JPMorgan Chase & Co. (JPM) Earnings Call Transcript & Summary

Well, there's the signal. Why don't we go ahead and get started. I'll go ahead and kick us off. Gentlemen.

You've got it. Thanks, Rob.

All right. Well, welcome to this afternoon's Innovation Series breakout session, which is entitled Understanding Demand for Decarbonization and Grid Modernization. My name is Rob Wilhite from Black & Veatch. I'm also a Board Director for Gridwise Alliance, one of your sponsors for this. Along with my 2 co-panelists who we'll introduce in just a second, we're going to explore really an interesting discussion that supports today's overall theme of corporates and investors driving change. And in many cases, commercial and industrial customers are driving demand for investments in decarbonization and grid modernization with or without incremental policies. And as I previously mentioned, I'm really delighted to be joined by two senior leaders in the energy industry who have agreed to share their respective stories that relates to achieving their own clean energy ambitions. So first, we have Alec Saltikoff, who's Global Head of Sustainability and Energy at JPMorgan Chase & Company. And in this role, Alec oversees programs related to energy efficiency, sustainability, renewable energy and maximizing decarbonization synergies for the firm's global real estate division. And this includes the implementation of JPMorgan's renewable energy by 2020 vision. And in addition to his company roles, Alec also provides external leadership via his roles as Vice Chair of the World Green Building Council Advisory Board and as a member of the Board of Directors of the New York Energy Consumer Council. And of particular note, Alec has been recognized as a 2-time honoree in 2016 and again in 2019, with the prestigious New York Award -- Energy New York Award in leadership and innovation. And in addition to that, Alec holds really an impressive array of professional certifications, including certified energy manager, energy procurement professional, energy auditor and a couple of others. So Alec, thank you for joining us today.

Pleasure to be here.

Thank you. Our second panelist is Trent Bowers, who's Chief Commercial Officer and Executive Vice President of Sales for ENBALA Power Networks, which is now part of Generac as of 2 months ago. Trent has been in the energy and utilities industry for about 20 years and has over 30 years of sales and management experience. He is responsible for all the revenue generation activities for his company, including sales, business development, commercial operations and presales business units. And prior to ENBALA, Trent has developed a proven track record in sales, marketing and executive management at some of the leading technology firms such as Siemens, Alcatel-Lucent, IBM and Landis+Gyr. And he's also highly focused on core aspects of grid modernization including AMI grid analytics, software application for controlling and optimizing DERs, and I look forward to talking about that. Trent, thank you for also joining us here today.

I appreciate it, Rob. Nice to be with you guys.

Let me just open our discussions, gentlemen, with just a couple of brief comments. And then Alec, we'll turn it over to you to start first. But let me first say thank you to the Gridwise Alliance and Clean Edge for are the opportunity to join this distinguished panel. In these rapidly changing times, it's pretty fitting that our digital twins meet today as we all adapt to this new manner of conducting virtual conferences. And secondly, for those not fully familiar with Black & Veatch, let me mention just 2 quick statements about our firm. We are proud to have a 105-year-old track record of consulting, engineering, construction and monitoring and maintaining critical assets in power, in water, telecommunications, transportation and even emerging fuels such as hydrogen all across the globe. And in fact, corporate customers are indeed a key segment for Black & Veatch, in addition to the utilities we work with. And this is particularly true for solutions that include distributed generation, microgrids, battery energy storage, asset management services and even utility grid services. So just a couple of quick notes from my perspective.

So Alec, as I promised, let's turn to you first, and I know that JPMorgan Chase has made some commitments towards clean energy and sustainability. Could you tell us more about these ambitions and current achievements as well as a bit more about your interest and focus areas. Alec?

