37 min read

🎧 #094: The ESG data gap with Ryan Knudson

“Carbon neutrality is a big lift and technology is a cornerstone of that. The way we look at our assets now is from a supply and demand perspective. We've really been able to hone in our demand side through investments in building automation technology."


—Ryan Knudson

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Episode 94 is a conversation with Ryan Knudson, Assistant Vice President of Operations & Energy Management at Macerich.

Summary

Macerich is a real estate company focused on what they call high quality real estate centers that successful retailers see as must-have locations across the US.

Ryan manages technology and energy across the 53 million square foot portfolio, so naturally we talked about Macerich’s ESG targets, the technology helping them reach those targets, and the challenges and opportunities Ryan sees along the way.

Without further ado, please enjoy the Nexus podcast with Ryan Knudson.

  1. Macerich (0:38)
  2. Larry Fink - BlackRock (8:57)
  3. Building IOT's onPoint System (30:22)
  4. Andy Frank on the Independent Data Layer (31:43)
  5. Tridium (43:39)
  6. EMS 2.0 (46:01)
  7. Yardi (48:11)
  8. Gresby (48:37)
  9. Net Positive: How Courageous Companies Thrive by Giving More Than They Take (50:50)
  10. Confessions of a Radical Industrialist: Doing Business by Respecting the Earth (52:20)
  11. Superforecasting: The Art and Science of Prediction (52:36)

You can find Ryan on LinkedIn.

Enjoy!

Highlights

  • Macerich’s sustainability target and plan (11:09)
  • ESG reporting and the emerging so-called “data gap” (22:25)
  • New technology that can help close the gap (42:43)
  • Carveouts (50:36)

Music credit: Dream Big by Audiobinger—licensed under an Attribution-NonCommercial-ShareAlike License.

Full transcript

Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!

James Dice: hello friends, welcome to the nexus podcast. I'm your host James dice each week. I fire questions that the leaders of the smart buildings industry to try to figure out where we're headed and how we can get there faster without all the marketing fluff. I'm pushing my learning to the limit. And I'm so glad to have you here following along.

James Dice: This episode is a conversation with Ryan Knutson assistant vice president of operations and energy management at Macerich. Macerich as a real estate company, focused on what they call high quality real estate centers that successful retailers see as must have locations across the us. Ryan man, just technology and energy across the 53 million square foot portfolio. So naturally we talked about Macerich's, ESG targets, but technology, helping them reach those targets and the challenges and [00:01:00] opportunities Ryan sees along the way. So without further ado, please enjoy the nexus podcast with Ryan. Knudson. Hey, Ryan. Welcome to the show. Can you introduce yourself please?

Ryan Knudson: Sure, James. Thank you. My name is Ryan Knutson. I'm the assistant vice president for operations and energy management at Macerich Macerich is a real estate company. That's focusing on high quality assets in what we refer to as fortress barrier markets.

So New York, San Francisco, Los Angeles, Phoenix areas that are difficult to develop in. So we already have a foothold in and our. Kind of go-to market, if you will, is the best assets in the least environmentally impactful way.

James Dice: So, can you talk about your, your background? How long have you been at Mesa rich. And what did you do before that? Sure, sure.

Ryan Knudson: So I've been at Mesa Ridge [00:02:00] for 11 years. Not including a, one-year what I refer to as sabbatical when I was at A jet propulsion laboratory in Pasadena. I came to Mesa rich right out of college as their subject matter expert for building controls because at the time may search was just starting their sustainability journey.

And as most real estate companies, they started their journey by tapping their meters and doing building automation overlays. And so they brought me on as an engineer to kind of. Really sit on top of the technology. And as may search has grown in their sustainability journey. I've been very fortunate to grow with them, kind of translate translating out of the pure technical and more onto the business.

Decision-making.

Yeah. I went to Arizona state for electrical engineering. And then recently [00:03:00] just got my MBA from university of Redlands here in Calgary. Got it.

James Dice: Got it. And I was stalking your LinkedIn profile. It sounds like you had a stint in the army as well.

Ryan Knudson: Yeah. Right out of high school, I joined the army preceptor 11th.

It was just something that I wanted to do and then became something bigger than that for awhile. And then after six years got out and that's when I went to school and now here I am. All right. Thanks for your service. Oh,

James Dice: So about base search. So you, you mentioned retail spaces. Can you, can you give a little bit of a background on how big the portfolio is?

Ryan Knudson: Yeah, ebbs and flows, but believe right now we are at about 50 million, 53 million square feet across 42 regional assets. They mostly are focused on retail space, but we do have some mixed use developments. We are [00:04:00] mostly centered in New York. Phoenix Southern California, Northern California.

And then our largest asset in Northern Virginia Tyson's corner center, which is also a large mixed use development with an office tower, a residential tower and a hotel all on the same campus.

James Dice: Got it. And you and I, you and I met at real common fall 20, 21. And sounds like you've been involved in the smart Boone's industry for a while now.

One of the, one of the originals.

Ryan Knudson: Yeah. I don't know about originals, but I definitely like came in at the, I think the right time. It was right at the end of the so-called protocol wars when everyone was trying to figure out lawn versus backnet and It just kind of worked out that Through the grace of a lot of smart people coaching me on the value of backnet.

