Transforming the energy industry through disruptive innovation

In the rhythm of our fast-paced lives, most of us don't stop to think about where electricity comes from or or how it powers homes, industries, and the technologies that connect people around the world. As populations and economies grow, energy demands are set to increase by 50% by 2050-challenging century-old energy systems to adapt with innovative and agile solutions. This comes at a time when climate change is making its presence felt more than ever; 2023 marked the warmest year since records began in 1850, crossing the 1.5 degrees global warming threshold.

Nadege Petit of Schneider Electric confronts this challenge head-on, saying, We have no choice but to change the way we produce, distribute, and consume energy, and do it sustainably to tackle both the energy and climate crises." She explains further that digital technologies are key to navigating this path, and Schneider Electric's AI-enabled IoT solutions can empower customers to take control of their energy use, enhancing efficiency and resiliency.

Petit acknowledges the complexity of crafting and implementing robust sustainability strategies. She highlights the importance of taking an incremental stepwise approach, and adopting open standards, to drive near-term impact while laying the foundation for long-term decarbonization goals.

Because the energy landscape is evolving rapidly, it's critical to not just keep pace but to anticipate and shape the future. Much like actively managing health through food and fitness regimes, energy habits need to be monitored as well. This can transform passive consumers to become energy prosumers-those that produce, consume, and manage energy. Petit's vision is one where buildings and homes generate their own energy from renewable sources, use what's needed, and feed the excess back to the grid."

To catalyze this transformation, Petit underscores the power of collaboration and innovation. For example, Schneider Electric's SE Ventures invests in startups to provide new perspectives and capabilities to accelerate sustainable energy solutions.

It's all about striking a balance to ensure that our relationship with startups are mutually beneficial, knowing when to provide guidance and resources when they need it, but also when to step back and allow them to thrive independently," says Petit.

This episode of Business Lab is produced in partnership with Schneider Electric.

Full transcript

Laurel Ruma: From MIT Technology Review, I'm Laurel Ruma, and this is Business Lab, the show that helps business leaders make sense of new technologies coming out of the lab and into the marketplace.

Our topic today is disruptive innovation in the energy industry and beyond. We use energy every day. It powers our homes, buildings, economies, and lifestyles, but where it came from or how our use affects the global energy ecosystem is changing, and our energy ecosystem needs to change with it.

My guest is Nadege Petit, the chief innovation officer at Schneider Electric.

This podcast is produced in partnership with Schneider Electric.

Welcome, Nadege.

Nadege Petit: Hi, everyone. Thank you for having me today.

Laurel: Well, we're glad you're here.

Let's start off with a simple question to build that context around our conversation. What is Schneider Electric's mission? And as the chief innovation officer leading its Innovation at the Edge team, what are some examples of what the team is working on right now?

Nadege: Let me set up this scene a little bit here. In recent years, our world has been shaped by a series of significant disruptions. The pandemic has driven a sharp increase in the demand of digital tools and technologies, with a projected 6x growth in the number of IoT devices between 2020 and 2030, and a 140x growth in IP traffic between 2020 and 2040.

Simultaneously, there has been a parallel acceleration in energy demands. Electrical consumption has been increasing by 5,000 terawatt hours every 10 years over the past two decades. This is set to double in the next 10 years and then quadruple by 2040 This is amplified by the most severe energy crisis that we are facing now since the 1970s. Over 80% of carbon emissions are coming from energy, so electrifying the world and decarbonizing [the] energy sector is a must. We cannot overlook the climate crisis while meeting these energy demands. In 2023, the global average temperature was the warmest on record since 1850, surpassing the 1.5 degrees global warming limit. So, we have no choice but to change the way we produce, distribute, and consume energy, and do it sustainably to tackle both the energy and climate crises. This gives us a rare opportunity to reimagine and create a clean energy future we want.

Schneider Electric as an energy management and digital automation company, aims to be the digital partner for sustainability and efficiency for our customers. With end-to-end experience in the energy sector, we are uniquely positioned to help customers digitize, electrify, and deploy sustainable technologies to help them progress toward net-zero.

