 Thank you and welcome everyone. I'm Mark Wagner with Johnson Controls and I'd like to thank the Navy League for the opportunity to sponsor this great innovation session. We really appreciate the opportunity, the opportunity to introduce Assistant Secretary of the Navy, Denny McGinn. Secretary McGinn has a great distinguished 35-year career in the Navy, started as a Naval Academy grad, flew combat missions in Vietnam, commanded the third US fleet and retired as a three-star Vice Admiral. Great private sector experience after that with Rocky Mountain Institute and the American Council for Renewable Energy and then just couldn't couldn't leave the Navy alone. So he came back to serve again as the Assistant Secretary of the Navy for energy installations in the environment. He's been a tremendous leader in the areas of energy efficiency, renewable energy, energy security and resiliency. We certainly appreciate his leadership because he's been a true champion for many inside the Navy as well as outside the Navy in our support for them. Let me just give you one example. We're working on a 15 megawatt co-gen plant that we're installing at Naval Station Norfolk and it's a $68 million private sector investment which is going to help the Navy reduce its energy load and increase its resiliency. This money is going to be paid back by guaranteed energy savings. And I can tell you standing up here, this project would not have happened had it not been for the vision and the leadership of Denny McGinn in the support of programs like Energy Saving Performance Contracting. So let me turn the podium over to Assistant Secretary McGinn for further inspiration. Secretary McGinn. Thank you. Thank you, Mark. And thanks to you and your colleagues at Johnson Controls for your great sponsorship. We're going to have a great session here today talking about energy innovation. You can see from the title that it is all about edging the competition, energy innovation for mission advantage. And that's what it's all about, the mission. You know, we use terms like the great green fleet or the green hornet or greenness or green net. One might think that we are climate warriors. We are, but the primary reason behind our energy innovation, both at sea as well as ashore, is mission advantage. And we thought that to illustrate this point, we would have some leaders from the private sector in areas that are quite different than what we do in the Navy and the Marine Corps. And I'll introduce those folks in just a moment. We'll plan on, I'm going to run a short video to get us all in the mood. And we will then, I'll make a few opening comments about energy innovation and then we'll turn to our panelists who will give a brief description of why their companies, their teams are innovating in the energy space and what it's doing for their competitive advantage. So to get you in the mood, we want to talk about the culture of the United States Navy and Marine Corps and how it's changing. I've said many times, it takes good technology, it takes partnerships like we have here, partnerships with Department of the Navy and Johnson Controls, for example, and other ESCOs and other large defense aerospace companies. But the third piece to really get things done, it takes culture. And you'll see from this video that our senior leadership in the Navy and the Marine Corps really gets it right from General Donald Lance Corporal from Admiral to Seaman. We are really, really moving ahead in terms of changing our culture to really understand and value energy for the actual mission delivery that it provides. So if we could roll the video, please. Where do I sign up? Those were quotes that came from the heads and hearts of the leaders that were indicated on the individual slides. Real operations and sometimes when we're doing our business here in Washington, we forget that 24-7, 365, 366 this year, they are out there doing the kinds of missions that were depicted at sea, ashore, and Navy and Marines. And that is what drives what we are doing with energy innovation. We're doing it afloat to increase time on station. We're doing it ashore so that Marines can go further, stay longer, and do it in a much, much faster way and be as self-sustainable as they possibly can be. We can see from that brief video that our mission edge is related directly to energy. Hasn't been that long ago that we developed nuclear power? Well, it seems like not that long ago to me. Maybe it seems like a long time ago to some of you. But it is really incumbent upon us in the Navy and the Marine Corps to look ahead to see what kind of future security environment we're going to have to operate. What kinds of capabilities and capacities are we going to have to have out there in every one of those future scenarios in which we are going to have to prevail has a key factor of energy in it. Right now in the world, a little over 7 billion people, by the end of this or the middle of this century, we'll have more than 9 billion people powered by the internet with expectations for an increased quality of life economic development, all of it dependent on energy of some sort. So to the extent that we can develop a more diversified portfolio that we can be able to squeeze more mission advantage out of every kilowatt hour or barrel of liquid fuel, we are better off and we will be serving our country better. We will be serving the men and women in uniform that are out there on the pointy end. So let me tell you that's our Navy and Marine Corps story, but we want to hear from others and maybe share best practices or determine how we can, in fact, edge the competition. Our panelists are Jim Bruce, who is with US, I'm sorry, UPS and he's the Vice President of Corporate Affairs. Ramea Hemstreet, Kaiser Permanente, a world-class healthcare provider. Ramea's joining us from California and Jasper Bosch School who is with Maritime, he's the head of technology and he comes to us from Denmark. So what I would like to do is have each of them briefly describe their mission and how energy