Carbon Software Firms to Benefit From Confusion

The selling point for carbon software companies is going to be confusion.

The carbon financial market one day could grow to $1 trillion, making it bigger than solar and wind combined, according to Stephen Mooney, VP of Carbonetworks, and Joseph Kwasnik, Group Head of Climate Change, National Grid. But being able to control and maintain an overview of the carbon management process is going to be a major problem for most institutions.

“There is a lack of full inventory of GHG [greenhouse gas] data. You can’t bring the data together. In many cases, probably 80 percent of the time, the system used is often spreadsheets,” said Stephen Mooney during a presentation on the topic this morning. “Many organizations on the executive level are not aware of the optimal reductions.”

Carbonetworks, of course, wants to take that problem off of your hands—for a fee. The company’s software can automate accounting or planning. While only a handful of carbon software companies existed a few years ago, more than 40 are out there now touting their wares. And more are entering the market on a quarterly basis. An influx of products from established software outfits along with a slew of acquisitions likely await in the future.

So, how does one avoid taking a “wait and see” approach where one is afraid of doing things too early, too big and too expensive?

The first step is preparing the boardroom for change, Mooney said. Organizations also have to come up with a comprehensive strategy. Right now, it’s mostly cobbled together between departments. One solution is putting a price tag on it.

Mooney also suggests creating a climate change task force within the company that should incorporate individuals from marketing, IT and finance where they can come together and understand the issues from all aspects of the business.

National Grid, the largest utility in the U.K. and the second largest in the U.S., has embedded a target of 80 percent greenhouse gas reduction against the Kyoto 1990 baseline by 2050. One of its strategic objectives is also how to get its money back from investing millions of pounds in new technology and reshaping markets. The company also wants to help others to meet the climate change and embrace energy efficiency, which is kind of odd for an electric company.

“We’re moving to a phase where we will not pay for how much gas we use, but for the service,” said Joseph Kwasnik, Group Head of Climate Change, National Grid.

So how will National Grid do it?

Among other things, reducing emissions is important, but so is protecting its assets during the change in the next 40 to 50 years. The company is also redesigning equipment and utilizing fleet vehicles.

“The dirty little secret is that 1 [percent] to 2 percent of the gas we move through the system leaks through old piping. That’s an area we’re focusing on in the U.K. and in the U.S. to reduce emissions over time,” Kwasnik said.

The company will begin by rolling out a five-year carbon budget for each line of its business, while its executive bonus plans will be linked to how they meet those corporate targets.

National Grid has also assigned a monetary value to carbon to be used in investment appraisal.

“We’re using a number developed by Defra. Twenty-six pounds per ton of carbon emissions. We’re investigating using shadow prices on carbon,” said Kwasnik.