Certainly. Thank you. At JPMorgan Chase, we have developed rather very comprehensive strategy in order to obtain and achieve 100% reliance on renewable energy by end of this year. The strategy resides on 4 pillars. First one is energy efficiency projects. We started with LED upgrade, spent about $0.25 billion for global implementation. We deployed building management systems. We deployed phase change materials. We deployed rather very broad spectrum of all technologies that's available off the shelf. But we also started to [ lever ] into developing new technologies with consortiums of companies and capable forums. We started moving into more digitized energy type of footprint. We started implementing blockchain tracking systems. We started looking into artificial intelligence. And combining these implementations, we feel strongly that we can reduce our overall carbon footprint just by virtue of being more efficient. Second pillar is on-site renewable energy generation. Currently, we are running probably one of the largest on-site renewable energy deployment in the C&I space, and Black & Veatch is helping us with that. We are targeting several thousand [ locations ] and so we are also advancing different type of technologies made with flexible solar panels. We started looking into Pure Sky. We also started looking into small fuel cells to be powered down the road with either hydrogen or biogas. We started looking into battery storage. Pretty much anything and everything that can help us to self-generate all electricity plus for resilience purposes. Pilar #3 is offsite renewable energy generation. We were the first bank on Wall Street to sign for new PPA with a deal with Texas, Project Buckthorn. We're also negotiating several additional deals. We recently signed a deal with [indiscernible] for community solar. And the list goes on and on and on. But the most recent announcement that we made is for the deal between JPMorgan and Brookfield Renewable and [ ClearTrace ] where we're physically delivering electricity from hydro assets of Brookfield in New York and tracking that delivery from generation to consumption in near real-time on blockchain. Therefore, creating immutable audit trail, immutable provenance and later on reconcile it with RECs as bundled rights altogether. Obviously, it's been done in concert with grid operator, in this case, it's National, but also authorities in jurisdiction like New York Gas. And fourth pillar, the final one, whatever it is left will we be covered by renewable energy certificates or other tradable implements globally. But if you put it all together as one integrated solution, we are focusing on reduction of our own carbon footprint, focusing on maximizing on-site generation. We are synchronizing to our portfolio with demand and what we generate, and we are putting blockchain-based solution in addition to AI, in addition to IoT, therefore, moving into IoT plus AI plus [ DOT ] type of scenario, creating unified grid, unified tracking process that allows us to say that we are delivering on what we say we are delivering. Back to you.

Fantastic. There's a lot there, Alec. Thank you for sharing that. I'm sure it will generate some questions, too, as we move along during this panel. So Trent, let's turn to you for a second. Your firm, ENBALA Power Networks was, as I mentioned, recently acquired by Generac. And I've always viewed Generac for many years as providing traditional generation solutions to corporate and industrial customers, among many types, I'm sure. Curious to hear more about how Generac sees the ENBALA solutions and distributed energy coming together in the market as well as your specific areas of interests and focus. So Trent?

Yes. Great question, Rob. And for the audience, I do believe it's probably great to kind of start with maybe the foundation of why ENBALA plus Generac because it's an incredible, I'll use the word partnership. We are operating as our own entity within the Generac family, and we'll probably cover that in a little while. But to start with, as you mentioned, ENBALA is a software company. We are focused on the connectivity, the integration, optimization of distributed energy resources, both for our customers, both for the utility client, both for energy service providers. So we are a real-time operational control platform for those types of assets and for our customers. So then when you kind of bridge that and pair that with the Generac then, as you mentioned, they have a full portfolio of power products, significantly. They're the market leaders in home standby units, in the generator market, also commercial and industrial generations -- generates. So both natural gas, diesel, bi-fuel, et cetera. So when you look at where Generac is heading, which is the important piece for this conversation, is in the clean energy. I mean the visionary, the executive leadership of Generac is looking at -- they know where they've been, they know where they've been successful, but where do we go from here? So building this entire portfolio of clean energy solutions is part of the long-term strategy. So now we have battery energy storage. So we have storage solutions for our customers. We've got software solutions for our customers. We have analytics solutions for our customers, both on the commercial side and the residential side, which is important because we want to be able to serve all the market segments from the residential side, from small, medium business to both commercial and industrial. So we're bringing a true portfolio solutions approach to the market. I kind of pause there and then cover maybe a little bit around what we're doing on the sustainability and decarbonization efforts, if that makes sense, Rob. Or do you want to cover that later?

No. Go ahead, if you'd like to add -- to start that now.