innovation affects it in a positive way and then I'll start a couple of questions and then we'll invite you to submit your questions. For those of you who are technologically challenged like me and haven't been able to download the app, we will have the ability to have you go up to the microphone but otherwise we'll have Meredith fielding your questions that are submitted via the app and we'll have a good conversation. So without further ado, I'd like to invite Jim Bruce to come up here and talk about UPS. Thank you, Mr. Secretary. And just to be clear, we are the brown trucks. Actually, my son tells me that people that he works with think that UPS is a part of the U.S. Postal Service. It's not true. Energy was not a problem for UPS originally. Our company started as a group of teenagers on bicycles a century ago. Today, we consume one billion gallons of petroleum a year in 100,000 plus trucks, 500 heavy trucks either that we own or that we lease. So our mission, to boil it down, our mission is to deliver 18 million packages a day on average, 36 million parcels a day on the holidays, the Christmas and other holidays and to deliver it to 220 countries that we serve on time. For that, we use rail with the largest users of rail in the country other than commodities. We use trucks. We use aircraft. We use ships, although we don't own the ships. I'm sure we use the services of the other panelists here as well. So the problem for us is not only you've got to deliver all those packages in a very timely way, but we also have to look out into the future. Our heavy trucks last 10 to 12 years. These are the over the road tractor trailers. We have 17,000 of them. Our package cars, the iconic brown trucks last 20 years. And then we crush them. There are those who think that we do the same thing to the drivers. It's not true. They are actually our best salespeople bar none. But so if you're buying trucks today that will last 20 years, that means we need to know what will be the energy requirements a decade, two decades out. Is it affordable? And can we meet the other constraints and the other big constraints that we face in energy is one urbanization. The world is moving very rapidly to mega cities and congestion is a big problem. And there are some cities in Europe that just simply say no more diesel trucks. So we've got to be able to address that. And there are a lot of cities and states that don't want pollution. And they also don't want carbon. So we've got to be ready for all of that. So that that is a big challenge for us. And so I would I would just leave it at that. I want to ask you a question a little later on about I'm waiting for a package and I just you know the track. Just kidding. OK, why don't we have Ramay come up here and tell us a little bit about health care and Kaiser Permanente. Well, thank you, Mr. Secretary for inviting me out here from the best coast. It's a great opportunity to reconnect with some old shipmates from the Navy days. So and thanks for inviting me to talk on this topic that is believe it or not very important to us as a total health organization. So the mission of Kaiser Permanente is to provide high quality, affordable health care to our 10.6 million members and to improve the health of the communities that we serve. So I'll talk about each of those real very briefly in terms of how energy relates to that mission. High quality. Obviously, health care is a 24 seven operation. So energy has to be dependable has to be resilient. Currently, it's resilient through large diesel gen sets. So I hope we have an opportunity to talk about some innovative ways to get away from that, which is increasingly getting harder to sustain from a environmental compliance perspective. Affordable. Obviously, energy efficiency can help us make health care more affordable as you probably know, we have in the U.S. a health care affordability crisis. We're actually starting to turn the tide a bit on that crisis and bend the cost curve toward, you know, the underlying rate of inflation. But still, we spend way too much of our GDP on health care for outcomes that lag the rest of the other advanced societies. So energy, you might be surprised, doesn't take up a large percentage of our cost structure. We're about a $60 billion a year company. We spend about $300 million a year on energy. So really for us, it's, you know, finding some incremental cost savings, but it's really more about hedging against price shocks. So I think we can speak some more on this panel about how renewable energy has enabled us to put in place some of those hedges. But really, most importantly, it's about our total health mission, that piece that I mentioned at the end there, the, to improve the health of our communities. We're not for profit. So we're required to give back to the communities. And traditionally, we've done that through safety net care and we continue to do that. But over the last decade, we've really turned our intention increasingly to the social, economic and environmental determinants of health. Your zip code has a lot to do with your health and your health care. Your future health depends a lot on things like how much you're read to from the ages of zero to three. And likewise, your health depends on the environment that you live in. So we've made a commitment to not being part of the problem. We've, we set a goal back in 2012 of reducing our carbon footprint 30 percent. We're on track to achieve that goal three years early. And this week, we're going to announce some updated and very ambitious goals in regards to reducing carbon footprint and making sure that while we deliver high quality health care, we're not contributing to those environmental determinants of health that are going to have negative consequences for our cells, our children, our grandchildren. Now we're here from Jasper Bosch School from NERSC and they're in the shipping business, something very similar to what we are in the Department of the Navy. And then we'll try to tie it all together with a few questions