Upgrading power grids to optimize green energy will support growth. “Every time a country develops it helps all consumer products,” says Brito. “More development translates into more beer sold.”
Carlos Brito, the CEO of Anheuser-Busch InBev, has been thinking for a long time about how the beer business can conserve energy. He recalls how back in 2001 he was a regional manager in Rio de Janeiro during a drought that had reduced the hydropower from Brazil’s dams. Brito’s customers, the owners of cafes and grocery stores, were ordered to cut power consumption by a third. They had to make tough choices about what to unplug. He made the case that coffee makers and sandwich machines were bigger energy hogs than the coolers where they kept the Bohemia. “Beer is higher margin, so they unplugged the ice cream freezers,” Brito, 57, says with a laugh.
Throughout a decade building the world’s beer Goliath, with its three global brands Budweiser, Stella Artois and Corona, Brito has focused on cutting costs. His big new kick: green electricity. He announced last week a commitment to make the company’s roughly $400 million a year worth of purchased electricity 100% green by 2025. “In some markets it’s cheaper to do this route. It makes business sense and it lessens the environmental impact.”
“Everything boils down to energy. It ties in to everything,” he says. Brito has made green consciousness the standard. The company buys thousands of beer coolers a year, always seeking those with more efficient compressors and eco-friendly coolants. Its truck fleet features hundreds of big rigs powered by clean compressed natural gas instead of diesel. In Argentina is uses biodiesel made from soybeans. At the giant Bud brewery outside of Houston they heat their boilers by burning methane captured from landfills. A brewery in upstate New York will soon run on solar. And on and on.
Even so, this new initiative is a pretty big deal. The company says its purchased electricity amounts to about 6,000 gigawatt hours per year. That’s akin to operating a 700 megawatt baseload power plant, or flying 5 jumbo jets around the clock. It’s enough to power about 500,000 American homes. At the U.S. industrial average power price of 7 cents per kwh, that electric bill would come to $400 million a year. (Company net income last year was $2.8 billion on $45.5 billion in revenues.)
Let’s put this 700 mw of baseload power into renewable energy scale. The biggest solar photovoltaic power station is the Solar Star in California (owned by BHE Renewables), which has a 580 MW capacity, using 1.7 million panels over 3,200 acres. Keep in mind that solar panels are only 25% efficient, so you’d need four of those 700 mw wind farms (plus a mountain of batteries) to provide 700 mw of 24/7 power. In short, to meet Brito’s goal, AB InBev will need the renewable energy equivalent of the world’s four biggest solar farms.
Brito has no doubt this can be done. And for a lower cost than they pay now. “It’s like anything in tech, it’s only getting better and cheaper with time. Look 20 years back and wind and solar were not competitive. Now in Mexico it is 20% cheaper to buy 100% wind.” In the past 5 years the cost of building utility-scale solar PV in the U.S. has dropped from about $2.60 per KW to $1.10. Last month Brito inked a deal with Spanish utility giant Iberdrola to buy 490,000 megawatt hours per year from a 220 mw windfarm to be built in the Mexican state of Puebla. This will meet all of AB InBev’s purchased power needs in Mexico, including for the company’s largest brewery, in Zacatecas, home of subsidiary Grupo Modelo and its flagship Corona.
For at least as long as interest rates stay low, AB InBev will enable developers to finance green power just by promising to buy the output from such projects under a Power Purchase Agreement. The beauty of the PPA model is that it requires no capital outlay by AB InBev — they simply contract with the wind farm developer to buy a set amount of power over a long term, usually 20 years. To hit that 700 mw number, Brito would need the output from 10 of these Iberdrola wind farms (remember wind capacity is only 33% efficient), plus a mountain of batteries. This is doable.
Brito has come to be known as a ruthless cutter of costs and squeezer of middlemen. In recent years AB InBev has reduced the amount of water it uses from 3.5 gallons of water per gallon of beer, down 12% to 3.1 gallons. For a company that makes 13.2 billion gallons of beer a year, that amounts to a savings of 5 billion gallons of water. “It’s not cost cutting per se. Use less water, it’s good for business,” says Brito. “Use less power, same thing.”
The revolution in energy efficiency is real. According to the Energy Information Administration, U.S. electric-power demand peaked in 2007 at 4 million-gigawatthours per year, and has since fallen 2% to 3.92 million at the same time that U.S. GDP has increased 28% from $14.7 trillion to $18.8. Thank CFLs, LEDs, the internet of things and the rise of smartgrid devices like the Nest themostat. We’re simply getting smarter all the time about how to save energy and integrate renewable energy into the old power grid.
The unfolding Battery Boom will keep this trend going and help Brito accomplish his energy goals. Analyst Hugh Wynne with SSR points out to me that global annual sales of large-scale lithium ion batteries have grown 200-fold, from 250 MWh in 2010 to 52,000 MWh in 2016. Meanwhile the cost of lithium ion battery packs has dropped from $1,000 per kwh in 2010 to $190 per kwh in 2016. Wynne’s data indicates that the current all-in cost of cycling electricity through battery systems works out to about 25 cents per kwh. That will continue to fall.
Cheaper batteries are bringing more business to San Francisco-based Stem, which has attracted $350 million in financing to install big banks of lithium ion batteries in commercial and industrial buildings for the likes of Cargill, Albertson’s, Marriott, Whole Foods Market and Wells Fargo. (Stem hasn’t done any work for AB InBev.) Stem’s software learns a building’s power-consumption habits and solves for the lowest-cost electric bill — which often means charging batteries at night when wind power is cheap and discharging during peak in mid-afternoon. John Carrington, CEO of Stem, insists every big commercial building will have battery banks in 10 years.
The Trump Administration has begun to roll back Obama’s federal regulatory legacy on climate change, including the Clean Power Plan. It’s still reviewing the obligations that America assumed under the U.N.-brokered 2015 Paris Agreement on climate change and carbon emissions. Ernie Moniz, Secretary of Energy under Obama, says it doesn’t much matter what Trump decides. “The die is cast in terms of heading to a low-carbon future,” Moniz told NPR this week. Indeed plenty of states and countries are determined to reduce carbon emissions. The administration of President Enrique Pena Nieto has initiated reform of Mexico’s deeply subsidized and inefficient electric power market and embraced the goal of boosting Mexico’s renewables cut from 20% now to 35% by 2024.
After a decade in which he acquired Anheuser Busch (2008), Grupo Modelo (2012), and finally last year, SABMiller, Brito has assembled an incredible 25+% share of the global beer market. Now Brito’s challenge is to grow organically, giving him a powerful motive to work with governments the world over to upgrade power grids and help plan for a green energy future. “Every time a country develops, it helps all consumer products,” says Brito. “More development translates into more beer sold.” F Source: https://www.forbes.com/sites/christopherhelman/2017/04/06/bud-boss-promises-green-beer-in-big-shift-to-renewable-energy/#27ee819c7ea9
Christopher Helman, FORBES STAFF From Texas, I cover the energy sector and the tycoons who control it.