is changing, and so we are changing as well.

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Tegan Jones

It seems like no matter where they work in the energy industry, project leaders are really feeling the pressure to deliver more business value. And as they try to deliver on these increased demands, they also have to keep up with changing markets, changing regulations. It can be a lot.

But these types of infrastructure projects have extremely long lifespans. They can be in operation for 50 or 60 years. So it’s extremely important for organizations to make sure they’re getting these investments right.

Stephen W. Maye

And it brings us back to this idea of future-proofing your projects so that new technologies and new business models won’t make your work obsolete in five or 10 years. And this is something I discussed with Dominic Barbato, who’s director of strategy for Schneider Electric in Louisville, Kentucky. Schneider was actually founded during the First Industrial Revolution, back in the 1830s. But today, the global company is investing in cutting-edge technologies that could transform the way energy is produced and distributed. 

Tegan Jones

Now, this is something I’m personally very interested in, because this idea that consumers can now capture, store and use energy locally, rather than pulling power from some massive, centralized grid, is really a revolutionary concept. 

So I’m really looking forward to hearing what Dominic has to say. So let’s go to him now.

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Stephen W. Maye

Dominic, I happen to know that you’ve spent a lot of time thinking about the big trends in the industry. So I’d love to hear you describe the big-picture trends that are impacting your work and really Schneider’s future project plans.

Dominic Barbato

Absolutely. So we often talk about the big trends in terms of what we describe as the three D’s. And those three D’s are digitization, decentralization and decarbonization. So to break that down a little bit further, when we talk about digitization, we’re really talking about rapid technology innovation and improvement. And so whether that’s in computing or processor power, in terms of storage, bandwidth. Really all the technologies that make up what we refer to as the internet of things, and you probably heard that term before, IoT. So as technology is improving very rapidly, costs are coming down. There’s also software components that are being enabled as a result of that, so things like artificial intelligence, distributed ledgers, digital twins, all these buzzwords that you often hear, and that is really serving to transform our business. 

The second D that I mentioned is around decentralization. And so just as important as technology innovation is, business model innovation is also really important as well. And so what we’re seeing right now is a move away from centralized generation resources that transmit and distribute electric power on transmission and distribution lines. And really seeing an emergence of renewable energy, whether that is wind or solar, improvements in battery technology, etc. And so we’re seeing this movement away from centralized resources more towards decentralized resources, and that’s really also creating a pretty significant change in our industry. 

And then kind of coupled with that is the decarbonization element. And so what we refer to when we talk about decarbonization is really this desire by organizations and individuals and perhaps even society as a whole to act in a more sustainable way, to get energy from cleaner resources, to leverage energy efficiency and ultimately drive down the world’s carbon footprint. And what we found over time is that while altruism certainly plays some sort of role in this, ultimately there’s positive financial impacts to be achieved. 

Stephen W. Maye

So when you think about the kinds of projects that you’re focused on right now, and you’ve been describing some of that, what are the big challenges that your project teams have to overcome for these types of projects to succeed?

Dominic Barbato

Yeah, it’s a really good question. You know, I think maybe there’s two pieces that I’d call attention to. The first is really choosing which projects to pursue. And just as an example in our own business unit, you know, there’s so many different companies, whether those are startups or mature companies that we compete with on a daily basis, that at times it almost feels like you’re getting a death by a thousand cuts. There are so many different things to maybe pursue and go after. And so being able to choose which projects and which initiatives are the most important or are going to deliver the most value to the customers and ultimately deliver value to your business, I think, is really important in setting priorities. 

And then the second thing I think I’d say is really just gaining executive support early in the process. I’ve seen so many times where there’s great ideas or great projects to pursue, and maybe the business is supportive but maybe the executives haven’t bought into it, the business case hasn’t been fully articulated, the financial elements aren’t there, whatever that might be. So I think the earlier that project owners and project stakeholders can gain that executive input and support, the better they’re going to be positioned for success in the long run. And sometimes I think about that in terms of those who are going to be supportive but also those who are going to resist. And how you can actually seek to break down that expected resistance early, as opposed to having that derail your project in the eleventh hour. 

Stephen W. Maye

So when you look at your project portfolio and the business strategies that you pursue, how do you future-proof at this point? How do you make sure that the innovations that you’re investing in will continue to deliver value for years to come?