and conversation. Right. Thanks a lot. Thanks for the invitation to being here and absolutely fascinating to see how much technology innovation plays a role in the energy agenda and to compare notes from a commercial company. As said, MERSC is in the shipping business. Actually, we are by means of introduction of the company. We are a little bit bigger than that. We are a diversified conglomerate of 40 billion revenue last year. About 10 billion US dollars is in the energy sector as in oil and drilling, where we operate around 115 platforms and rigs. We also have a big terminal business, about four billion dollars, where we operate 60 terminals across the globe to sort of load and offload containers. But we are most well known and also the biggest for shipping, which is the rest of our sort of business. We operate around a thousand fourteen hundred ships in total and we are actually the biggest container line business, which we are most well known for. It's called MERSC Line. We operate around 600 vessels in all sizes, all the way from 2,000 containers to the really big ones and 18,000 container vessels. A total capacity, about three million, what we call TU, 20 foot equivalent unit. So that's the small containers that fit a truck. And we have around 12 million container moves a year. We have a fairly specific setup when it comes to technology innovation, which sets us a little bit apart from other shipping companies. We have MERSC Maritime Technologies, where I work, which is basically a group setup of technology engineers, around 150 engineers serving as a best practice and competitive unit of looking into energy efficiency and innovation, where we have around 100 technical projects a year helping MERSC Line to get more energy efficient. Now, when it comes to energy efficiency, it has always been a big focus for MERSC Line. Actually, since 2007, we have had a target of reducing our footprint and we have made a commitment. Since then, we have been able to reduce our CO2 footprint by 40%, which is quite an achievement in itself. At the same time, we have actually managed to increase the volume of the goods that we're transporting, also by 40%. So it's actually quite encourage us to see that by deploying the right technology, we're able to decouple our growth in volume from our emissions. And partly based on that, we have actually recently set an even more ambitious target and said that by 2020, we have the ambition to reduce our carbon footprint by 60%. It's partly, not at all, but partly driven by cost. Cost is, we operate in an extremely competitive industry and fuel is a large part of our cost structure similar to our colleagues. Actually, last year, we bought about 10 million tons of fuel worth around 3 billion US dollars. So you can imagine that anything we can do on making our ships more energy efficient also has a huge impact on the bottom line. We do it in roughly three ways. First, we focus a lot on our new building program to make them make the ships more energy efficient, partly by increasing the size from the MMRSK in 2007, carrying around 14,000 boxes to the latest ships that carrying 18,000 containers on a single ship. And actually that raise is still going on because the larger the ship, the less energy you consume per container transported. The other thing is a very extensive retrofit program like our colleagues from UPS. We have ships that are roughly in operation like 20 years. That means that the older ships need to be fitted with the latest energy efficient technologies every now and then, both because the technology becomes more advanced, but also we change our operational profile. Part of saving energy is slow steaming. That means that we sail slower than we used to do, but that also means that our whole energy setup of the ship is not as energy efficient as you would design it for those slower speeds. So every now and there we take a big step of upgrading our ships to make them, to fit them with the latest technology and make them compatible or competitive again with the new building program. And also we have quite an extensive program of simply trying out and testing all kind of new technologies and innovation programs. We had a huge program testing air lubrication, we testing waste heat recovery systems, we testing all kind of new technologies simply to see and be ready for a future technology scenario where they might be fitted on our ships. That's basically the energy drive from from Mexico. It seems clear to me that there are three dynamics at work here and all of our our panelists have mentioned them. You can't do anything in energy without thinking about economy. You can't do anything in either energy or economy without thinking about environment. And that environment can be local in Omega City that Jim mentioned or it could be environment in a global sense as Jasper just outlined for us, the desire to reduce greenhouse gases. But when you consider energy, security, environmental security and economic security, those are the pillars, if you will, of what we do in the Navy and the Marine Corps. I mentioned earlier that it takes three elements, technology and partnerships and culture to really make a difference in getting this energy innovation. So I just like to start with Ramey and give me some examples and you can use just use the mic there. Hopefully it'll work and examples of some technology, either challenges or opportunities, partnerships that you have developed or are developing that are making a difference and how things are going with culture. We'll just go down the line on that. Well, I mentioned earlier the reliability aspect of energy and the fact that currently in order to have 24 seven operations and meet regulatory requirements, we're required to install large diesel ginsets at our hospital. Those are becoming increasingly difficult to operate and maintain because the local air quality control board don't like you to fire up. So we're exploring options and these have not yet come to fruition, but there are technologies out