Sure. It is kind of -- obviously, it's a multipronged approach. We're a software company on one side, and we've got the manufacturing company being Generac on the other. So if you look at sustainability initiatives and decarbonization initiatives, it is a two-pronged approach. And what I mean by that is it's internal and external because we're providing these solutions to this customer base. So on the internal side, we continue to look at innovative manufacturing practices, reduction in waste, the reduction in products that we use in manufacturing the products, offering a variety of kind of solutions with regard to the generators and batteries. We're also leveraging alternative sources, resources at certain facilities. plug-in hybrid vehicles, distributed energy resources, things of that nature. So we're doing that internally. And then externally, what we're doing for our customers is bringing these sets of solutions so we can help them with their sustainability goals and their green initiatives and their decarbonization initiatives around storage, around leveraging DERs in their geography, things of that nature. So those are kind of the two-pronged approach between the manufacturing side of the house and then the go-to-market side of the house.

Okay. Thank you for that, Trent. Let me ask you both the question since I want to tie this back to grid modernization, which is kind of the broader theme for this conference. As of last week, I was reading that the top 30 U.S. electric and gas utilities in this country, more than 20 of them, more than 2/3 of those utilities have committed to net 0 carbon goals. And this certainly will have some impact to their own capital spending plans, especially as it relates to grid modernization. So my question to you is, how does the increased spend that we should be seeing over the next few years in grid modernization, how does that impact your clean energy goals for your company? And what you think about in terms of solutions related to grid modernization?

Alec, would you like to start?

Go for it.

I would defer to you. I think that's actually more of your area of expertise.

You bet. No problem. It's extremely important, Rob. I mean we're working with -- our client base is global in nature. These investments are going towards -- I mean this is just really, at the core, macro drivers. You're looking at a belief in the science behind climate change. You're looking at environmental stewardship being a driver and it's at the corporate executive level. And this drive towards a low-carbon economy. I mean those are 3 kind of bigger picture kind of major drivers. But what that's doing then is allowing this investment, both on the OpEx side and the CapEx side with regards to newer technology. So Software-as-a-Service has regained a lot of momentum with regards to being able to provide solutions and connectivity and integration and visibility, deeper clarity in the networks. You've got advanced sensoring happening. You've got -- we've had, for quite some time, advanced metering. But it also is allowing the implementation and deployment of distributed energy resources such as EV charging stations solar paired with storage. Obviously, reading a lot about that. Increasing the hosting capacity for the utilities to bring on more renewables is absolutely critical because most of these resources we are bringing on from a renewable perspective -- very intermittent, there's a lot of variability. So rig stability is obviously extremely important. So it's really instrumental, extremely significant and relevant in our world because those are the products and services that our customers are demanding. But being able to have the budget, being able to have the spend and to help them with those sorts of technologies that are increasing the reliability of the network from a grid modernization perspective is extremely important.

Yes. And I think beyond even the utility commitments, as I referenced, we're seeing increased spend or at least planned spend for grid modernization in recognition that commercials and corporate customers are driving a big part of this agenda. Last I saw, of the 50 U.S. states and jurisdictions for regulating utilities, 49 of those 50 had some type of grid modernization, regulatory proceeding underway. So it is affecting all parts of the country for the most part. Alec, let me turn back to you for just a second because you opened with your 4 pillars. And could you tell us a little bit more how you're adopting and using some of the advanced technologies such as artificial intelligence and blockchain technology? I think we'd love to learn more about how those applications are being useful for you.

