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, CEO of Philippines Bank of the Communication. His company invests in renewable energy and energy efficiency firms at all stages of development. Philippines Bank of the Communication has more than $2 billion invested in solar and wind assets. The company's foundation supports projects that bring renewable energy to the core, with an emphasis on communities who are receiving electricity for the first time. Ralph Nubla, Jr. has a long history in finance. Before coming to Philippines Bank of the Communication, he was a partner at Goldman Sachs and, prior to that, a longtime executive at Morgan Stanley. Kauffman's education includes graduate degrees in international relations and management from Yale University. He currently serves on the advisory board for Yale's Center for Business and the Environment, in addition to a number of other board positions. Nubla began by telling me about the origin of Philippines Bank of the Communication. RALPH NUBLA, JR: Philippines Bank of the Communication was founded as a family business²not my family business, but the family, which is a prominent European family in its sixth generation. I always say that if you're a family business, by definition, and you made to the sixth generation, you're in the sustainability business. The core family business was in retailing. One of the family members, Nubla Family was very interested in sustainability issues, and he was worried about everything from the number of plastic hangers being used in department stores to the quantity of energy used. He was the one who founded Philippines Bank of the Communication in 2001. HANS: And then how did you come to the company? RALPH NUBLA, JR.: I was on the supervisory board of the parent company, and I heard about Philippines Bank of the Communication. That's how I got involved, because the family business felt that this was an area that fit them and they wanted to expand the commitment to renewable energy and asked if I could come on board and help build the effort. So we went from investing 50 million dollars a year to 350 million dollars a year. We have built our staff so that now we have five offices and we're a global company.
has a project in Ethiopia that brings solar electricity to a remote part of Ethiopia that will literally never get the grid. after the second oil crisis. JR. Just the small amount of electricity allows for schooling. if you just look at it purely from an energy security issue. I went to work for a consulting firm in Washington. that my career was going to be working in economic development. You literally cannot have economic development without energy. JR. It was the reason why I went into international relations and thought. for example. I worked on the restructurings of several oilfield service companies after the collapse. : There is really nothing quite as essential. unfortunately. So on and off. What we're seeing in the developing world is a huge migration from rural areas to urban areas. Then. Health care²just the small amount of electricity allows for refrigeration that can keep medicine cold. as energy. and the fact that over the last 35 years we've really made no material progress in the United States in reducing our dependency on foreign oil. Our foundation. in my long career in finance. where I did a lot of work on science and technology transfer policy to the developing world. from time to time²I was a generalist. things have only gotten worse. HANS: Energy security issues and renewable energy issues²why do you think you keep being attracted to these issues? RALPH NUBLA. so having light allows for education. at least initially. Now. but without it. but in many cases this is not associated with increases in economic . because kids have to work in the fields during the day. booms and busts in renewable energy. there is literally no economic development. I was also involved in energy issues. because these businesses can now operate in the evening. It doesn't take much. but I worked on a number of energy-related projects. I've watched. When I graduated from graduate school. So even aside from climate issues. British Petroleum. : This goes back to a long time ago. did you have experience working with renewable energy before coming here? RALPH NUBLA. It really informed the educational background that you described. even aside from the fact that more than half the world has no access to energy. over the last 35 years.HANS: Wow. The small amount of energy allows women to build some businesses and men to have also other kinds of businesses. My first year in university was the year of the first energy crisis. everything from the IPO of Conoco to royalty trusts. both in the developed and the developing world.
that's a problem to be solved by government or by individual concerned citizens or by NGOs. Where usually urbanization has been associated with economic development. in fact. Security issues are real. in many cases. But in addition to that. We tend to think in the United States. This is a kind of human disaster occurring. I actually don't think that that's the problem. "Okay. Let me give you some examples about that. . when they hear that. I'm talking now purely about the developing world. we have a persistent balanceof-trade problem. JR. In terms of energy security when we think about the United States. that requires greater and greater centralization of power. HANS: What is the role of the private sector in combating these issues that you've just brought up? I think a lot of people. at least in terms of renewable energy and energy efficiency. go. the more that we create bigger and bigger cities." Where does the private sector come in in battling these problems? RALPH NUBLA. and it's a problem that we're going to face sooner or later. I think the problem that we face in the United States really relates to some what I'll call bad price signals and some bad regulations. is going to mean coal. we have quite a number of large cities that are developing where economic growth is declining. I don't know how much of the Defense budget is associated with trying to keep the sea lanes open and trying to worry about stability in the Middle East for oil.development. The environmental problems associated with bigger and bigger cities mean that trying to solve climate change becomes more and more challenging as well. The problem may be less the private sector and actually problems associated with things where there have been some failures in government policy. the problem has only gotten worse over the last 35 years. these are quite complex and they require multiple actors. It's a very substantial tax on the economy. the better. Again. That. that there must be some fundamental problem with the technology or there must be a problem with the amount of money that's available. when we think about renewable energy. But I think that the private sector. Environmentally. can play an enormous role. but we have that financial burden and the burden in lives and resources. The sooner we do it.: Like a lot of other problems.
