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strategy and business
 / Summer 2013 / Issue 71(originally published by Booz & Company)


Innovating for Energy’s Future

S+B: Where do your best new ideas come from?
We look across conventional boundaries. For example, many people know that one of the big problems with wind generation is that it’s an intermittent resource. We’re developing the next generation of compressed air energy storage, or CAES. This technology uses power generated by the wind that blows during the night to compress air and inject it into the ground. The air is then extracted under exceedingly high pressures during peak periods of the day, using turbines to generate electricity.

CAES technology has been around for a while, but we are improving its efficiency by exploring more advanced cycles that will help reduce operating costs and make CAES an economically viable option for bulk energy storage. This advanced application of CAES came from the joint efforts of our carbon sequestration group and our renewables group. When we put these two teams together, they said, “Let’s not just think about sequestering CO2 underground. Let’s think about how to use wind energy and compressed air underground.”

S+B: Do you kill many ideas?
Oh, sure. In fact, I would argue that your greatest indicator of success is how many ideas you kill. It proves that you’re developing ideas and pushing the envelope. And it proves that you have the discipline not to pursue just any idea—and sometimes that’s the hardest part of all, especially once you’ve started down the road.

Sometimes we’ll say, “That just isn’t going to work now, but let’s keep experimenting with it.” The original coal liquefaction idea eventually morphed into gasification from the ground up. Then we blended that with carbon capture technology, and now we’re on the way to bringing the concept to reality in Mississippi. It took some time, but ultimately it emerged into something really valuable.

Right now, we’re building a nuclear power plant and a 21st-century coal plant, converting other plants to gas, adding environmental equipment, and developing sources of renewable energy. That’s a total commitment of about $20 billion. A little bit of R&D goes a long way if it can raise the efficiency of these assets or reduce the amount of capital investment needed. Even our failures have more than paid for themselves in terms of cheaper energy, and that’s what matters most to our customers.

Reprint No. 0017

Author Profiles:

  • Edward H. Baker is a contributing editor to strategy+business.
  • Tom Flaherty is a senior partner with Booz & Company’s energy, chemicals, and utilities practice, and is based in Dallas.
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