As for my role, we know that innovation is pivotal to drive the energy transition. The Innovation at the Edge team leads the way in discovering, developing, and delivering disruptive technologies that will define a more digital, electric, and sustainable energy landscape. We function today as an innovation engine, bridging internal and external innovation, to introduce new solutions, services and businesses to the market. Ultimately, we are crafting the future businesses for Schneider Electric in this sector. And to do this, we nourish a culture that recognizes and celebrates innovation. We welcome new ideas, consider new perspectives inside and outside the organization, and seek out unusual combinations that can kindle revolutionary ideas. We like to think of ourselves as explorers and forces of change, looking for and solving new customer problems. So curiosity and daring to disrupt are in our DNA. And this is the true spirit of Innovation at the Edge at Schneider Electric.

Laurel: And it's clear that urgency certainly comes out, especially for enterprises. Because they're trying to build strong sustainability strategies to not just reach those environmental, social, and governance, or ESG, goals and targets; but also to improve resiliency and efficiency. What's the role of digital technologies when we think about this all together in enabling a more sustainable future?

Nadege: We see a sustainable future, and our goal is to enable the shift to an all-electric and all-digital world. That kind of transition isn't possible without digital technology. We see digital as a key enabler of sustainability and decarbonization. The technology is already available now, it's a matter of acceleration and adoption of it. And all of us, we have a role to play here.

At Schneider Electric, we have built a suite of solutions that enable customers to accelerate their sustainability journey. Our flagship suite of IoT-enabled solution infrastructure empowers customers to monitor energy, carbon, and resource usage; and enabling them to implement strategies for efficiency, optimization, and resiliency. We have seen remarkable success stories of clients leveraging our digital EcoStruxure solution in buildings, utilities, data centers, hospitality, healthcare, and more, all over the place. If I were to take one example, I can take the example of PG&E customer, a leading California utility that everybody knows; they are using our EcoStruxure distributed energy resources management system, we call it DERMS, to manage grid reliability more effectively, which is crucial in the face of extreme weather events impacting the grid and consumers.

Schneider has also built an extensive ecosystem of partners because we do need to do it at scale together to accelerate digital transformation for customers. We also invest in cutting-edge technologies that make need-based collaboration and co-innovation possible. It's all about working together towards one common goal. Ultimately the companies that embrace digital transformation will be the ones that will thrive on disruption.

Laurel: It's clear that building a strong sustainability strategy and then following through on the implementation does take time, but addressing climate change requires immediate action. How does your team at Schneider Electric as a whole work to balance those long-term commitments and act with urgency in the short term? It sounds like that internal and external innovation opportunity really could play a role here.

Nadege: Absolutely. You're absolutely right. We already have many of the technologies that will take us to net-zero. For example, 70% of CO2 emissions can be removed with existing technologies. By deploying electrification and digital solutions, we can get to our net-zero goals much faster. We know it's a gradual process and as you already discussed previously, we do need to accelerate the adoption of it. By taking an incremental stepwise approach, we can drive near-term impact while laying the foundation for long-term decarbonization goals.

Building on the same example of PG&E, which I referenced earlier; through our collaboration, piece by piece progressively, we are building the backbone of a sustainable, digitized, and reliable energy future in California with the deployment of EcoStruxure DERMS. As grid reliability and flexibility become more important, DERMS enable us to keep pace with 21st-century grid demands as they evolve.

Another critical component of moving fast is embracing open systems and platforms, creating an interoperable ecosystem. By adopting open standards, you empower a wide range of experts to collaborate together, including startups, large organizations, senior decision-makers, and those on the ground. This future-proof investment ensures flexible and scalable solutions, that avoids expensive upgrades in the future and obsolescence. That is why at Innovation at the Edge we're creating a win-win partnership to push market adoption of the innovative technology available today, but laying the foundation of an even more innovative tomorrow. Innovation at the Edge today provides the space to nurture those ideas, collaborate together, iterate, learn, and grow at pace.

