Ralph Izzo, CEO of energy giant PSEG, speaks out on climate change's implications in Rutgers Business School's CEO speaker series

Wednesday, May 26, 2010

As Chairman and Chief Executive Officer of America’s 7th largest energy utility company, Public Service Enterprise Group Inc. (PSEG), Ralph Izzo (RBS MBA ’02) commands the unique position of having to provide shareholder value while navigating the shifting regulatory rules and working for the public to safeguard the environment. The packed auditorium in Rutgers Business School’s (RBS) new state-of-the-art pavilion at 1 Washington Park in Newark was treated to Izzo’s thoughts on climate change and his views on what the implications are for the economy.

The hour-long talk and Q & A was the second lecture in RBS’s CEO Speaker Series hosted by Dean Michael R. Cooper, PhD and the Rutgers Business School Board of Advisers. The deep corporate partnerships and commitment by distinguished alumni like Ralph Izzo maintains RBS’s standing as a premier business school dedicated to solving today’s economic and business challenges.

Izzo in his own words

Overview of lecture "Climate Change: Implications for National Security and the Economy"

“My perspective is that climate change is not just an environmental imperative, but also has wide spread implications for economic development and even national security. There is a need to develop new technologies – but what will be the anticipated response from the market on these new technologies. We can leverage market mechanisms to bring these new technologies to bear. And government should play a role in helping this along. Business Schools also have a role in forming the debate and making sure that people are participating in the development of policy and regulation in a way that helps the nation be prepared for climate change.”


What evidence of climate change have you seen that affects the way PSEG does business?

“As a company we haven’t seen anything different than what the rest of the world has seen on the physical manifestation of climate change. But what we’ve seen that is different is the regulatory response. For example, we are part of a 10-state region today that charges people to emit carbon. It’s called the regional greenhouse gas initiative – every ton of carbon that we emit costs three dollars. Just to translate that, it means that about a megawatt hour of electricity from a coal-fired power plant has about a ton of carbon. So that costs an additional three dollars over and above what it cost before.

On top of that we’ve taken some steps to reduce the amount of carbon we emit. From the very obvious use of hybrid vehicles to drive some of our supervisors around to advanced materials on some of our cables and some of our transformers to have less ohmic dissipation which is the loss of energy through natural resistant processes. So we are seeing a bunch of effects both operationally and in terms of the economics of our businesses as the result of regulatory changes.”


What businesses are PSEG getting into as a result of climate change

“We’ve been very active in the development and deployment of renewable energy supplies. Solar in particular. But we plan on getting active in offshore wind, compressed air energy storage – which is an energy storage technology which is useful for renewable energy because that is not easily controllable in terms as when you get to generate it, the wind blows when the wind wants to blow. Beyond that we want to make sure that the policy framework that is put together encourages companies like us to actually deploy that spectrum of technology – solar, wind, compressed air energy – we are also getting active in energy efficiency. Which really is the cheapest of all fuels – the avoidance of the need to produce a kilowatt hour of electricity.”


Is there certain percentage you invest in renewable energy?

“We don’t fix the percentage but our plan over the next three years is to invest nearly a billion dollars in solar energy, which is a sizable sum of money for a company of our nature. We’ve already invested over $300 million in solar energy. I compare that to the $25 million investment, much smaller, we are making in a new nuclear plant. Not because a new nuclear plant costs less, actually it will cost far more, but because we think that the duration, the time it will take to develop a nuclear plant, the regulatory uncertainty, the risk associated with that, really warrants us putting our efforts in the near term into some of these renewable technologies.

It’s strictly government regulation that forces you to do it – certainly for this part of the country, solar energy is not cost competitive with gas-fired or coal-fired electricity. But there are government requirements that say a certain percentage of the electricity we deliver must come from renewables, and in fact a subset of the renewables must be solar.”


What role should higher education and in particular business schools play in the debate on climate change?

“Clearly there is a need for additional research and development for some of these both demand and supply-related technologies, whether it’s a more efficient heating system or more efficient solar panel, there’s engineering and basic science that goes into both of those to make sure that those are more viable in the marketplace.

From a business school point of view, one of the issues that is not getting enough attention – is this whole notion of what does the future world economy look like. And what do we need to do to make sure this a sustainable economic future.

So you hear a lot of talk about why should the US be aggressive in climate change if other countries – like China and India – are not actively controlling their carbon. I don’t necessarily have an answer to that question. I do know this – as we explore solar, wind and various other opportunities in this space, the people that come to visit us as suppliers have business cards that read “China, Japan, France, India, Israel.” The rest of the world is developing the supply chain to make these products and services available and we are really falling far behind in this. And I think this is a ripe opportunity for business schools to explore and bring to the forefront in the whole social debate over what’s our role vs. other countries, should we be aggressive or should we be observers.

Rutgers Business School plays an important role in this debate – from hosting forums and seminars, to specially designed classes, to articles and research in this whole area of what will the new economy look like.”

- Daniel Stoll

TAGS: Alumni CEO Lecture Series PSEG Ralph Izzo Thought Leadership