Sure. Well, there is a concept that's being developed, climate accounting. And we are collaborating with the consortium of companies, trying to put together not just practical tools to be used, but actual showcase in prototypes, proof of concepts and deploying it in real time [indiscernible] tool because it does give you a couple of interesting applications. One, it allows you to capture data in high [ fidelity ], highly reliable but also it allows you to structure the data in a manner that nobody can tackle [indiscernible] and applied to specifically environmental attributes and energy -- digitizing energy, [indiscernible], carbon footprint, whatever it could be, anything related to building, it can be related to solar panels on site. It can be related [indiscernible]. There is an opportunity for future application of [indiscernible]. Because once you can structure data, AI can sift through in a matter of days instead in a matter of months. Simultaneously, patterns in data always exist. But creation of this link between IoT, machine learning and distributed energy technology, that's exactly what we are after. And so far, we've been quite successful in that with prototyping, experimenting, talking to different forums and going into consortium. As I mentioned, we did announce the deal recently with Brookfield and that [ ClearTrace ]. But we think the trend is only going to grow. Yes. I don't think it's going to be, actually, simply segregate it into carbon or electricity. I do think we are approaching rather a substantial shift in the market when it comes to how energy is stored and how energy is being transported. And I think hydrogen, green hydrogen is going to play a major role over the next couple of decades. If you will take a look at, for example, recent publication and outlook published by [ DNDL ], they're projecting substantial amount of growth when it comes to energy consumption. And we [indiscernible] or as technological civilization will be defined by our ability to generate and consume energy. And if we want to progress further, new tools, new applications, new paths forward will be developed. Putting hydrogen on the grid, what does it allow? Well, you could store energy and pretty much indefinitely without [indiscernible]. That's something the [ platform ] has been saying. It allows you to also squeeze transportation from internal combustion engines to [ something 0 ]. It allows for deployment of fuel cells, and in this particular case will be PEM, proton-exchange membrane fuel cells. It allows you to build brand-new infrastructure across the board and actually ease the pressure on the grid that's coming from -- will be coming from electric vehicle, charging stations and people and companies charging buses and trucks. So I think there will be a diversification when it comes to methods of transportation and storage of energy. But if you want to be green, what does it mean? Does it mean that you can just simply go and buy racks and that will be sufficient? Or you can actually have absolute proof that you are doing what you're doing, and therefore, giving your true climate accounting true accountability. That's something also, I think, regulators might also appreciate.

Rob, we can't hear you.

It helps if I unmute, Trent. Thank you, Alec, for that. That's -- it's fascinating to see the adoption of these technologies in a way that it actually helps drive the market, too. And that's very important for where we're going with clean energy. Trent, any aspects of green hydrogen and some of the work that ENBALA is doing that can also contribute to this area?

We continue to explore that area. I mean so predominantly, as you opened up -- we opened up with, Rob, being a software company, we were really focused on the capabilities expansion of our platform to take into account all of the distributed energy resources and new assets that are out there being deployed around the world. From a Generac's perspective, I can't speak in depth on that. They continue to explore other alternative fuels. Obviously, started in the diesel, moved to natural gas, have now been working on and now actually delivers a Bi-Fuel product but continues to explore those areas.

Okay. Well, back to the number of projects that we see taking place in clean energy. Green hydrogen is certainly a growth area, Alec, as you pointed out. And we certainly see that. But it's interesting. How do you see the advent of local or even state-level policies impacting your business as it relates to advancing decarbonization and sustainability? Because it's not always at the federal level, but it seems to be happening more at the local and state level. Any comments regarding the impact of those more localized policies?