I had the influence to direct may search towards backnet and it worked out very well in that regard. Yeah, so I was, I was [00:05:00] definitely an early proponent of everything needs to be back net from the edge all the way to the Jace. And then who cares at that point? Cause it's all, you know, digitized and Yeah, Java at that point.

James Dice: Got it. Okay. One more question about the actual types of buildings we're talking about here. So, obviously we're going to dive into different products and different use cases for technology, but you have like shopping malls. I think you have outdoor malls. Is that right? Can you talk about the types of systems that are in installed in these buildings?

Because one of the things in my head is like, you know, a small outdoor, a small space, like in and outdoor mall, it ends up being like a pretty simple system, I would think. But I don't, I don't actually know, like I've never done projects and malls before. So can you talk about the sophistication and the different types of systems that are, that are across your.

Ryan Knudson: Absolutely. That's one of the things that I actually enjoy most about my job at Mesa Ridge is [00:06:00] the diversity in our assets. We have everything from your standard, you know, shopping center, your suburban shopping center. Giant rectangle with some boxes on the end to some really unique featured assets that are outdoor indoor mix use.

Like I was describing with our Tyson's corner center asset in terms of systems it's all over the board. So yeah, so like at our centers in Arizona, lots of central plants and you know, air side, chill, water and our assets on the east coast. We have boilers and Coming in like as a utility in Chicago, we have chill water as a utility coming in that gets pumped around.

And then we have to your point outdoor assets that are all, you know, 90 plus packaged DX units. And part of the. Part of the challenge is how can you get these assets normalized so that they perform. And how do you con how do you convey that [00:07:00] to real estate people who inherently don't view building automation as a asset on the balance sheet, but as a cost of doing business.

Right. And so really kind of communicating the, Hey a full building automation system is actually. A lot more than a thermostat on the wall. And so that's, that's always an interesting and challenging part of my job. But it is, it is a mixed bag based on location and the asset.

Cool.

James Dice: All right. Well, let's jump into sustainability ESG as a topic before we get into sort of, sort of some deeper tech from, from there. Can you talk about may searches just overall plan, like what target is the organization trying to hit? What are investors expecting you guys to do? And then what's sort of the plan to get there.

What's what's the road.

Ryan Knudson: Absolutely. So two years ago we announced that our goals were [00:08:00] aligned with the Paris agreement and even more. So we have set a goal of being carbon neutral by 2030. And. That is like the first major carbon goal that we have set. In our journey, we have progressed from reducing our electricity by 20%.

And then we blew past that and said, well, now we want to reduce our, you know, consumption by 50%. And we blew past that. And, you know, as the science has kind of matured and we've seen, you know, the effects of climate change, we really did decide to pivot away from, instead of talking KW and KWH, we really need to be talking scope one, scope two, scope three, we need to be talking GHG.

And fortunately those kinds of discussions are really taking off in the zeitgeists of our investor class, in the form of ESG reporting, in the form of you see, David Fink at BlackRock with [00:09:00] his annual CEO letter saying, "climate risk is investment risk". And we were already kind of going in that direction and that really gave us, and by us, I really mean my executive team, the Confidence to say, we are going to set really aggressive carbon goals because we have internal experts both on the sustainability and the energy side. And we have high class assets that we've been making investments in the technology for 10 years.

We're positioned really well to capitalize on these. So. As we sit today, we are about 21% of the way to our goal of carbon neutrality. Which sounds like a lot, but when you consider the path and the distance that we have, we have less than eight years to get there. It's still a big lift. It's still a big lift and you know, technology is a cornerstone of that goal. There's technology that includes hard energy assets, like obviously solar [00:10:00] and energy storage, but also on the demand side, right. And the way that we really look at these assets now is from a supply and demand perspective, right. And, you know, through investments in building automation technology, we've been able to really hone in our demand side.

But we also now need to look at the supply side and how, you know, rate structures are impacting not only our financials, but also our carbon goals. You know, it makes a lot of sense to turn all the lights on in the middle of the day when the solar's on, because hey, you're offsetting it but you're not now being able to use those electrons in other places.

And how do you measure that? And how do you measure the impact of these investments deep into long-term cash flows? Like solar has a 20 year period. How are they performing in year 12? Right. And how are these HVAC systems being maintained in year 12? In year [00:11:00] 15? And these are the questions that we're asking ourselves now.

That is all part of the larger strategy to become a carbon neutral.

James Dice: Got it. And you mentioned the demand side. How does the. When you're looking out over these eight years, does each building have like a target energy consumption that it has to hit and you're kind of working your way towards that in each building.

And you kind of have like a roadmap for each one, I think the question I have out there to the industry, right? I don't know about your guys' specific situation, but a lot of people are setting targets. In fact, almost everyone is setting targets, but. Know, I came from the energy conservation world where, when we were developing a project, we had like a list of like 35 things that a building would need to do to get to X energy consumption reduction.

Right. And so what I'm picturing across a portfolio, you got a thousand projects, 2000 [00:12:00] projects that you have to do right across the whole thing. Right. In my mind, the plan to get there has to involve like when each of those are going to get done and how they're going to get funded and all of that. So how are you guys thinking about like that, that roadmap?