Laurel: What's your strategy for investing in, and then adopting those disruptive technologies and business models, especially when you're trying to build that kind of innovation for tomorrow?

Nadege: I strongly believe innovation is a key driver of the energy transition. It's very hard to create the right conditions for consistent innovation, as we discuss short-term and long-term. I want to quote again the famous book from Clayton Christenson, The Innovator's Dilemma, about how big organizations can get so good at what they are already doing that they struggle to adapt as the market changes. And we are in this dilemma. So we do need to stay ahead. Leaders need to grasp disruptive technology, put customers first, foster innovation, and tackle emerging challenges head on. The phrase that's no longer how we do it," really resonates with me as I look at the role of innovation in the energy space.

At Schneider, innovation is more than just a buzzword. It's our strategy for navigating the energy transition. We are investing in truly new and disruptive ideas, tech, and business models, taking the risk and the challenge. We complement our current offering constantly, and we include the new prosumer business that we're building, and this is pivotal to accelerate the energy transition. We foster open innovation through investment and incubation of cutting-edge technology in energy management, electrical mobility, industrial automation, cybersecurity, artificial intelligence, sustainability, and other topics that will help to go through this innovation. I also can quote some joint ventures that we are creating with partners like GreenStruxure or AlphaStruxure. Those are offering energy-as-a-service solutions, so a new business model enabling organizations to leverage existing technology to achieve decarbonization at scale. As an example, GreenStruxure is helping Bimbo Bakeries move closer to net-zero with micro-grid system at six of their locations. This will provide 20% of Bimbo Bakeries' USA energy usage and save an estimate of 1,700 tons of CO2 emission per year.

Laurel: Yeah, that's certainly remarkable. Following up on that, how does Schneider Electric define prosumer and how does that audience actually fit into Schneider Electric's strategy when you're trying to develop these new models?

Nadege: Prosumer is my favorite word. Let's redefine it again. Everybody's speaking of prosumer, but what is prosumer? Prosumer refers to consumers that are actively involved in energy management; producing and consuming their own energy using technologies like solar panels, EV chargers, EV batteries, and EV storage. This is all digitally enabled. So everybody now, the customers, industrial customers, want to understand their energy. So becoming a prosumer comes with perks like lower energy bills. Fantastic, right? Increase independence, clean energy use, and potential compensation from utility providers. It's beneficial to all of us; it's beneficial to our planet, it's beneficial to the decarbonization of the world. Imagine a future where buildings and homes generate their own energy from renewable sources, use what's needed, and feed the excess back to the grid. This is a fantastic opportunity, and the interest in this is massive.

To give you some figures; in 2019 we saw 100 gigawatts of new solar PV capacities deployed globally, and by last year this number had nearly quadrupled. So transformation is happening now. Electric vehicles, as an example, their sales have been soaring too, with a projected 14 million sales by 2023, six times the 2019 number. These technologies are already making a dent in emissions and the energy crisis.

However, the journey to become a prosumer is complex. It's all about scale and adoption, and it involves challenges with asset integration, grid modernization, regulatory compliance. So we are all part of this ecosystem, and it takes a lot of leadership to make it happen. So at Innovation at the Edge, we're creating an ecosystem of solutions to streamline the prosumer journey from education and management to purchasing, installation, management, and maintenance of these new distributed resources. What we are doing, we are bringing together internal innovations that we already have in-house at Schneider Electric, like micro-grid, EV charging solutions, battery storage, and more with external innovation from portfolio companies. I can quote companies like Qmerit, EnergySage, EV Connect, Uplight, and AutoGrid, and we deliver end-to-end solutions from grid to prosumer.

I want to insist one more time, it's very important to accelerate and to be part of this accelerated adoption. These efforts are not just about strengthening our business, they're about simplifying the energy ecosystem and moving the industry toward greater sustainability. It's a collaborative journey that's shaping the future of energy, and I'm very excited about this.

Laurel: Focusing on that kind of urgency, innovation in large companies can be hampered by bureaucracy and go slow. What are some best practices for innovation without all of those delays?

