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- Well, from a global perspective,
one of the things that we're seeing in the world
is many companies like the S&P 500, for example,
all have new requirements around ESG reporting,
environmental, social and governance reporting,
those reporting requirements are now ones
that are almost becoming foundational
from an investor standpoint.
And if it's foundational for investors,
it also implies that your stock price may be affected
by one way or the other by how well you're doing
in any one of those areas.
In the environmental area, we're seeing a lot of activity
that's coming down from the management teams
saying we need to have an environmental plan,
what does that look like?
And how do we implement it?
The question then, is when you go to implement,
it's not only the technical opportunities,
because many cases are technical opportunities,
but it's also the financing, how do we finance these?
And at scale, there can be issues with regard
to how much money am I putting into this energy
or environmental mitigation, upgrade,
energy intensity reduction,
all those things that you want to see
from the behind the meter standpoint?
If I do it at scale,
how much is that gonna impact my financials
as a corporation and that leads us to sometimes
a off balance sheet,
or sometimes an off credit type of discussion.
Now, what that means is that when we put these in place,
the savings paid for the cost,
and it is a variable pay contract,
but the way it's structured,
meets the new accounting standards requirements.
And those new accounting standards allow the corporation
then to not count this against things like
their debt ratios and coverage ratios.
And overall, it doesn't affect their Moody's S&P rating
at some level.
So these become very appealing at scale.
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When we talk about the technical details,
many times the technical details are taken care
of by people that are at the plant level
or some corporate level,
but generally below the C suite, for example.
But as soon as you get into finance questions,
the finance questions become elevated
to a level usually above that, not that it's good or bad.
It just is because the finance decisions
are handled by other groups, the CFO, the treasury group,
and all that.
So there's a an idea that at scale, again,
you're doing larger projects
across a wide variety of locations.
For a large customer,
they want to have a common contract, for example,
they want to have common understanding
of what the provisions of those contracts are,
in terms of the terms the conditions,
the covenants that are they're signing up for,
so that each individual plant does a sign up
for their own version of what the the idea would be.
And then when it gets to corporate they go,
why do we sign up to all these different contracts
that don't make any sense for us?
So we see the the stakeholders from a customer standpoint,
now starting to get up into the vice presidents
and even CFOs,
where they're becoming integral to this discussion.
And by that,
I mean, they're the ones that are helping drive
this at scale idea.
And they're driving the idea
that I want a common set of contracts
that meets these accounting standards rules.
So I get the outcomes I'm looking for not just technical,
but also financial.
And you really can't effectuate
that at the plant level, generally speaking.
The other key question that generally is asked,
at least by me is around something
called delegation of authority.
So if you think about any big company, Schneider Electric,
for example, people at various levels can always sign off
on so many dollars of commitment for the corporation.
And that's true with any corporation.
And if you're signing up to a, even though it may be
called a service agreement, there may be a threshold level
that the plant manager can't sign up for.
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Well, the ESA, in and of itself
has provisions around performance guarantees.
And those performance guarantees take two forms.
First part of the performance guarantee
is when we're implementing a project.
So when we're implementing a project,
you have to construct it,
get it in on time on budget and everybody expects
that to be done at per the contract requirements.
And there's a contemplation of having
something called an acceptance at the end of that process.
So when the customer accepted,
the customer is accepting the fact
that you've put it in exactly
the way it was supposed to put in.
So there's a risk there,
and performance guarantees around how you put that in
and what the provisions are.
And if you don't, there are some damages in many cases.
The second part of the performance
is after the acceptance for what we call
post acceptance performance period.
During that period,
there is a series of requirements under the contract
that may include for example, energy savings.
So what are the performance requirements
under energy savings?
How do we arrive at those?
How do we measure those?
How do we report those and what frequency to report those?
And those dictate what the payments will be
under the contract.
There can also be things called key performance indicators,
so KPIs and the KPIs might be things like uptime,
they might be things like response time to emergencies.
So there's a series of these KPIs
that might also be layered into the contract
that then go back to the performance of, for example,
Schneider Electric, that are part of part and parcel
to this performance period guarantee.
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So in case of PPA,
I'm buying power from some other source
that in this case now is renewable.
So I'm buying wind power, solar power, what have you.
But now I've got to affect change my buildings.
And that behind the meter idea of effecting change
in the buildings is where the ESA comes into play.
So I'm gonna put in new lighting, new HV and HVC
and the like.
So I'm affecting the demand side over here,
where the PPA is giving me a supply side solution.
So the more you reduce the demand,
the less you need of the supply.
So they actually go hand in hand,
so they're not in lieu of each other.
Further on ESA,
we've structured in many ways where I not
only do the behind the meter,
lighting and HVC and things of that nature,
but I can also include solar, battery storage,
to give a resiliency outcome
as needed for the customer.
So there are ways to work the ESA
is that they can and by the way,
the ESAs can be energy savings agreements,
energy services agreements,
they could be energy as a service,
these are all structured essentially the same way
for the customer,
depending on what outcomes they're looking for.
And then I'm looking to reduce the amount
of energy used in a building,
so you don't have to use as much supply.
And then in that whole equation
becomes this idea of resiliency.
And how resilient do I need to be at the location
to supply power to critical loads for what time period
and that gets to the idea of having solar and battery
storage together, which combined give you resiliency.
And there might be things like mining power, for example,
that then have a base load power nature to them.
So if there were a grid outage,
that grid outage could be mitigated,
because now I have the base load combined heat
and power plus the battery storage on a spinning load
with a black star capability that now I have
this critical load covered irrespective
what the the grid is doing.
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