Yeah. And you sum it very well and you make it sound big and scary and you kind of gave me a little anxiety even though that's my day to day life. No, no. No, it's great. If you sum it up very well and, and. That is exactly the way that we are looking at this. So may Stritch makes pretty heavy investments year over year in our, what I refer to as energy and sustainability program.

And these are the tune of several million dollars every year. And it is asset by asset. So we've approached it from many different perspectives. We you've you take like our assets in New York that are subject to local law, 87, that require us to do energy audits and retrocommissioning okay. We had to do it anyway, but now we have a plan and we just execute that plan.

Same thing [00:13:00] in Boulder, where it's required to do energy audits. And retrocommissioning great. We had to do it anyway, but now we have a plan. Let's go execute the plan, but in areas like California or Arizona, It becomes a bit more challenging. Just based on the governmental buy-in on some of these types of activities, but that's where we really sit.

With our energy team. And I have a team that sits inside of it that are building automation, experts, right. They come from industry, they worked at system integrators. We poached them out and brought them onto the owner side. And they, everyone gets really excited about coming onto the owner side. And then they go, why did I come over to the owner side?

But no, we have people that sit here and our, our kind of sounding board experts and go, Hey, what is left out there? And we do approach it from a asset by asset project by project basis. Now, it, [00:14:00] it seems very big, but. The way that we approach it is frankly, I forced ranked the properties and say, where are our biggest spends and where our biggest uses, because sometimes those don't match based on your rate structure.

And that's the way that I attack it is where is our biggest. Yeah, carbon load and let's go reduce that. And then let's go to the next big carbon load and reduce that. However, as you know, this is the built environment. There is embedded carbon. You're only going to get to a certain level, right. And we are a retail company.

We want people to be in the building. So having, having a dark cave that's really uncomfortable is not conducive to my business model. So there are certain levels of energy and carbon that are just inherent in our. But how do we optimize that? And again, that's where I say technology is a cornerstone of our [00:15:00] sustainability goals.

One of the things that I always say to our internal stakeholders and to anyone else who will listen such as yourself is matrix, will not sacrifice operational excellence for energy efficiency. These are not mutually exclusive goals. These are one in the same. It's just a new version of operational excellence.

And it, and it can be achieved through, through technology, but to your, to your overall question. Yes, it is like two, 3000 individual projects. Everything from, you know, a simple. At that point, setting adjustment to we're going to replace an twenty-five year old chiller to, we are going to get rid of single use plastics, too.

We are going to target removal of our, all our 22 from our property. Like it is a multifaceted approach that is sometimes unwilling, but is important. You know, the joke that I like to make is we're saving the world one green mall at a time. [00:16:00] I know it's cheesy. It's cheesy. Got that one out if you want,

uh, Super cheesy, but we'll leave it in to, despite you for,

Ryan Knudson: to I get, I get so altruistic sometimes anyway.

Cool. So,

James Dice: Ryan, you mentioned scope one, two and three. You mentioned climate neutral. I want to kind of demystify some of these terms for people real quick. Cause I think a lot of people listen to this are they're nerdy in one facet of what we're talking about, but we're talking about 20 different potentially nerdy topics here today.

So can you talk about what. What does scope one, two and three. And then what is actually climate neutral mean? Like given the context that you just said, which is like retail spaces need to have sexy lights and they need to have, you know, they need to be comfortable. So there's only a minimum amount of energy that you could possibly use.

Right. And so then how do you get to carbon neutral after that?

Ryan Knudson: Great question. So, let me start by level setting you know, [00:17:00] greenhouse gas, emissions, GHG they are measured in, you know, carbon outputs the scope one scope two really just is how do you define where the carbon is coming from?

So scope one is more geared around. This is on your, on your property and a part of your business. Makeup. Right. So, you know, you can think of like burning natural gas, right? That's a scope. One, scope two is indirect carbon from your business operations. That's mostly ours. That is electricity. That's your utility.

That's everything that most of the audience here is used to talking about. When we talk about KW KWH, Really, you need to kind of start to look at like, Hey, how does this KW KWH translate into your scope to a mission? And then scope three is your indirect emissions that the emissions that happen.

At your properties, but aren't a part of your direct business operations. So [00:18:00] specifically the best examples you can give is like your employee community, right? You can't control where your employees live, but you are responsible for their commute because you're making them come to an office. Maybe not.

I don't know. But the other, the other part specifically for retail which is a hot topic amongst my peer group is. The tenant load at a place that is master metered. That is our scope three because it's energy that's coming through us to them, but we don't have direct control over their lights.

We don't have direct control over their plug load, et cetera, et cetera. This is a little different for like office space, right? And this is where we get into like the different building use cases, kind of carve things out a little differently. And that's why something like energy star, right? Very important for the office. Not relevant for a mall. And in fact, department of energy has come out and said, Hey, malls, don't really qualify for our energy star [00:19:00] rating. So that's where other rating agencies like Grimsby. If you've heard of these kinds of things, they've kind of tried to fill the gap and say, we can normalize these buildings in some way and measure against each other and assign ratings to it.