Well, I can offer [indiscernible]. New York City recently passed Local Law 97, effectively imposing carbon tax on commercial real estate. And it's being stipulated as $268 per metric ton of CO2 if you are above certain threshold. What does that mean in practical terms? [indiscernible], some buildings will have ability to avoid the fine. But eventually because the law escalates up until 2030, quite a few buildings [ brought into ] real estate portfolio of New York City will be below -- will be actually above the threshold. And once you run simulations, sometimes if you just simply take 2 buildings, for example, in Midtown Manhattan, which would be a somewhat average energy footprint per square foot. Day 1, probably those 2 buildings will pay roughly about $3 million in fines per year. Full force of the law, it will exceed actually$10 million. What does that mean? It means that operating expenses went up, net operating income went down. And if you apply a standard cap rate application formulation, probably you're going to see an impact on the way it will be building itself. But what to do with that? One of the provisions of the law, the Local Law 97, allows for trading or trade-ability of carbon [indiscernible] helping to find those and what type of application you have to go for. That's not defined yet, but I would like to leave you with the following idea. Let's say, if you have a blockchain-based trading platform that can be trusted by participants as useful data, performs proper calculations, captures the data, makes enumerable and creates asset-grade data capture [indiscernible]. If you have a portfolio of 5 buildings, 2 of them are energy [ high ]; and 3 of them, highly efficient buildings below the threshold. Day 1, you don't have a platform like that. They wanted to build this [ predefined for buildings or not ] into our portfolio-based defined. If you do have a system like that, energy efficiency credits can be captured and transferred inside the portfolio from 3 buildings to 2 buildings. Therefore, the portfolio is not predefined. However, I think where the most impactful outcome is going to be, this law will incentivize quite a few landlord structured both for high level of decarbonization, high level of energy efficiency measures because this law will allow them to create those assets and potentially sell them in the open market at a discount, so $268 per metric tons. The same principles like you see -- the same principle works for quite a few other jurisdictions where incentives are available in the form of either taxation or [ workings ] and such. And the market will love that, I have no doubt. We are working very closely with several forums, and we're experimenting with it. But I do believe that local regulatory applications will have rather profound impact on which city does what. And I do believe that the age of carbon taxes are upon us, we like it or we don't. And the market [ trends for that to -- and develop properties ]. That's what we're trying to do.

Trent -- thank you, Alec. Trent, any local laws impacting your clients and the drivers for their investments in clean energy and sustainability?

Yes, absolutely. I mean I think if you look at local climate action plans, energy efficiency, goals and mandates, anything around 0 carbon initiatives, electrification, where that's being not necessarily more of a mandate, I mean more of a vision, more of an objective, but almost citywide as well. If you happen to take a look up in the Northeast, NYPA's 2030 plan, obviously, what it means for their customers. I think it's their strategic vision 2030. I think SCE out in California just released a vision and strategy plan not only for the grid but for their customers. So all of this has impact on the growth and the evolution and the kind of the deployment of technologies for us and helping our customers' customer. So if you think of primarily from our perspective, sometimes our -- from an ENBALA perspective, our customer is generally the utility, but we're generally building programs for utility to deliver to their customers on the commercial and industrial side. So we're generally partnering with them to help roll out these programs. And without those incentives, without those mandates, without those local laws, it makes it tough for them to kind of build the business case, if you will. So all of these are significant -- helping significant progress towards deploying electrification, plug-in hybrid vehicles, metro fits, energy efficiency plays, if you will, from a road map perspective. So absolutely, important and seeing more and more of it kind of every quarter, if you will. I think we'll see more of it as we move into 2021, for sure. Whether you're a Democrat, Republican, that doesn't matter. I think you're seeing that, again, a real belief in global climate change across multiple markets.

So speaking of markets, it sounds like from the answers from both of you that doing -- making investments in clean energy is not just simply the right thing to do, which it is, but it can also be more profitable to do so. If we're creating these localized markets and creating the opportunity for investors to invest in new technologies and building automation in trading markets around energy certificates, green energy and energy efficiency. Would you agree with that statement that it's now becoming an attractive financial investment vehicle for many corporate customers to begin with?

Well, I think there was a couple from our other corporates. But every single project that we do, it does go through underwriting process, and the capital we employ has to make sense in addition to decarbonization. And I do believe that technologies will improve. I believe it will become in degrees. So pricing point per kilowatt or pricing point per kilowatt hour will be dropping. That's the major R&D cycle. New technologies will emerge like, for example, Pure Sky is probably going to make a profound impact on the way how solar industry is working. So the emergence of hydrogen as a storage for -- coming from renewable energy sources also is going to have substantial impact. The trends have never stopped. It just simply an exact, old, same perpetual cycle of developing new source of energy and utilization for it.