there that we think can eventually replace those diesel ginsets, which of course also are expensive capital investments, expensive to operate and maintain and then 99.9% of the time they just sit there doing nothing. So, you know, we're exploring fuel cells as a option for those diesel ginsets. Already many data centers utilize fuel cells as their primary source of power and have the grid as a backup. So that might be a solution and or battery storage, battery storage is definitely coming quickly, especially in California and other states where the RPS, the renewable portfolio standard is ratcheting up. And as we head toward 50% requirement for green energy on the grid in California, in order to maintain a reliable grid, we are going to have to have extensive battery systems to deal with the intermittency of wind and solar. So, you know, a hospital, for instance, or a naval installation would be fantastic locations to host battery storage as an alternative for peaking plants. And already there are firms, one of which is run by one of your predecessors, Mr. Secretary, who we're talking to about hosting battery storage and essentially we would just provide a no cost lease and share in the upside of the demand reduction, the demand shifting and the peak shaving opportunities from those batteries. So those are some of the technological innovations that we're looking at that are going to, we think, help us both remain resilient, reduce cost and and hopefully even improve our reliability. Yeah, thanks for the question. I mean partnerships on establishing technology advancement is actually quite important for for us. And we have been forging partnerships for for quite quite a long time now. Two examples that spring to mind recently. First of all, whenever there's a challenge that's not met by current technology, usually partnerships are really necessary. One of those challenges currently facing us is the socks enforcement. As you might know that in 2020 or 2025, there will be a global cap on socks. Technically, that's perfectly possible to comply with. What we are worried about is that the actually enforcement, the technology to actually detect and enforce in a cost effective way are not in place. So we are a little bit worried that there's no level playing field as there might be shipping companies that at mid seas do not care to comply so much. So what we're doing is we actively work with the governments and with the poor authorities and with the technology providers to address the problem and see what are the pitfalls and what are the possibilities for technologies to have a global detection and easy enforcement options to detect socks at mid sea. The other thing is, as Jim and I were previously a little bit chatting about is we don't make ships. We don't we don't design ships. We have a lot of specification and we have a lot of sort of pushing our suppliers to do, but actually we focus on our role as owning and operating the ships. So that means that whenever we have technology advancement or technology innovations, we really have to work closely with our OEMs to push them to make their engines or propeller more energy efficient and also have a close collaboration with the arts because we have a lot on specifying the ships, but actually the art that has to build them and ultimately deliver them to us. So in partnerships, it's really a long term program of what we call supplier driven innovation, where we work together with our key OEMs and the ship yards to make our ships more energy efficient. Hello. OK, partnerships. One was mentioned partnerships with OEMs. When you buy as many trucks as we buy, the OEMs listen. For example, when we buy today a common brown truck, it is already the software is already in each of those trucks to run on gasoline, propane or compressed natural gas. It's all set up. It's just a question of what the fuel tank is. And there's some other changes as well, but we do a lot of driving the OEMs to build custom. Most of what we get are custom vehicles. Another partnership that's very important, and this is complex, so you have to listen carefully. That's the U.S. Postal Service. They are our customer, our supplier and our largest competitor. If you think about it, the Postal Service goes to every address because they have to pick up any mail you put in your mailbox. We're not allowed to put anything in the mailbox. So people are often confused because they see packages that are delivered by the Postal Service in the mailbox, and it was clearly sent by UPS. That's because we in FedEx will let them carry the last mile. That's a very, the package on the last mile, it's a very efficient way to go. They're going anyway. In fact, we created, well, we bought a company this past year called Coyote Logistics, which has the role of trying to make sure that all of our trucks run full. We had a lot of trailers that we were moving around the country to rebalance our fleet, and they were empty on the backhaul. So this little company with no actual physical assets arranges for our trucks to run full both directions using their customers, and there are many other, there are thousands of them. So that's a certain number of examples there, but the final one I want to mention is we have a fleet of about 7,000 alternative fuel vehicles. We call it our rolling laboratory. So these are liquid natural gas, compressed natural gas, electric hybrid, pure electric, hydraulic hybrid, propane, you name it, we're testing it. Almost every single one of those vehicles was the subject of some sort of government incentive that came to us. And we make the final decision of deployment on an alternative vehicle as to where we like those incentives. So we consider them to be our partners as well. So each of you has mentioned some challenges, opportunities in your organizations, and it seems to me that using the old adage, you manage what you measure, how are you employing information technology in your energy domain, whether it's per customer, per vehicle, per driver, whatever. But before