Nadege: Schneider Electric, we are not strangers to innovation, specifically in the energy management and industrial automation space. But to really push the envelope, we look beyond our walls for fresh ideas and expertise. And this is where SE Ventures comes in. It's our one-billion-euro venture capital fund, from which we make bold bets and bring disruptive ideas to life by supporting and investing in startups that complement our current offering and explore future business. So based in Silicon Valley, but with a global reach, SE Ventures leverages our market knowledge and customer proximity to drive near-term value and commercial relationships with our businesses, customers, and partners.

We also focus on partnership and incubation. So through partnerships with startups, we accelerate time to market. We accelerate the R&D roadmap and explore new products, new markets with startups. When it comes to incubation, we seek out game-changing ideas and entrepreneurs. We are providing mentorship, resources, and market insight at every stage of their journey. As an example, we also invested in funds like E14, the fund that started out at MIT Media Lab, to gain early insight into disruptive trends and technology. It's very important to be early-stage here.

So SE Ventures has successfully today developed multiple unicorns in our portfolio. We're working with several other high-growth companies, targeted to become future unicorns in key strategic areas. That is totally consistent with Schneider's mission.

It's all about striking a balance to ensure that our relationship with startups are mutually beneficial, knowing when to provide guidance and resources when they need it, but also when to step back and allow them to thrive independently.

Laurel: With that future lens on, what kind of trends or developments in the energy industry are you seeing, and how are you preparing for them? Are you getting a lot of that kind of excitement from those startups and venture fund ideas?

Nadege: Yeah, absolutely. There are multiple strengths. You need to listen to startups, to innovators, to people coming up with bold ideas. I want to highlight a couple of those. The energy industry is set to see major shifts. We know it, and we want to be part of it. We discussed prosumers. Prosumer is something very important. A lot of people now understand their body, doing exercises, monitoring it; tomorrow, people will all monitor their energy. Those are prosumers. We believe that prosumers, that's individuals and businesses, they're central to the energy transition. And this is a key focal point for us.

Another trend that we also discuss is digital and also AI. AI has the potential to be transformative as we build the new energy landscape. One example is AI-powered virtual power plants, or what we call VPP, that can optimize a large portfolio of distributed energy resources to ensure greater grid resiliency. Increasingly, AI can be at the heart of the modern electrical grid. So at Schneider Electric, we are watching those trends very carefully. We are listening to the external world, to our customers, and we are showing that we are positioning our solution and global hubs to best serve the needs of our customers.

Laurel: Lastly, as a woman in a leadership position, could you tell us how you've navigated your career so far, and how others in the industry can create a more diverse and inclusive environment within their companies and teams?

Nadege: An inclusive environment starts with us as leaders. Establishing a culture where we value differences, different opinions, believe in equal opportunity for everyone, and foster a sense of belonging, is something very important in this environment. It's also important for organizations to create commitments around diversity, equity, and inclusion, and communicate them publicly so it drives accountability, and report on the progress and how we make it happen.

I was truly fortunate to have started and grown my career at a company like Schneider Electric where I was surrounded by people who empowered me to be my best self. This is something that should drive all women to be the best of herself. It wasn't always easy. I have learned how important it is to have a voice and to be bold, to speak up for what you are passionate about, and to use that passion to drive impact. These are values I also work to instill in my own teenage daughters, and I'm thrilled to see them finding their own passion within STEM. So the next generation is the driving force in shaping a more sustainable world, and it's crucial that we focus on leaving the planet a better and more equal place where they can thrive.

Laurel: Words to the wise. Thank you so much Nadege for joining us today on the Business Lab.

Nadege: Thank you.

Laurel: That was Nadege Petit, the chief innovation officer at Schneider Electric, who I spoke with from Cambridge, Massachusetts, the home of MIT and MIT Technology Review.

That's it for this episode of Business Lab. I'm your host, Laurel Ruma. I'm the global director of Insights, the custom publishing division of MIT Technology Review. We were founded in 1899 at the Massachusetts Institute of Technology, and you can find us in print, on the web, and at events each year around the world. For more information about us and the show, please check out our website at technologyreview.com.

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