G.E. CEO Immelt Is Bullish On Profitability of Ecomagination

Jeffrey Immelt

As one of the world’s largest and most successful multi-national corporations, G.E. stands in a unique position to drive the innovations of the green tech industry. With the launch of its "Ecomagination" initiative, G.E. was one of the first companies to recognize the broad scope of applications available to green tech innovation. In order to share some of G.E.’s accomplishments and catch up with the company’s shareholders, CEO Jeffrey Immelt assembled many of the company’s most innovative corporate partners for a press conference kicking off the “Green is Universal” Conference on May 25 at Universal Studios.


Jeffrey Immelt: Two years ago this month, G.E. launched an initiative called “Ecomagination.” We looked across our company and recognized that a focus on environmental technology could be a big business initiative for the company. The concept we worked on at the time was this notion that green is green. In other words, the time had come that, through technology, we felt like we could create a good business initiative to focus on conservation and greenhouse gas emission reduction and do good business at the same time.

One of the things we believe in at G.E. is metrics and accountability. So two years later we have the opportunity to visit with our partners and customers. What you’ll hear from a series of people who are in different businesses is that green is now becoming pervasive—that it’s becoming universal, that working on emissions reductions, conservation, and clean water is simply good business. In our case, it’s been growing the company. In the last few years we have generated a $50 billion backlog of Ecomagination products and technologies. We see this as a huge source of growth for us in the future of the company, one we think we can manage for years to come.

When we launched the initiative as a company in 2005, one of the concerns we had was it would seem too soft—that for a company that prided itself on being tough-minded, there wouldn’t be hard enough metrics around to demonstrate how it could create shareholder value and drive future growth.

At that time, we said we were going to have four big commitments and continue to revisit those commitments as time went on. First, we pledged to double our R&D and Ecomagination, in other words, in technologies that reduce global warming and promote clean water. We’re well on the track. We had $700 million in 2004. We had close to $1 billion in 2006. We’re well on our way to $1.5 billion by 2010. We see fresh technology and lots of technology in our pipeline.

Second, we said that from investors’ standpoint we’d double our value. In 2004 we had $6 billion in revenue. In 2005 we had $10 billion. In 2006 we had $12 billion, on our way to $20 billion. I’m convinced that we can exceed that number and expand as time goes on.

Third, we committed to lowering our own emissions by 1 percent by 2010, which translates to the impact of 30 percent given our growth. And we’re currently on a pathway to lower it by 4 percent. One thing that surprised us is that it’s a way to save money as well as lower emissions.

The last thing we said is that we would communicate our progress and engage in public dialogue. We’ve been transparent; we have an Ecomagination report that talks substantively about what we’re doing. We were also one of the founding members of the U.S. Climate Action Partnership, which was initially a group of ten businesses and four NGOs formed with the aim of providing a catalyst for public policy change in the area of global warming.

There are three points worth making that capture what we see about this initiative. The first one is that environmental solutions are pervasive. This is no longer a fringe topic. It’s no longer a niche topic. This is now a mainstream topic that is being driven across the broad economy. Second, the technology and the service solutions are real. Some may take time to put into place, like coal gasification, sequestration, or hybrid technologies, but they are technologies that can be commercialized over the next five or ten years. Finally, this interest has accelerated, sometimes driven by public policy—things like renewable performance standards. But a lot is driven by businesses that finally said, “Let’s get ahead of this theme. Let’s get ahead of the trend. Let’s invest before we have to because we see it coming.”

Ecomagination Panel Excerpts:

Lewis Gillies, CEO, Hydrogen Energy, announces creation of Hydrogen Energy: Last night in London we launched a company called Hydrogen Energy, which is a joint venture between B.P. and Rio Tinto to develop and operate 10 to 15 hydrogen power plans in combination with carbon storage over the next decade. On Monday, in Australia, we announced plans for development of our third such hydrogen power project: a 500-megawatt coal-fired hydrogen power plant with carbon storage. This follows from the launch of the second project here in Carson, California, which was launched last year with the governor [of California] in attendance. The project continues to make very good progress commercially; it’s developing very well. Along with G.E., we’re confident in its viability.

From a policy perspective, I can say there is no state more committed to making this happen than California. And now today, along with G.E., we’re announcing an alliance that will speed and develop the deployment of this technology that will dramatically reduce CO2 emissions from the power sector.

Jim Donnell, CEO, Poseidon Resources, updates Carlsbad Desalination project: [Water] is fundamental in addressing today and tomorrow’s environmental challenges. Here in California, it’s easy to argue that water represents the most significant environmental challenge the state faces. The ability to supply the citizens with ample quantities of safe drinking water is paramount. California’s citizens require and deserve to have environmentally responsible, cost-effective, and secure water supplies.

Today, we at Poseidon announced a creative partnership with G.E. that will accomplish exactly that. Down in Carlsbad, we have the Carlsbad Desalination facility, which, when in commercial operation, will be the largest of its kind in north America, producing 50 million gallons of water a day, which would meet the needs of roughly 300,000 citizens in San Diego county. We at Poseidon have been working on this project for almost a decade, spent a tremendous amount of our shareholders’ capital, and we’ve had the good fortune of forging a public/private partnership with the key agencies in San Diego County... The Carlsbad facility will use G.E.’s ZeeWeed Ultrafiltration membrane, which is state of the art in the water pre-treatment technology. It drives the cost down because the energy consumption goes down for the Carlsbad project, yet we make a more pure water project.