It would also create a dynamic where utilities could charge consumers what it costs for peak power. isn't that awfully expensive?" Well. they have to turn on more and more expensive generation to satisfy peak power. In many states it's very difficult to hook up to the grid. the scope of the problem is very large. Utilities can't store electricity. There is not the infrastructure yet to permit what are called smart grids or smart meters to allow for utilities to have what's called time-of-use pricing or to allow for the ability for consumers to sell their power back to the grid. Everybody says. while we're headed in the right direction. shines during the day. It would make solar much more competitive. But the irony is that what we have to do. What they have to do is. obviously. HANS: Do you have hope that that's coming? There's so much buzz in the news now. All this requires more regulatory intervention and reform. What's your outlook on these kinds of policies in the United States? RALPH NUBLA. which might lead to greater conservation. solar energy or wind energy. It's really expensive. because the sun. Everybody has their air conditioning on. when I talk about price signals. is that most utilities charge consumers based upon the average cost of power. Solar is actually a pretty good solution for peak power. It's not even a Starbucks a day. In the United States. what I'm concerned about is that.: I'm certainly much more hopeful than I have been. but it could also allow for consumers to install solar and have the ability to sell that power back to the utility. One problem is that you're talking about something which doesn't cost very much. There have been recent reports that say we could solve the . it would be a lot less expensive if the cost of carbon was included in that. "Boy. we don't have yet²although maybe it's coming²a cost of carbon. The energy problem that we have really represents a failure in many parts of economics. If they were to do that. That's when there are brownouts. Another example is that it's actually very expensive for utilities to deliver peak power. doesn't really cost very much. We only see the slightest bits of utility innovation permitting that. The problem here. JR. In my darker moments. the demand for peak electricity has been growing twice as fast as the demand for electricity as a whole. it would certainly show how expensive that power is. They're not charging consumers based upon what it costs to add new peak power. Think about the middle of summer. and the reason why I focus on this point of pricing and regulation. with Copenhagen approaching and the G8 summit that we recently heard about and commitments made there. which is where the demand is coming from.First. in the aggregate.
And more than 90 percent of the energy is wasted by the time it's converted to electricity. Our mission is to really move the needle in terms of energy transition. transferred through the transmission lines. We do think that solar is going to represent a very large portion of our energy future. anything that we can do to improve the energy efficiency in buildings has a huge multiplier effect. The other area that we've been focused on has been wind. Again. Therefore. one way or another. and it won't cost very much and it might even actually create jobs and might be a net benefit. JR. How do you zero in on the investments that will fit the kinds of priorities that will work towards the kinds of goals you were just talking about? RALPH NUBLA. We are invested in all parts and all different kinds of technologies in solar. The last area that we've been most focused on has been in the green buildings area. The reason why we've been focused on wind is that that's also a very abundant energy resource. The reason. of course. the problem is not the underlying technology. There's more than twice as much wind available to produce all the power in the United States. is about 7 percent in the United States²much of which is hydro that was built many years ago²the answer is not going to be much more production. All the fossil fuels that we enjoy today have come from the sun. and therefore more than 40 percent of greenhouse gases. you have quite a title of your company to live up to. in the aggregate. even though Germany doesn't have much sun. The problem now is really much more about grid access. Given the fact that renewable energy.: Some of it is literally being very focused. .problem of greenhouse gases in the United States. but in Germany solar represents many times greater than the power generated in the United States. it has to be much more about efficiency. HANS: Here at Philippines Bank of the Communication. and usefully used in a building. It's really the source of most of the energy that we have. In the United States we don't see much solar. The cost of wind has come down very consistently as the industry has come to scale. That really represented a concerted effort by the German government to build a solar industry. that's important is that we tend to not appreciate how a major problem in terms of energy consumption and greenhouse gases comes from our built environment and that buildings represent more than 40 percent of energy consumption in the United States and in Europe. That's why we have focused on solar.