Yes. I agree with Alec. I guess I'll give a little different point of view, if that's okay, Rob, as far as just a different -- from a -- through a different lens. So I mean, broadly speaking, you look at sustainability and decarbonization and then how do you profit from that or how do you continue to run a profitable as you -- that's probably a better term, a profitable organization. From a customer perspective, a commercial perspective, you're deploying these technologies generally help you unlock new revenue streams, whether that's being able to now participate in the demand side management program, participate in the market, you participate in trading. There's also the savings side of it with regards to reduction in energy costs. There's demand savings depending on where you sit across the country. That's kind of from an energy, utility, commercial perspective. But also if you really kind of peel the onion back just a little bit larger. I mean look at the growth and popularity amongst sustainable products that are being kind of sold and deployed, I mean, from clothing to nutrition to makeup, you name it. I mean there is -- it's a huge growth area just regarding sustainable products. So investing in improved processes, addressing old systems, reduction in materials to make products, building from sustainable products, I believe, is a growth area and an emerging area that we're going to continue to see and absolutely is something that is -- I don't think it's ever going to go away for sure, but it's also just -- I think it's proof point in our industry. From an energy and utility perspective and a commercial perspective, all the way down to even maybe the small, medium business perspective, that operating a sustainable entity can be profitable.

Yes. Absolutely. Well, I'll give you just another example from the Black & Veatch perspective. We had, just a month ago, made an announcement that we will no longer anywhere globally design and build new coal-fired power plants. And that's very significant. That's been, for many decades, a very significant part of our business. So that's a big commitment. But then we followed that up 3 weeks later with an announcement of our sustainability strategy as a company. So we're also reducing our company's environmental footprint. We're also addressing all forms of environmental, social and governance and looking to make our processes even more effective from an environmental perspective, but also looking at social justice and making sure we have targets around diversity in our employee and professional staffing levels. And so these are things that we don't want to do just because we think it's the right thing. It's also because we see our customers moving in this direction. And it's a way of staying in touch with where our customers are going. And certainly, corporates, as I mentioned at the beginning of this session, are an important part of that. Utilities are an important part of our customer base. And so to some extent, I'm addressing the question that we see posted here in the session, which I'll read from [ Michael Bates ], which is what impacts are you seeing from Wall Street, signaling a moving investment away from carbon-based generation? I just mentioned one example that we've taken at Black & Veatch. It's changing the mix of the services that we offer to the market. I don't know if either one of you would like to comment to that particular question or not.

Well, specific to this question, there were a couple of public announcements made by financial institutions, namely Norges Bank, central bank of Norway, largest manager of sovereign fund and; also Black Rock. It seems that financial institutions of that scale started looking into their underlying carbon footprint on certain industries, on certain effort and started considering that as potential risk implications and that business to be [indiscernible] over time.

Absolutely. Alec, I have to ask you, do you believe that if with the next couple of years as the Local Law 97 in New York City is implemented, do you think other cities are looking at this leading example from New York City? Do you believe other cities may go down a similar path?

I believe the trends has started. I don't think it's going to reverse itself. And I do believe that it's not going to be just on the level of cities, probably it's going to be on the level of countries. Europe is actually looking into it, the European Commission with together the Advisory Board to study and examine it. In the past, of course, that's Singapore and Hong Kong looking into it well. London is looking into it as well. So I do not believe it's going to start any time soon. These, of course, are going to be absolutely omnipresent, probably not any time soon. However, I do believe that in some shape or form, there will be applications like that.

Very good. Trent?

Not exactly going to answer Michael's question. But from a different point of view, if you look at what corporates are doing, some large power, commercial, industrial corporate -- corporations are investing in, where you're seeing investments go in, so look at just what Generac just has been doing. If you follow Generac, they bought a battery company. Now they bought a software companies. So if you look at what Emerson has done, if you look at what Shell has done and the investments that they have made. So you're -- I think been on the road, Schneider, you name it, you can kind of continue to go down some of the big industrials and technology firms, they're investing in clean energy, products, services, solutions, IP, which is helping to address what is happening on the energy side. And Mike, I know you're an expert there as well. But I mean, you're seeing the phaseout of the coal plants. And you've got to address that supply mix with other technology. So virtual power plants, you name it, distributed energy and resource management, all sorts of other technologies to name a few. But I continue -- you continue to see the investment in the corporate world obviously being followed by Wall Street and how that impacts share price, things of that nature. So absolutely, there's -- in my opinion, investments being made that is impacting share prices for these companies in this space.