Jim Young, chairman and president, Union Pacific announces the world’s first hybrid locomotive: You may wonder why a 146-year-old company is interested in energy efficiency and reducing emissions. Let me put a little business context around what this means to Union Pacific. We’re in the transportation business, and we transport most of the goods that people use in their daily lives. Last year, we burned 1.4 billion gallons of diesel fuel, the largest amount of diesel fuel consumption in North America. We’ve had great success over the last several years in improving efficiency. G.E. locomotives have been a big part of that success, and going forward we’ve committed to continued efforts to improve our efficiency.

We can move one ton of freight on the railroad almost 500 to 700 miles on one gallon of diesel fuel. Most of the communities we operate in grew up around the railroad. We believe that we need to be part of the solution in terms of emissions and reduced congestion on the highways. We really believe that railroads can help reduce emissions in local community areas. We’ve had good success so far. In fact, in California we’ve reduced emissions almost 28 percent, even though we’ve grown our volume. And we just committed to another 50 percent reduction in emissions on top of growing volume over the next several years. A big part of that is going to be the investment of technology in the new G.E. hybrid locomotive.

Charles Zimmerman, vice president of new format development for Wal-Mart explains smarter lighting: We worked with G.E. a couple of years ago to develop the first motion-activated LED lighting system for refrigeration cases. We announced last year that every store we open this year would include that technology. Recently we announced that we’re retrofitting 500 existing stores with that technology. And there was reference to Wal-Mart being the largest retailer in the world. Maybe more importantly for this discussion, we’re the largest private consumer of electricity in the world.

I’m focused on shareholder return and returning low prices to our customer so that LED lighting reduces our total building electric footprint by 3 percent—only a small piece of that is the actual lighting. The rest is the energy consumed by the refrigeration. Generating less heat and using less refrigeration has been a huge win for us. Our customers say, “That’s great, but LED lighting for my use is a few years out.” We stepped up and made a commitment to sell over 100 million [compact fluorescent lamps] this year. Thanks to G.E. and others stepping up to the plate and committing to reduce the mercury content below the 5 milligrams specified, even mercury is now less of a concern. As [WalMart President] Lee Scott says, sustainability is a business imperative. There’s no reason why as a consumer you wouldn’t do these things—no reason but you couldn’t do these things—and that’s really our motivation.

Don DeMarie, president, Masco Corporation, announces homebuilder program: We started Environments for Living in 2001 to address livable issues for builders. Science requirements help builders construct homes that are healthier, more durable, more comfortable, and more energy efficient than code-built homes.

To get an idea of how powerful the program is, we can guarantee the comfort in homes so that no room will vary more than three degrees from the set point of the thermostat. We created strong consumer value propositions like guaranteed heating and cooling costs. Those allowed customers to pass on the incremental cost of quality.

This was a business proposition for us from day one. We have over 100,000 homes in the program, making it the most successful program of its kind in the world. The world has changed since 2001—so have homebuyers. Energy costs are continuing to rise, and global warming is on everyone’s mind. Builders are asking us to build more energy efficient products.

It’s made good business sense to expand the program to address these growing demands. But we never lost sight of the business model. And we continue to add additional features to our new certified green level homes. Adding more efficient water requirements makes sense—like Delta low flow faucets and G.E.’s front-loading washing machines. By adding energy efficiency lighting from G.E., we drive to achieve higher levels of energy efficiency. We also looked at alternative energy options such as solar power from G.E. to the installation capabilities of the portfolio products we offer in new homes. Requirements have made great business sense to builders as we help them find what customers want and provide the team with marking options that help sell upgrades for a profit.

Rob O’Neel, CEO, RWO Acquisitions, explains energy efficiency in master-planned communities: We have a project in South Carolina [Withers Preserve]. It is an old Air Force base recycled into a fantastic new inbuilt community near the beach. There’s a new town center being built right now, 200 acres of parks installed, and 30 acres of lakes. We are going to develop almost 4,000 homes.

One of the hurdles that we faced was getting people out of the automobile. We spent time developing the neo-traditional neighborhood, hiding a garage, making sure there are amenities within seven minutes’ walk of everybody—which includes the beach. G.E. and Masco have given us a program for our clients to get an energy efficient home. When we tell a customer that they can save 20 percent guaranteed on energy, or save 20 percent on their indoor water use, or save 20 percent on their CO2 emissions as part of the program, it just tops off what we’re trying to accomplish at Withers.

David Vieau, CEO, A123 Systems, explains progress toward plug-in vehicles: [Plug-in hybrid vehicles] are the next step and the logical path toward making vehicles electric. Think of it as a Prius on steroids.
We recently demonstrated a plug-in hybrid vehicle that delivers over 100 miles per gallon for the average driver. That represents a 75 percent saving in fuel compared to their current vehicle and a 50 percent reduction in emissions. The problem has been the batteries, and it’s understood that the battery problem has been a result of older technology; batteries are either too big, too heavy, or they don’t have a sufficient life. The overall cost effectiveness hasn’t been sufficient.

A123 started five years ago with a small handful of entrepreneurship. Now we have over 300 people. We’ve raised over $100 million. These batteries have achieved much smaller size, lighter weight, better power, longer life, and better cost effectiveness.

One of the critical aspects of developing something that will change the game of transportation is to make sure that what you do is environmentally responsible in its use and in its development. So the materials we employ are abundant on the earth: nickel aluminum, copper, and carbon. So from cradle to the grave there’s a benefit of the battery technology. We started off being responsible, even as a small company. So, we teamed up with Black and Decker and Dewalt to create a new generation of cordless power tools, which gave us an opportunity to demonstrate what the batteries could do in volume. We’re working with General Motors on the next generation plug-in hybrid vehicle, Saturn Vue, and working with G.E. on a fuel cell bus hybridization program.

The batteries of the future have begun today.