But that actually opens up. In my mind, an interesting discussion around Office space versus retail space and the kind of clients that we are. Because I, I have piloted and looked at and spoken with a lot of technologies that are in energy information systems or energy management systems, right out of the box and everything like that.

And. Really well in office buildings because office buildings are kind of all the same. They're a rectangle with carved out, you know, standardized floors and, you know, kind of standardized HPAC. But when you start to lay that building horizontally and you start to carve it up and really interesting and unique and undefined ways, like we like to carve our buildings up [00:20:00] it becomes a challenge and some of these things really do.

So, I've always, I've always found I've, I've admired our office peers because they are able to go much faster than us at times because they have a lot more control over their, their buildings. And frankly, a lot of times they're Utilities are a little bit more centralized than our building.

So it becomes easier to collect all the data when it's all in like two or three places right next to each other.

James Dice: so, okay. So when you have scope one, two, and three, and then where, how is the, and I think we're going to head into a lot of the work that you've been doing recently here, but like, how do you then calculate where you are now compared to your carpet?

Ryan Knudson: Carbon neutral goal? Sure. Yeah. So, you know, on our roadmap, we talk a lot about like, demand side supply side, right. And there's only so many. We can do to optimize our buildings. There's new technology coming out. [00:21:00] That is really interesting. And I think can help us a little bit more. But at the end of the day, like you said, we still need to have my slides and we still need to make people comfortable.

So it does come down to either we optimize the supply side through renewable energy assets, like solar panels on the roof or fuel cells, or that's not really renewable. You know, these kinds of hard energy assets. And then finally we have to address the elephant in the room, which is the carbon that we just can't get rid of.

And that's where a renewable energy credits or recs kind of come in. And that is a part of our roadmap. But we've approached it from the perspective of, we are going to set a high limit on the number of wrecks we want to buy. Right. And that's holding ourselves accountable. So that it forces us to do the projects that we know can get us there on the demand side can get us there on the supply side can really help the [00:22:00] asset itself be as optimized and the best version of itself as we can.

And then that embedded carbon that we just can't dig out of. We would then go into the rec market and that's, that's a part of anyone's strategy. But yeah. Those companies that are trying to minimize the number of wrecks that they buy that are the most aspirational for me. Got

James Dice: it. Okay. So let's talk about the, you know, you mentioned weird building configurations, different metering, configurations different across the whole portfolio.

And then all of this data, that's not just based on my knowledge, not necessarily always easily available, like scope two emissions, for instance, like those types of things that are like, okay, I consumed a kilowatt hour, but well, how much carbon is attributable to that kilowatt hour? So I can only

Ryan Knudson: imagine this

James Dice: mess that you're going through to try to figure [00:23:00] out, like, where are we at on this journey?

So can you talk about. What it's like to collect and crunch all this,

Ryan Knudson: all this data. Uh, Very timely question. Thank you, James. I'm actually in the middle of my, what I refer to as reporting and disclosure season. So

no matter how smart a building is at the end of the day, the data needs to flow out to a spring. For reporting agencies because they haven't really quite figured out how to connect into buildings in, in a elegant way. There is a lot of companies out there that are energy services, companies that are looking to bridge that gap or what some of my peers and I refer to as the data gap.

But the problem with that data gap is the quality of data. And I think sometimes We as an industry, get enamored with the quantity of data. And I remember, you know, eight years ago, six years ago, it was big data. Big data is going to solve all our problems. We're going to have so many insights with big data.[00:24:00]

What is big data? I don't know. It's more, I guess it's more, is that what it is? Like more data. Let's get more data in there and, you know, while having. Good insights are key to a optimized operations forum, an ESG reporting perspective. It really does come down to the meters and it comes down to do you know, what is upstream and downstream of those meters?

Do you know what your utility is and how is their energy being produced? And do you know, what's downstream of the meter and where does that energy. And that is something that I think at times gets lost because I will talk with. And the first thing they'll say is, Hey, I'm going to put a meter. I'm going to put a little like Aqua suite on your, on your house meter.

I'm going to collect all this stuff. And I'm going to show you a really interesting dashboard. That's going to provide you insights. And like, I already have that meter tapped. Would you like my data? No, no, no. I want, I want it myself because I [00:25:00] don't trust your data. Like, okay, that's fair. But also. Right. And as I kind of roll upstream on the reporting and you get to somebody like a CDP or a graspy, or now, you know, you're, you're seeing.

The sec starting to get involved in like, how are people reporting on environmental disclosures? They expect invest what they refer to as investment grade data, which is financial level data. And part of my job is taking our real-time metering portfolio and doing comparative analysis once or twice a year off of our.

And I tell you every, every time we do it, we find differentials, right? So it's solving the data gap problem to feed into these systems is, is key because the process lives right now, where I do a data scrape of all of [00:26:00] my total usage by utility. And I take that total KWH value. I plug it into a spreadsheet and I then compare that versus, you know, previous years to make sure that it's not completely crazy.

And then I put that into a different spreadsheet for this reporting agency and I put it into a different spreadsheet for this you know, corporate responsibility report and I put it in. The spreadsheet for this reporting agency or framework. And it becomes an administrative burden that takes away from, you know, being able to go do the thing.