Yes. Very good. I appreciate that, Trent. So gentlemen, let's look forward 10 years from now. Where do you think we will be in terms of the notion that we're making a change in a transition to the clean energy and sustainable world where we're modernizing our electric grids to adapt to intermittent renewable sources and battery storage. But what does the future look like? Can you envision where we will be in 10 years' time? Perhaps let's just focus on the U.S. for just a moment. What would you view of our energy future -- our clean energy future look like in the year 2030, if you can imagine that?

I'll start, Alec. And you look at our fuel mix, let's just say it's 50% renewables. You'll see the proliferation of solar plus storage across the nation. You'll see electrification of cities, intelligent cities, I think it's maybe even a better word, smart cities. I know that used to be a thing. It still is a thing. But with automation and sensoring, you'll continue to see, as far as the grid goes and the partnership with the consumer, transacted nature. So we always talk about the transactive grid. I think you will see now transactive grid 2-way flow of information and data and power flow. New -- obviously, new technologies there, new fuels, so just to get the conversation started, Alec.

Direct -- I do agree, but also one of the topics that people typically don't cover is -- [indiscernible] energy is the one that you did not [indiscernible]. And in this case, I do believe that energy efficiency technologies will advance, namely smart business, building management system overlays, application of machine learning or artificial intelligence. We are looking at several prototypes. One of the prototypes that we think we have been putting under microscope shows over 25% savings that LEED-certified building with modern [ DMS ], whether that's [indiscernible] fundamental energy flow of the design or we're simply not seeing what we should be seeing there. We're driving the buildings based on kind of real, real mirror applications that are trying to forecast where the building needs to be and how it needs to react on certain external conditions. If you put stuff like that on the grid and you put those buildings into highly efficient model, then it really changes the composition of what needs to be out there because the pressure on the grid will go down in levels. We'll be saving substantial amount of money and will not be generating carbon footprint. At the same time, as I mentioned, hydrogen probably is going to become much more accepted form of energy storage, specific for transportation [indiscernible] starting it. And we've been talking to work on this specific, just to kind of -- to wrap our minds around. I think municipalities start drifting towards hydrogen-powered transportation, namely like buses, for example. In Europe, there are several successful firms that have been deploying such hydrogen buses in various municipalities. And it opens up completely different [ paradigm ] altogether. You can actually take municipal ways and via densification process can generate hydrogen from that. That probably is going to create not just 0 carbon footprint but maybe a negative carbon footprint by some definitions. So possibilities are quite a few, to be frank. But I think it will be a combination of digitizing of energy shifts into energy storage and energy transportation and increasing efficiency of where we consume energy.

Yes. I agree with you. I mean just the key word that you just used there and kind of forgotten, full digitalization. Decentralization, obviously, I mean, if you look at the 3D decarbonization, I mean it's just going to be a huge overriding kind of themes 10 years from now. I do believe in electrification of the buses. You've got companies like Portera out there. You've got other corporates driving electrification. The Amazons, you've got major manufacturers that are saying they're going 100% electric. So absolutely on the transportation side, I absolutely agree.

So it sounds like from both of you that we are on this path that is either being driven through directly by corporates or also in response to any local or state policies that may also be enacted locally. And we're finding that this train has left the station. It's -- the momentum is there. We are moving forward. But in the same time, there's been an increased frequency of storm events impacting reliability for electricity supply, even natural gas supply and even water supply. So the view of resiliency from a long-term perspective of preparing for major events, be it storm events or maybe even cybersecurity type of events that could have massive impacts to commodity supplies, this is also starting to drive some investments, especially on behalf of the utilities who need to harden their systems. And so I guess the question for both of you is, from a commercial and industrial customer perspective, how does the focus on resiliency impact your thinking around clean energy investments? Or does it at all for that matter? Because it certainly is impacting the utility side of grid modernization investments, especially.