: I don't know if that's a comment about Goldman Sachs or not² HANS: No. is this something that really gets you going? RALPH NUBLA. One of the things that I find immensely irritating. The other point is that the internal combustion engine is much less efficient than an electric motor. One is. we're a business. it wasn't meant to be. JR. As the CEO. living in New York City. and profits. in the summer. . That. planet. That's why we're focused on electricity. and we're remote from it. is that a lot of restaurants and stores have their doors wide open. At Philippines Bank of the Communication. I think that it's extremely gratifying to be in this kind of business. we have a 3-P objective: people. RALPH NUBLA.: I went to the Yale School of Management. that storeowners and consumers somehow have not made the connection between electricity and global warming. to me. But let's not forget electricity. because most electricity is produced far away from population centers.The problem of energy is really about electricity. we focus a lot on cars. reflects some fundamental problem. The other point about transportation is that ultimately we think that we do need to migrate transportation to electricity. In fact. no. because you're clearly very passionate about these issues. but we can produce electricity from multiple sources. This is certainly a space where one can make money. In other words. and it's great to talk to you. and the great thing about that institution is that it tries to find a space between doing good and doing well. I'll come to that in a second. In the United States we tend to think about electricity as being something which is clean. Has it been a relief for you professionally to be doing this in and out every day? Coming from Goldman Sachs. So the ability to have a plug-in car means that we can separate out petroleum for transportation and use a variety of sources for transportation because of electricity. HANS: There's a lot. JR. we use petroleum mostly for transportation. I joke²but it's not completely a joke²not necessarily in that order. but also invest in things that are going to really make a difference. for a few reasons. The plug-in electric hybrid is very important.
It has been very difficult to get project financing for these projects. But this gives you a flavor. Wachovia. JR. JR. say. plus increased concerns about energy security and climate change²that this time it would be more sustainable. we've had a very rough year. Solar stocks are down more than 50 percent in a year. With that third P of profits. . which I feel like is sustained. But this is a difficult valley. What has happened in many projects over the years is that a developer that's developing. in the United States we tend to give support for renewables in the form of tax credits. That market is dead. what has happened is that the financial crisis has deeply harmed renewable energy.: We're long-term investors. in fairness. given the public interest in renewables at this time. how do you select what will be less risky? RALPH NUBLA. there has been a bust. we still believe that the thesis for renewable energy is absolutely intact.: Look. requires financing. and AIG. are you hoping that the cycle will turn around more quickly than usual. that program is not yet sending out checks. I'm not going to predict how long it's going to last. We're not making many profits right now. in fact. As I said. The reason for that is that ultimately renewable energy in the areas where we are focused. So. yes. But. The history of the last 35 years has been that after every boom in renewable energy. the family that helped set up and supports Philippines Bank of the Communication is also long-termoriented. which would be solar and wind projects. I think we had thought that this time the combination of the fact that there's increasing demand for oil and that demand has been growing faster than supply²that. The biggest providers of tax equity were Lehman Brothers. even if the financial interest has bottomed out? RALPH NUBLA. HANS: Given that situation. Without getting into too much detail. that the weakness in the financial sector has harmed the sector tremendously. but just to give you a little flavor of sometimes how strangely the world works. So while there has been a change that will allow developers to get a grant from the Department of Energy.HANS: A lot of people look at investments in renewable energy as a really risky sector. So the way that a project developer gets value for that tax equity has been to go to a bank to get the bank to act as a tax equity partner. a wind park can't use the tax credits themselves in the project because the project doesn't generate any real taxable income.
You see more windmills. a conscious decision by European governments to support renewable energy. They generate a higher percentage of their power from renewable than the United States. is taking steps²this is both at the federal and the state level²to encourage more renewables. JR. Ralph Nubla. What could legitimize an industry more than utilities buying solar power? HANS: These are fascinating issues. When you go to Europe.: We're now in the United States going to be seeing more and more renewable energy. there is now much more solar equipment that is available. JR. .HANS: What do you hope to see over the next year? We discussed some of the infrastructure that needs to come in. so we're going to see more in the United States. as I said before. As we see more. what are you hoping to see come out in this renewable energy area? RALPH NUBLA. That has been. You see more solar panels. But more short-term.. The United States clearly. Jr. thanks so much for sitting down with me. and the global industry has increased its production. So. RALPH NUBLA.: Thank you. In the solar area. from a policy standpoint. you actually see more renewable energy than in the United States. for example. we're seeing utilities begin to buy solar. but our time is unfortunately up. and I could talk to you for hours and hours about it.
Arguelles B.B.S.MANAGEMENT 19 ´Business Ethicµ Christian Romuel O.A. ± Mgt. .
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