A subscription to Harvard Business Review would’ve spared President Trump his embarrassing “Pittsburgh, not Paris” punchline, delivered as he pulled the U.S. out of the Paris climate accord. Abandoning the treaty was predicated on preserving American jobs, but if he’d tuned into our HBR webinar, Delivering Economic Resilience in the New Energy Paradigm, he’d have been forewarned that Pittsburgh dismantles his argument. Instead of suffering from the Paris accord, Pittsburgh and its corporate partners stand to profit as pioneers of a clean and green energy future. As Bill Peduto, mayor of Pittsburgh, said after the announcement, the city has already done what the Paris agreement calls for. What Pittsburgh is doing has implications, not just for policy, but also for business strategy and the future of public-private collaboration.
In his inaugural address, the president portrayed cities like Pittsburgh post-apocalyptically, as being filled with “rusted-out factories scattered like tombstones across the landscape.” That vision was correct…about 40 years ago. With the collapse of the coal and steel industries, Pittsburgh experienced an existential crisis in the 1970s, with a deep recession that decimated the city’s population. The crisis called forth what locals call “the Pittsburgh Way”: the ability of community leaders in government, business, and academia to come together and collaboratively tackle the city’s problems.
Pittsburgh’s leaders recognized that attracting businesses and talented professionals would require revitalizing its polluting and aging infrastructure. With the fracking industry booming, some thought the city’s recovery lay in fossil fuels. But with its “Smokey City” moniker, Pittsburgh had paid a heavy price in the last industrial revolution; most people didn’t want to go back to the “two-shirt-a-day” metropolis where streetlights burned around the clock to pierce the smoggy air. The choice for Pittsburgh’s leaders was investing in the future or the past.
The energy that ran the city came from a centralized macrogrid-based power system. Created at the turn of the century by industrialists like George Westinghouse, Pittsburgh was arguably the birthplace of the energy system that lets you toast your bread with electricity generated hundreds of miles away. While world-changing in its day, Westinghouse’s technology is now decades old, and years of underinvestment have left the macrogrid increasingly inefficient and unreliable. Repairs to get the system up to snuff are projected to cost tens of billions of dollars.
To tackle the infrastructure challenge, Pittsburgh’s city leaders pulled together a broad collaboration that included Carnegie Mellon University, the University of Pittsburgh, and Duquesne University along with corporate partners such as Duquesne Light, NRG Energy, and Siemens in an effort to think strategically with local businesses and nonprofits about moving the city forward.
The resulting plan has put Pittsburgh at the forefront of the clean energy revolution. Instead of rebuilding the old centralized system, the smart city project moves toward an intelligent series of district-scale microgrids that interconnect energy generation, transportation, and communications to provide high-tech infrastructure for universities, health care campuses, data centers, communities, and even a city-owned electric vehicle fleet. The new decentralized system will be cleaner, greener, and more resilient, since microgrids can share power in the event of a district outage. With the intelligent data system, even the batteries in electric vehicles become part of the system’s stored energy resources.
Pittsburgh is pioneering a renewable energy system, one that is driving job growth and economic dynamism. The city already employs 13,000 people in renewable energy and energy efficiency. Compare that with 5,300 people in iron and steel (there are only two operating coal mines left in the county), and you can see why Pittsburgh supports the Paris accord. Producing greener energy has helped clean up the city and create a quality of life that attracts companies and talent. A vibrant startup scene is emerging alongside university research labs. Google has established a Pittsburgh campus and has doubled its staff. Uber chose Pittsburgh to launch its self-driving cars initiative.
Is there a lesson here for executives? The dumping of the Paris agreement is emblematic of a larger issue. With the deconstruction of the administrative state, there will be no national energy policy. Mayor Peduto recently noted that Pittsburgh is “not going to find the help in the federal government.” In the face of an aging infrastructure, it is likely that companies will need to forge their own energy policy. Executives, however, are way behind. Our HBR survey found that the majority of readers agree that we need more efficient and reliable energy, yet only a fraction of the companies we surveyed said they had an energy strategy. Even fewer are generating their own energy or are working on any kind of strategic initiative around energy. That attitude was fine when there was a national consensus around electrifying the country with abundant and reliable power, but that era has passed.
Companies could set up their own corporate campus energy systems and go “off-grid,” severing their reliance on the centralized system. Advances in renewable energy generation and storage technologies make this increasingly feasible. The truth, however, is that no company is an island. All businesses depend on a network of suppliers and local services that also run on energy. And companies depend on workforce talent that wants to live in communities with modern, clean infrastructures. Building isolated gated energy communities is unlikely to create the satisfying, dynamic city life of art, culture, and entertainment that companies and their employees seek.
This is why the Pittsburgh example is so telling. It’s up to cities. Your employees work in cities. You work in cities. Sooner or later, corporate leaders will be drawn into addressing the energy future of the communities in which they operate. The collaborative public-private spirit of the Pittsburgh Way will be needed across the country if companies are serious about making America great again.
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07 September 2018
17 September 2018