Dominic Barbato

That’s a great question. And I think in a perfect world, everything that we invest in would result in some great business return. I think there’s an element of trial and error where any good company who is pursuing innovation and pursuing new products and services, you know, there are going to be times where you fail. And I think that’s part of the learning experience. And so I think for us, we’re always looking for the friction points that the customer experience, and then try to understand how can we alleviate those friction points. 

And ultimately, I think with the Schneider venture fund and other things that we’re doing around innovation, we want to continue to really push out of our comfort zone and into new territories. And I heard a quote probably about a year ago that I really loved, and it was, “We need to test the extremes, because learning occurs at the edge where assumptions and options break down.” And that really resonated with me because I think when we’re looking to future-proof the business, we always need to be testing those extremes and making sure that we’re wading into an area in the pool where we’re a little bit uncomfortable, where the assumptions are starting to break down, and we’re actually having to really try new things and maybe risk failure to make sure that we’re really developing something that’s going to resonate for a long period of time with our customers and with the market.

Stephen W. Maye

Yeah. There’s always a percentage of people that listen to a conversation like this, and they say, “Man, I would love to get involved. I’d love to work in that sector.” So I want to ask you a little bit about that. When you think about the skills that people need to develop in order to be a part of the energy sector, especially in a very forward-looking, next-gen, energy perspective, what do you advise? 

Dominic Barbato

Yeah, that’s a really good question. You know, I’ve been in this industry for about 15 years, a little over 15 years. I feel like there’s never been a more exciting time to be in this space. And I think I’d answer your question in maybe two different ways. 

Broadly, I’d say, given the rate of change on the softer skill side, two things that we really look for are people that can synthesize what I’d refer to as maybe seemingly disconnected ideas. Kind of this concept of lateral or nonlinear thinking. So that’s maybe one piece. 

And then just a relentless curiosity. Because with the rate of change that we’ve experienced, you have to have people that are hungry and asking questions and trying to really figure out: What does this mean in the context of the broader market? And how can we leverage some of the new ideas that are coming out to really drive value back to the customer? From a more technical or tactical standpoint, the one area that really stands out for me is with respect to data science and artificial intelligence. You know, the amount of data that is being collected in our world today continues to grow at an exponential pace. And it holds true for the energy industry as well. And so what we’re really focusing in on right now is: How can we use that data to create better products, to create better services, to create better outcomes, and ultimately a better experience and more value for customers? And so I think the more that an individual has experience with data analysis, with how they can translate that data into actionable insight, that’s really valuable for us within Schneider and I think for a lot of different companies in the energy and sustainability space.

Stephen W. Maye

Yeah. Thank you. So if you were going to boil it down to a single piece of advice or the top piece of advice that you would give someone who perhaps has some experience as a project leader, program leader, they’re in the project or program management space, what’s your advice to them on succeeding in the shifting energy landscape?

Dominic Barbato

Yeah, that’s a very big question. It’s tough to boil it down to one thing. But I think if I had to boil it down to one thing, I would simply say to get started. So I think the best way to succeed is really to learn by doing. And ultimately that requires you to just jump in with both feet to get started. I mentioned earlier that sometimes failure is required to succeed. And so the best way to just do that is to just go and try new things. 

You know, a long time ago, I went to high school at this all-male Catholic high school. And we had a principal of the school. Her name was Mrs. Mullen. And she was a very intense lady. She was my calculus teacher. And she used to tell us, she’d say, “Gentlemen, have the courage to be an individual who stands for his own convictions.” And that really stuck with me because in my view the leaders that I admire most are the ones who have a conviction, who have a vision. And they’re able to really inspire action in others to the point that those other individuals want to follow them. And I think ultimately when you’re the person who kind of gets started and sets the wheels in motion, I think you’re more likely to have success and have other people follow you because you can inspire that vision in them.

Stephen W. Maye

I love it. Get started. Learn by doing. Embrace failure along the way. And have the courage to stand for your own convictions. And with that, Dominic Barbato has the last word.

Dominic, it has been great to meet you and great to talk with you. Thank you for being with us.

Dominic Barbato

Likewise, Stephen. It’s been a pleasure to be with you.

Narrator

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