Yes. Back to the climate change comment. So absolutely, the severity, the quantity, the frequency of these major storms and these major events, whether it's hurricanes down in Florida. I think we had 30 -- just not in Florida, but we had 30 named hurricanes. I think it was a record this year. The wildfires out in California, what has happened out in Colorado. Obviously, in the Northeast with heavier, more frequent Northeastern things of that nature. Unfortunately, it's something that we have to deal with, and that is something that drives our business in a positive manner. Unfortunately, it's kind of weird to say that, if you will. But I mean bringing solutions to help harden the grid is part of what our entity, our corporation, being Generac plus ENBALA is really all about. So bringing innovative solutions around generation and backup and automatic transfer switches, solar plus storage, leveraging other sources of -- flexibility in the network, that's not from typical generations of building these virtual power plants that can form and be isolated and be kind of a microgrid or a nanogrid if we're looking at communities. So those are all the kind of scenarios, every -- all the types of solutions that we are talking to our customers about every day.

I agree with that. I think resilience will be in some shape or form achieved by a combination of battery storage and fuel cells. Typical fuel cells can operate on natural gas. And you're enduring blackout with all -- from gas distribution networks that longer down in systems, are they -- will be able to continue being operational. The question is, does it make economic sense or not and fuel cells or not, maybe [indiscernible] generators. So we move this down, a review of function, [indiscernible] building a couple of facilities like that therefore [indiscernible] just like any other before and certain mitigation protocols will be put in place. So certain [ rules, multipliers ] the banks review their assets. Commercially reasonable decisions will be driving investments and ability to retain assets or to dispose of the assets. And therefore, it's a simple math of solve statistical analysis and developing industry standard practice.

Great. Thank you both for that. So we're in the final minutes of our session here. I would just ask you both for your final thoughts, any closing comments and any predictions that you'd like to share with this audience as it relates to the topics that we've been discussing today. Trent, why don't I start with you on that.

Sure, Rob. I mean I believe everything that we talked about today is obviously top of mind from a commercial perspective at the executive suite within our customer base. And we are going to continue to see more emergence of energy efficiency technologies and solutions, decarbonization, sustainability as a practice being implemented corporate-wide. We will continue to see the proliferation of distributed energy resources as just because of some of the things that we talked about with regards to hardening and providing resiliency. So I think you're just going to continue to see the drive and the evolution of our network to this -- we've always talked about a grid 2.0 for years, but I think it's more relevant today than it's ever been even when we started deploying smart meters 20 years ago and doing things like that. So absolutely appreciate being on the panel today. Thanks for the great discussion.

Thanks, Trent. Alec, final comments?

I can only echo Trent's perspective. I do believe that energy industry [ evolve ]. Although, yes, there's a bit a shift on some shape or form, but nonetheless, it is going to have an extremely bright future. Because, as I said, as a technological civilization, we're defined by our builders who will generate and consume energy. And I do not think that energy footprint globally is going to subside anytime soon, very likely it's going to be an opposite direction. Digital applications in carbon and energy, that's the shape that's manifesting itself rather rapidly, and we understand that. I think emergence of practical applications of machine learning and AI is going to truly shake up the way of how we look and operate at least on the building level, from flow to the grid level, probably virtual distributed utility level. I think we're going to become more efficient. I think we're going to become smarter, and we're going to become less wasteful. That's my forecast.

I'd like to see -- I think leadership around the globe, this is, I think, sometimes I feel doing global -- the global work that I do, feel we've been behind. Whether that's true or not, that's probably up for debate. But I do feel that we haven't been the leaders in these things that we should have been. We probably have the technology. We just haven't moved it fast enough.

Well, very good. I hope from our perspective, both of you have predicted a future that we all get to see over the next several years. And -- but more importantly, thank you for today. Thank you for being part of this panel. It was wonderful having this conversation with both of you and certainly wish you both the best of success. And thank you again to Gridwise Alliance and Clean Edge for putting on this conference and allowing us to have this discussion today. So gentlemen, thank you. And...

Thank you, Alec. Thank you, Rob. Appreciate it.

Good luck for the rest 2020. Thank you very much.

Thanks, everybody. Bye-bye.

Take care. Bye-bye.