Listen, and it's no fault of anyone's own it's we don't own the meters, right? The utilities will come in, they'll change it and they'll change the pulse factor. And they won't necessarily tell us every time tenants will come in and come out and, you know, we may not have a mature communication process to go, Hey, This load now has 20% more landlord load because we have a tenant move out or hopefully conversely, the other way around, right?[00:27:00]

Hey, this tenant meter no longer has 20% load because a tenant moved in. So the data management is paramount. And it is something that takes up a good portion of my Q1 every year to scrub the data and make it as close to investment grade data as possible because the investor class is asking more and more.

ESG topics, they are asking more and more about our environmental impact. But then now they're also starting to ask us to show our receipts, show your work. How did you get to this? How proved to me that this is your actual greenhouse gas emissions. And that's a challenge because right now we have to default to the bills because the.

Tie back to the financials and that's what they're comparing against. So when you say investment grade

James Dice: data, you're talking about amount of energy, a total amount of energy, and then a total [00:28:00] amount of dollars that are hitting it, utility bill. And they want

Ryan Knudson: to know the total yeah. Investment grade data is, Hey, you're saying that your carbon footprint is.

Tie this back down to your utility usage and then tie that to the expenditure that you show on your income statement. So it's this kind of, you know, And you know, fortunately we have digitized our billing process. We digitized it years ago. And so it's easy for me to get to that. Here's the total usage per bill per year per asset.

But it still requires me to go into that system and pull these reports and, you know, in my perfect world, I look at it and go, there's only so many HPAC systems that you can optimize. Right. But there is this data gap issue that can be addressed where, you know, FTD around, Hey, if this thing goes to zero, that should [00:29:00] be an alert.

Just like, if a rooftop unit dies or a chiller dies, that should be as high of an alert because there's more eyes on this. And that's yeah, that's, that's, that to me is a, is a growth opportunity. That I talked to like my, my team about often. Yeah.

James Dice: Yeah. I've always been, I've always been under enthused.

When you look at the EMS MIS EIS industry, w we, we say EIS and utility, bill analytics and interval data analytics. We sit at separate from FTD, but it's like, why wouldn't we put the algorithms looking for issues on all of the data, not just our system data. I've always thought that was a weird to me. FTD is a capability that software can provide.

And it's what scope or what equipment or what meters are you applying that capability of software to? And I've always been like blown away and I'll probably get 20 software companies reaching out to me after I say this, but I've always been blown away [00:30:00] on why can't you do FTD on utility data I'm ever missing?

Bill that's the easiest one. I have a spike in usage. That's also a very easy one. These things, these sorts of alerts, it's just been weird to me that they haven't been standard across every software that does utility bills.

Ryan Knudson: It's interesting. Yeah, no. And, and honestly, you know, I feel very fortunate. I have a good ecosystem of partners that I work with.

So, you know, I guess free plug we use building IOT's And they have their OnPoint system that does their FDD. And when we initiated this conversation with them, I'm like the first thing I said is I want my solar data in there. No, I why I'm like, trust me, it'll make sense in about three years.

Like I want my solar data in there and as Brian's team and I started talking more and more, I'm like, listen, I want to know. When the peak of my solar production is cause I want to push my HPAC. Start time to that. Can we tie those two things [00:31:00] together? Can we figure out when is the optimum start time?

Cause it's no longer the middle of the night so that you pre-cool the, the low rate structure time for. Is the middle of the day, which is completely opposite of everyone that's ever done energy. Right? The first thing you do is you look for that peak in the middle of the day, like, aha. I'm about to show some value.

And my, my messages, no, no, no. It's actually the other way around. I want those peaks in the middle of the day, because that's when my. Most producing. And those are the interesting questions that we can ask ourselves and we can play with when you have the right tools and you have trusted data. And it's not necessarily about collecting the data.

It's about proving the data. And I think Andy talked about that really kind of interestingly, in a couple podcasts ago where it's, Hey, we're collecting all this, but is it. Does it make sense? Is that sensor actually producing? Is it actually 72 degrees or is it not? Does anyone know? And you know, you talked [00:32:00] earlier about like 10,000 or 2000 projects, and yes, that is a big number, but when you start drilling into each project, there's 10,000 things that you have to do for each project so that it all rolls up and rolls up and rolls up.

And these are the big ideas that we talked about. On the client side, who are those partners and what are those technologies that can help us answer some of these questions or at least approaching these questions because, you know, Integrated a lot of buildings at the may search portfolio level. And I've seen really good integrations that, you know, have trusted data and I know exactly what is going to go on and then I've seen not so great inner integrations earlier in my career that, you know, we only had one set point and one sensor and hopefully the HPAC turned on.

I don't know. Can somebody go check? But again, and I'm not harping on it because I'm on a technology podcast, but [00:33:00] it really is only solved by technology and technologists that are approaching it from a data collection, data analysis, data storage perspective, and a use case perspective. Right. And in your.

Previous life being energy consultant. I mean, you probably had to dig through a million energy bills and put it into a heat map in Excel. And these things are just awful, but it was the only way that you could give an accurate representation to the client. And to this day, as, as advanced as my systems, It's still, almost kind of boiled down to we're still at that, like, give me the bills and let me go look at your peak usage.

