Episode 196: The Role of NGOs in Decarbonizing the Future with RMI's Jules Kortenhorst
Episode 196: The Role of NGOs in Decarbonizing the Future with RMI's Jules Kortenhorst
Today's guest is Jules Kortenhorst, CEO of RMI. RMI is an independent, nonprofit think-and-do tank, RMI engages with businesses, communities, and institutions to accelerate and scale replicable solutions that drive the cost-effective shift from fossil fuels to efficiency and renewables.
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Can you give us a quick overview of RMI?
Yes, we are an NGO founded in 1982, so long time ago. And for all of our existence, we have focused on the transition to a clean, prosperous net-zero energy future. It's really the wisdom and inside of our founding father, Amory Lovings, who created the institute almost 40 years ago now, um, with that foresight, with that idea that this transition is going to need to happen. At the time it was informed by a whole host of important benefits, a cleaner future, a more prosperous future, a more efficient future. But over the last years, of course, climate change has become the dominant driver for the energy transition, and our focus has increasingly become to accelerate a transition with an eye on reducing greenhouse gas emissions and mitigating climate change.
What about your personal journey that led you on this path? From my standpoint, it's helpful to understand not only what led you to do the work that you're doing, but what led you to care about this problem in the first place, and when and how did that come about?
Well, as you saw from my background, indeed started my career at Oil Dutch Shell, um, the oil and gas company immediately after business school. I'm Dutch by origin, although I did my MBA here in the United States. And after spending almost 10 years at Shell, I realized that entrepreneurial blood was not going to get a real chance in the big Shell system. So, I left shell and for almost 10 years, I was the CEO and chairman of a number of private equity back, buyouts in the call center sector, in industrial electronics, and in HR outsourcing. But then when I exited my last business, I took a little bit of time off, a sabbatical, and I enjoyed some time with the family. I read up on issues in the world, and I also took a journey in Africa and a leadership journey. Together with seven other CEOs hiked for a week through the bush in Africa, slept under the stars, no cabins, no roads.
It was really an inspirational journey. And I was, at the time reading, Al Gore's book, An Inconvenient Truth. And those two things sort of really banged together during that trip. I realized that we were taking mother earth for granted and that the risks associated with climate change would put our lives at risk, but even more importantly, the lives of future generations. And even more importantly, the lives of future generations in parts of the world that are more vulnerable. And so it was more or less then and there that I decided to focus my life on addressing climate change. Initially and I would say somewhat naively, I decided that we need to change the rules. I get myself elected to parliament. Well, turns out that successful chief execs don't necessarily make successful politicians. So, after two years, I turned my attention to climate philanthropy and started the European Climate Foundation, but it's now the largest philanthropic organization of climate change in Europe. And about nine years ago, I was asked to come to Boulder, Colorado to take RMI under my wings, and we've been growing the institution ever since.
Now, we've been talking about the belief system about the way the transition should manifest, and also about some of the key pillars or levers, if you will, about what will facilitate that transition most impactfully. So, when you think about the scope of work for RMI, tactically, what is the organization actually doing? With the understanding that it's a large organization, so it's doing a lot of different things, but what kinds of things do you generally do to bring about the change in the focus areas that you were describing?
Absolutely. That's important. We are sometimes referred to as a think tank, and that annoys us a little bit because thinking alone is not gonna get the job done. So, our mantra is very much, think, do and scale. Yes, we have our roots in a deep understanding of the whole of the energy system. We are integrated energy system thinkers, and we do publish thought leadership on the future of the electricity system, or the barriers of electric charging, electric vehicle charging, or what is necessary to scale up the hydrogen economy. But the thought leadership alone is not sufficient. It can set out the pathway, but it doesn't mean that we are necessarily moving markets and moving businesses as fast as is necessary. So, then the other thing that we do is we work on demonstration projects, on pilots. We illustrate that the ideas that we have can actually work in the real world. And there are many examples of first-offs of pilots that RMI has been involved with, whether it is in the built environment.
For example, almost 10 years ago, the retrofits of the empire state building to become a really energy-efficient building. It was of course, quite iconic and attracted the attention of other real estate developers. Or our ability to work with the utility regulator in New York to create the regulatory framework for what is called a transactive electricity grid, a highly interactive, digitized transactive electricity grid, and so on and so forth. But even that piloting alone is not good enough. We have to get to scale. We have to drive the deployment of all of these solutions at scale. So, what we then do is we very often work with individual companies or with clusters of companies, with industry user organizations, to accelerate the deployment of these ideas, of these solutions, of these new business models, and to deploy the capital at scale.
So, one good example of that is the Clean Energy Buyers Association, CEBA. That organization is a spin-out of RMI in collaboration with WRI, WWF, and BSR. And what we did there is we brought together all the corporates that were buying clean electricity, to learn from each other, to create standard contracts, to build momentum in the market for corporate procurement of clean electricity. And what was five years ago, six years ago, a market of maybe one gigawatt per year, now is a market that is approaching six, seven gigawatts.
I wanna pick up on something that you said earlier in the discussion, which is that when you were at Royal Dutch Shell, you came to the realization that if you wanted to be truly entrepreneurial, working in a large organization like that wasn't the best way to do so. When you talk about the kinds of initiatives that you're trying to facilitate in the areas that we just discussed, how do you think about the big incumbents versus upstarts or, or new players to the mix? Where do you focus your energies? And if you had to guess once the transition is complete, what percentage of the leaders of the decarbonized world will be the same players of today?