Let me go look at your consumption and I'll put it in a spreadsheet because it could be accurate or that meter could have died and we lose like four days of data. And what if the peak was set there? [00:34:00] We don't know, but these are, these are the interesting questions that, that I think need to be addressed beyond.

Hey, we need to optimize HPAC, like yes, of course. Obvious, but also this over here.

James Dice: Hey guys, just another quick note from our sponsor Nexus labs. And then we'll get back to the show. This episode is brought to you by nexus foundations, our introductory course on the smart buildings industry. If you're new to the industry, this course is for you. If you're an industry vet, but want to understand how technology is changing things.

This course is also for you. The alumni are raving about the content, which they say pulls it all together, and they also love getting to meet the other students on the weekly zoom calls and in the private chat room, you can find out more about the course@courses.nexus lab. Start online. All right, back to the interview Okay. So you're, you're getting the data from all these utility bills potentially from OnPoint. You're, you're making it ingress, investment grade. Ready? Your investment [00:35:00] level. And then you're sending it, uploading it to all these different reportings agencies.

What do you make of, I just feel like it's a mess, like the, like tracking all of these different reporting methodologies, they all have their own, you know, upload spreadsheet. It sounds like that you're using. Where do you see that headed? Do you think that's ever going to get cleaned up?

Ryan Knudson: I do. I do. I, at least I help my, my Eternal optimism is this is going to con there's going to be some consolidation.

And we're already seeing that coming out of cop 26 CDP TCFD CDP climate disclosure project that kind of just measures your carbon output and measures it against other use cases. Taskforce for financial disclosures. Has a framework for how you should report on energy data.

They've kind of come together along with some other reporting agencies under the banner of the ISB or the international sustainability standards board and their [00:36:00] mandate coming out of co-PI is we are going to be gap or generally accepted accounting practices for ESG. So we are going to say.

High-level rules high-level guidelines. This is how everyone has to report on your carbon. This is how everyone has to report on your social. This is how everyone has to report on your governance. And the security and exchange commissions has already said, like, yeah, they put out something. We'll just use that as our yardstick to make sure that you guys are doing this.

So I have hope. That's the good news, the bad news. This happened late last year. So we're probably three to five years out from any sort of meaningful consolidation. So in the interim, it's really a use by use case basis, right? Again, if I was an office. I would be pointing to energy star and saying that is my north star, if, but I'm not, I'm [00:37:00] a retail REIT.

So I'm looking at Grimsby right now and saying, well, that's the only way that I can measure myself against my peers and measure myself against myself. So that's what I'm going to target. But I think it's important that. Anyone that's taught having these conversations, you have to address it from the perspective.

Who are the, who's the audience? Who are your stakeholders? Who are you trying to communicate to? Right. If you're trying to communicate to the investor class, that's really focused on, I don't know, ISS or Sustainalytics which is just a third party, you know, agency that gives you a environmental score.

Well, they look at your public disclosures, so you may want to just focus more on your financial disclosures. And your corporate responsibility report. And that is one method and it really is. It's an interesting time. It's very reminiscent of kind of the building automation systems or the, the industry, like 10 years ago when [00:38:00] everyone was kind of coming out with like their version of backnet and their version of lawn.

And you had tritium as kind of the overlord on top of everything. And everyone was kind of, you know, coming up with their own lines and then you saw some consolidation, some standardization. Now we are where we are, where, you know, I think there's an assumption that you're either getting backnet or you're getting haystack tagging either way.

Doesn't matter. I can scoop the data out and I can go do something with it. And I think that's where we're eventually going to get. But it's, it's an interesting time. It's a, it is a fun time to kind of be in these discussions because you can see real change happening in almost real time, which is unique.

Cool.

James Dice: So when you said, when you first said an aggressive investment grade level, what my mind went to was an investment grade audit, which is like something totally different.

Ryan Knudson: But the question I had. [00:39:00] Yeah, the

James Dice: question where it came up in my mind, it sounds like, yeah, this is where you're headed, which is you, you pull all the data from the sites.

Now you do the reporting. What I'm wondering is inside your organization, how you then start to justify the business case for making these investments in each, each facility. So I, I, I crunched the numbers. This facility could be reduced by 50% or whatever. What's the business case today because. You know, when I was doing this energy stuff, you know, 8, 7, 8, 10 years ago, it was pretty much all energy ROI.

And. What I'm gathering from the industry these days is the business case is changing. And it's more like, what if we don't hit that number, right. Or what if we don't hit our target? What's the, what's the risk to the organization then? So can you talk about kind of how you're thinking about that and making the business case in the next eight years before

Ryan Knudson: 2030.[00:40:00]

For any there's still some, some hard energy asset, ROI projects left out there. We haven't done a wall. But for any new technology or any, anything like that I build into the proposal. You will give me a full MNV report. You're gonna measure, and you're gonna verify you, quote me at 18% ROI. All right.

Let's pilot it. And then I want to see it run for whatever period. And I want to see what the actual return. And do a comparative analysis. So like, I think gone are the days of kind of eyeball on it and going like, well, you know, based on our model, we see this it's okay. Based on the model, I'll give you a pilot and then based on the MNV, I will give you a project.