That's a very good question there, Jason. Let me first say, and we should come back to this in a moment, but RMI is very much an entrepreneurial organization and an innovative organization by our nature. And much of what we do today is quite different, quite new, quite innovative compared to what we did say 10 years ago. So, that probably also paints a little bit of the picture of the mindset that we have about the energy transition. A lot of the innovation that needs to happen is coming from disruptors, coming from entrepreneurs, coming from new companies in all of the sectors of the economy that involve energy, which is pretty much everything thing in the economy. It's very hard when you are a large company to be disruptive, to be innovative, to be creative. And that's partly because large organizations by the end nature are not like that.
But it's also because if you grow up in a big energy incumbent, then the mindset, the learning, the context that you have in the back of your mind, as you are thinking about your business, tends to be the context in the mindset of the past, rather than seeing the future. So, much of the disruption is happening by innovators, by disruptors, by startups, by entrepreneurs. But if you think about the magnitude of the energy system, if you think about the amount of capital that needs to be deployed, then we are going to need energy incumbents and incumbents across the economy as well. To give you just one example, the largest container shipping company in the world is Maersk. You've undoubtedly seen pictures of some of those very large container ships. Very hard to imagine how an entrepreneur can launch the next shipping company, can deploy the amount of capital that is necessary to build out a green shipping fleet.
Fortunately, Maersk is one of those unique companies that has early on understood the magnitudes of the climate crisis, and has decided to be a leader in the transition and has now placed an order for 10 methanol ships, ships that will sail on green methanol made from green hydrogen. And that is a big breakthrough for the industry. And what that implies is that there are incumbents that have the capabilities to innovate and to disrupt themselves and to change, but it's not easy. And certainly, when you think of the oil and gas industry, you see that challenge, right?
Companies like Exxon and Chevron are finding it really hard to imagine that the future will look dramatically different from the past. On the other hand, there are other companies more the European oil and gas companies that maybe hesitatingly, and may, and certainly not fast enough, but that have embraced the energy transition, and have come to recognize that if they want to be energy leaders in the future, it's going to have to be not on the basis of their existing fossil fuel competencies and resources, but on the basis of green electrons and the technologies and solutions of the future.
I'm sincerely curious about just how to do the tap dance of speaking truth to power, but also with the responsibility for your team, for example, that if significant amounts of your funding were to be pulled, then people's jobs would be lost and you would have fewer resources to have the kind of impact that you aspire to have. So, whether it's specifically with an RMI had or, or urge generally for anyone that's trying to do that tap dance. How do you think about that? And what advice do you have for other leaders that are in similar shoes to yours?
It's a very good question. Thank you for asking it. Let me first clarify that it is not the case that a large part of the funding of RMI comes from the fossil fuel industry. 99% of our funding does not come from the fossil fuel industry. But it is true that we work in certain programs with energy incumbents because we think that engaging them is useful. So, for example, Shell and BP are two of our corporate partners in our cleantech incubation program called Third Derivative. They pay for the privilege of being part of that ecosystem, seeing cleantech innovations, and being able to invest in those cleantech startups. And similarly, a number of gas producers have certified their gas production under our methane intensity quotient, MIQ, and MIQ is geared towards reducing leakage of natural gas, of methane in the production of oil and gas.
It's critically important for us to address that methane leakage. So, yes, we do work with these energy incumbents there. But once again, it is a moderate part, but be the only way we can work just simply from the passion we have about this subject is to speak truth to power. To be crystal clear with a company like Exxon, we are appreciative of the fact that you are certifying your gas productions to show that you're reducing your methane leakage, but in the meantime, we are not happy that the announcement you recently made that you will be net-zero by 2050 only covers your scope one and two emissions. That's a nice start, but that's not good enough. You need to start addressing what is called scope three emissions, the emissions associated with the burning of your product. So, we feel comfortable speaking truth to power and being crystal clear that we don't see a long-term future for unabated natural gas, but that in the meantime, while we're still using natural gas, we need to make absolutely be sure that it doesn't leak.
And going back to one point that we talked about before about the Shells and the Exxons of the world and how increasingly the innovation is coming from upstarts and, and disruptors. But given their might, and footprint, and expertise, and balance sheets and, and things like that, that they're gonna be an important part of the transition too. Now, compare and contrast that to the NGO landscape, for example. Because you mentioned that RMI is super entrepreneurial and I believe that, and you also have a stellar reputation in the marketplace, of course. But you're also one of the giants from an NGO standpoint, you've been around for decades, right? You know, maybe been doing things kind of rooted in a, in a way of doing things for a long time. How do you think about the transition as it relates to the NGO landscape? Is your answer the same as the big energy companies, or do you think about it differently?
Let me first say that if you look over your shoulder and consider the progress that we have made, I think the world owes better gratitude to organizations across the NGO landscape, that all have played their different roles, that all have fulfilled important roles in making this transition happen. Whether it is the powerful activism and public voice of organizations like the Sierra Club, or 350.org, or Greenpeace, or the savvy political operation of the league of conservation voters or NRDC, or the important role that the environmental defense fund has played in putting the methane subject on the global agenda. All of these organizations have done amazing work, and we wouldn't be where we are without them. But you're right, the world is changing very quickly and we have to innovate. And we're also faced is a huge growth opportunity, which in some ways is also a challenge.
At RMI we've been in growing more than 50% a year, and our organization is now facing a significant challenge to bring on board, to attract, and to retain the talented and passionate environmentalists, leaders, and energy experts that are so crucial for the work that we do. Fortunately, and I think this is also true for many of my colleagues leading NGOs, we are blessed with people who are driven by the mission, who show up every morning because they know how incredibly important it is, what they do. And they may not get compensated as well as they are when they were to go to industry, or they may sometimes be fighting bloody hard when they're not seeing enough progress, and that may sometimes be a bit disconcerting or, or challenging, but they put their heart into this fight. And I think as NGOs that is undoubtedly one of our greatest advantages that we have deeply passionate people who are also very capable and competent leading this work.
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