But beyond kind of that project by project basis, moving into 2030. Number one, the barrier to get a project approved [00:41:00] is much lower than it used to be. Right. It was at one time, you know, if you're not talking 20% in a five-year return, you're not getting any entertainment. And that barrier, I think. Kind of come down.

At least it has in my world. Because we are talking return on carbon. We're not talking return on investment. We're talking return on carbon. And you know, I talked earlier about renewable energy credits, right. And that's always kind of the escape hatch. Well, Hey, if we miss, we can always just buy racks.

But everyone, as the, as, more companies start to develop more reporting and that reporting becomes more significant and more sophisticated. The rec market is only so big and it is a true a supply demand market. And I, I see the demand increasing. I do not see the supply increasing at the same rate.

So wrecks are just going to become more expensive and that's, what's going to end up becoming, I think a um, Plus for getting some of these projects approved. Hey, if you don't want to do this project on a [00:42:00] cash on cash basis for 10% cool, but I'm going to have to go offset that in the open market and that's going to cost X, but we can avoid that cost too, by doing the project.

And now this 10% cash on cash project becomes a 20%. Return on carbon projects and we're not quite there yet, but that is definitely something that I've started to kind of socialize with some decision-makers. In terms of, you know, I may not be able to get you cash on cash like you, like I used to, but I'm also going to avoid long-term expenses because this market is getting more.

Got it. Got it.

James Dice: Cool. Okay. So when you think about everything, you just kind of took us through this journey to get to 2030. What, what technology tools are important? And it sounds like you've mentioned a few already, but then where are the opportunities that are still like, [00:43:00] it sounds like you have great tools and I'm not knocking anybody's tools, but.

You also mentioned this data gap and how it's kind of a pain still and any kind of a pain is the understatement. So, can you talk about kind of what tools you use now and then where, where do you think this industry needs to evolve to make this situation easier for teams

Ryan Knudson: like yours? Sure. So at the base level where we're a Tridium Niagara house, right.

Normalize all the dates. You know, below the Jace we use backnet that's about as deep as I can get to it at this point. Like I can only speak at that level these days. But we're a Tridium house and that gives us the flexibility to still be kind of a vendor agnostic while maintaining some semblance of standardization.

What would make, you know, how would we leverage this, this kind of base technology better is exactly like you described, like instead of focusing our fault detection and alarming [00:44:00] platforms strictly on those operational needs we need to focus on the energy needs and we need to put meters on the same level as your HBS.

Because more and more, those are becoming frankly more important to my executive team than the HPAC because they expect now at this point that the HAC is going to take care of itself. Having said that though, I think And this is not knocking on anything, but I think there is kind of a myth around fault detection, diagnostics, that if you build it, they will come.

And if you give the operators the data, they will go turn the wrench and fix it. And I don't know if that's necessarily the case and what technology most interests me is anything that can. The automated, but not to the point of like, removing the operator completely out of the equation, but giving the system.

The ability to [00:45:00] make certain decisions. So I look at, you know, some what I refer to as like fault to resolution, right? Instead of fault detection fault to resolution, Hey, I see that, you know, this HPAC is running 24 7, and I can just turn it off and I will wait for somebody to come yell at me. Right. And that would save energy because nine times out of 10, A lot of the energy opportunities that I see at my assets, when I go do an audit is the same five things over and over again.

You're leaving your lights on 24 7 because somebody had to override it to do night stocking and forgot. You have your set point set at 64 degrees. Cause somebody two years ago said that they were hot and you forgot to set it back. And so like having systems. No at a, at a global level, what are your operating parameters?

Okay. I'm going to give the operators at the local level flexibility to go outside of those, but only for a certain amount of time. My first kind of like foray into this was when we built out our, [00:46:00] what we refer to as EMS 2.0 platform, which is really just sky spark on the backend and four in the middle and DG in the front.

One of the things that we. On the street side enforced was no override can go past 24 hours. Because half of my job at the time was undoing PR permanent overrides. Right. And my message back to my operators was, Hey, this, you know, multimillion dollar piece of technology is not a.

It has not a light switch as much as that would make your job easier. It's still not a light switch. So it's not going to replace you, but it's also not a light switch. So we, we set an override for 24 hours. Does that create a burden for some of my operators? Absolutely. Does it save me energy every day?

Absolutely. And so I look for these kinds of technologies. I also look for. New technologies that are going to revolutionize operations that don't [00:47:00] necessarily need human or. Changing our operations. So, you know, the new turn tide motors that are coming out, they seem very attractive to me because they're kind of just us fan motor.

That's just slightly more energy efficient than a typical motor. I will take that because when you scale that across my portfolio, That gets us to carbon neutrality just that much quicker. So I will take that all day long. So I'm looking at all of these different technologies at the kind of the higher end, the falter resolution and at the lower end on the, you know, what new gadgets and gizmos out there, that's going to be a slightly little bit better.

Right?

James Dice: Got it. How about in the sort of data wrangling and like planning side of this? So. You know, we talked about PRI all projects and then those projects being made up with energy conservation measures. What if there was a, like a platform to help you with all of that? Like across the whole portfolio?

Ryan Knudson: Yeah. [00:48:00] There's a lot of people that say that they have that and I've talked with most of them and they have really interesting uses. It's, it is a struggle. We currently use. Yardi energy for our real-time metering and for our. Utility billing. And that's mostly because our accounting software is you already.

So there's like a nice kind of play there. But when I look at like, you know, what Aqua is doing, when I look at what switch automation is doing, when I look at what buildings IOT is doing from an energy information system they are trying to plug into a CDP. They are trying to plug into a Grimsby Measurable also is out there and they're trying to, you know, collect the data, send an alert thing.

This doesn't quite make sense. And then we can build a report that you can upload to CDP, but it's been my experience that. You still need human eyeballs, right? It still requires somebody to take a look at it. And again, you know, people are, are [00:49:00] starting to scrutinize and interrogate the data. The sec is coming out saying we want audits.

We want third party audits, which may search hires to do third-party audits on. Environmental data. So we're already there. We're already doing that. And the only way that I'm going to feel comfortable giving it to a PWC or Deloitte to interrogate our data is if I look at it first and I think it's just going to be a challenge.

It's going to continue to be a challenge. And you know, but it's a challenge that has solvable problems. Right. And like I said, I kind of view the ESG reporting space very much like the building automation space of 10 years ago, there was a significant challenge with, you know, ripping out old systems, putting in new systems, overlaying old systems.

And what do you really get from that? And that was growing pains that the industries had to go through. And I view this as the next evolution of those growing pains. Great. Now that we have the data, can we trust the data [00:50:00] and you know, what are we going to do to install no pun intended controls around that data integrity, right?

How do we tag this to go, Hey, this is financial level data. It needs to be maintained at all costs. Right. And, and I think those are going to be the next interesting discussion that we. Fascinating.

James Dice: Well, thanks for taking us through that. I feel like you're, you're letting us behind the curtain a little bit and in a way that not a lot of people do when it's public and it's going to go out to thousands of people.

So I appreciate that. Let's let's conclude with with some carve-outs. So sort of what, what book, movie, TV show podcast, or other thing to share with you, would you like to see more eyeballs on from the.

Ryan Knudson: Yeah. So I'm currently reading a net positive how courageous companies thrive by giving more than they take uh, is written by the former CEO of Unilever.

Um, And it is [00:51:00] a very interesting. Again, behind the curtain, look on how Unilever how they approached ESG years ago and how they changed their business practices years ago to be more of a, not only a carbon neutral. But a, a truly net positive from a social community stakeholder engagement perspective.

I think the authors do a really good job of balancing the, you don't have to lose all of your value creation, like chasing down these, you know, altruistic ideas. These are one in the same. And I think it's, I think it's an interesting read for anyone that is pitching anything to do with return on investment or ESG, environmental.

How are people talking? Where is their head at? I think it's important read also for those people in your audience that are CEOs of their companies and how [00:52:00] are they engaging with their stakeholders both externally and. Okay. Yeah. You

James Dice: mentioned it was like a book that a lot of executives are starting to use the vernacular that is in that book.

Okay. Yeah. It reminds me of this book that people on YouTube will, will see me holding up. Those of you on audio will not see me holding out. It's called confessions of a radical

Ryan Knudson: industrialist

James Dice: written by this guy who started the interface or it's just a carpet company. Incredible. Incredible book.

Very inspirational. I read it. I don't know, 10 years ago now. But that, wasn't my carve out though. We'll put that in the show notes. Maya's Superforecasting this book that I've been reading. I haven't been getting through it very quickly.

But it's interesting. It's the art and science of prediction. And the reason I picked it up is because I read the economists annual like 20, 22. It's kind of like a special magazine on 2022, basically. And in there. There's a bunch of predictions for what's going to [00:53:00] happen this year. Like are the Republicans Democrats going to hold the house in the Senate, et cetera.

Like people are making extremely accurate

Ryan Knudson: predictions. Like

James Dice: there, they have a proven track record on. It's basically like crowdsourcing, all of these extremely intelligent people, like really good forecasters, crowdsourcing, and then basically aggregating all of those predictions into one. You know, here's the answer essentially.

And they're not always right, obviously, but this. Basically it walks you through like the history and science behind all of these different science experiments behind how people make good predictions. So super fascinating. And one fascinating thing though, is that the economist prediction said nothing about an envisioned on Ukraine and it's like the obviously blown up our entire world for, for, for good reason.

Because it's a terrible thing that's happening, but they didn't say anything about. That happening. So one caveat is you can't, you can't see the future in 2020, so

Ryan Knudson: [00:54:00] clearly, clearly uh, no, that sounds super fascinating.

James Dice: Well, thanks Ryan. For coming on the show. This was fun. I'm glad we caught up and hope to do it again sometime.

Ryan Knudson: Thanks, James.

James Dice: All right friends, thanks for listening to this episode of the Nexus Podcast. For more episodes like this and to get the weekly Nexus Newsletter, which by the way, readers have said is the best way to stay up to date on the future of the smart building industry, please subscribe at nexuslabs.online. You can find the show notes for this conversation there as well. Have a great day.