I pass it back to Jim, I want to find out, are you going to start issuing stamps, and are they going to be cheaper than the postal service? Well, this is a very ticklish issue here. It turns out that our biggest competitor is a federal agency. The postal service is a federal agency. And about half their business is a government monopoly. The other half, really 20% of their revenues, is really competing as a private company against us. So we have this constant concern that there's cross-subcity going on, and we've been very busy at the Postal Regulatory Commission trying to ensure that that cross- subsidy doesn't occur. As long as that cross-subcity is possible, we probably will not be in the stamp business. But if you take a postal truck with 150 packages, and you say, what is the optimum route to deliver those 150 packages, that's not obvious. We took 10 years of our best mathematicians to develop the algorithms to find the optimum path for any given truck given a real slate of packages. We knew we had a winner when the old hands who would do this by intuition in the middle of a route would say, wait a minute, that doesn't make sense. And it turns out that it doesn't make sense. The algorithms, when we're fully implemented by the end of this year, will save us 100 million miles of unnecessary travel and 10 million gallons of fuel. Yes, we have used that quite successfully as part of our drive to get energy efficiency down. Basically what we did and still doing and increasing it is gathering fuel data per ship, first on a noon basis, so that's once a day. And we use that to sort of determine the energy efficiency per route, compare it and get some transparency in the company to be able to compare different ships, different fleet groups to determine the most energy efficient way of operating a ship. It sounds very simple. It took us a long way to get there. Part of it is that if you look at the energy efficiency of a ship, it's actually quite complex. It depends on the sea state, on the waves, on the current, but also depends on the hull fouling that builds up over time and the optimization point of the engine and the propeller. So actually there's a lot of optimization to be done. But once you've cracked that nut and once you've been able to compare it on a like for like basis, it's a very powerful way of getting data driven decisions and compare on a fair basis different ship routes. One of the very simple ways we did is that there's obviously a tendency from the crew to be on time, which is good because we are the most reliable shipping line and we want to maintain that. But one way of doing it is to be early at the terminal and then wait for the terminal to be ready. Now that sounds like a very logical one, but if you think that the faster you sail, the more energy you use is a very energy inefficient way of doing it. So part of it was helping the crew to determine the optimum speed to be both in time but only just in time not to spend too much energy. That's part of our energy efficiency drive. I think the next wave is to have these vessels permanently connected and using the vast amount of data that's now primarily used on board in a more consistent way and offloading all the data and doing the fancy stuff that the industry now talks about as big data and internet of things and that kind of stuff. Well, Mr. Secretary, I'm an exacting IT expert. I almost got out of the Navy five years earlier than I did when I was threatened with the job of NAVFAC CIO at one point. But I can't tell you that some of the unsung heroes in our civilization are the independent system operators who are tasked with continuously balancing the demand and the supply of our energy grids. That job is only getting harder and harder with all the behind the meter solar and all the renewable energy coming into the grid. And as I mentioned earlier, batteries are coming as an integral part of that grid operation. So the battery is not the complicated part. Batteries have been around a long time. It's the IT, the intelligence that sits on top of those batteries that allows them to talk to the building, to talk to the independent system operator, and to instantaneously respond both to reducing peak loads and to shifting demand. So that's an important part of our future as we transition into this renewable energy architecture in the state of California. How about ideas? Where do you get your ideas on getting innovative energy into your companies? Have you had occasion to say, darn, the competition came up with this great idea? I'll start with Jim, because there's an obvious competitor besides a postal service that comes to mind. And are there ideas that you get from someone who is a supplier of OEMs, for example, for trucks or various things that UPS uses? We'll go down the line again as far as where do you get your ideas? And then how do you create the organizational culture to accept and adopt those ideas? Jim? As for our getting our best ideas from, say, purple, it never happens. Actually, our best ideas come internally. We have a culture of efficiency that has been at our company for a century. And everybody understands this culture. Everybody in the Washington office has to take a week's training on trucks, wearing the brown uniform, and then deliver packages for six weeks at holiday. So people understand the business. And if you've got, I mean, let's think about the UPS driver. We tell him everything, or she, everything about how to do that job. We worry about what finger of the hand the ignition key goes on. And we're going to get rid of the ignition keys pretty soon. But everything has been thought through. The company was built by industrial engineers. And it's being rebaid over and over again. So we get that culture is what we rely on for a whole lot of our new ideas. The other is we work with the OEMs. We get a lot of people who have new ideas for devices on trucks. I mean, that's constant. And the question is, how do you sort the wheat from the chaff? And that's kind of part of UPS's job, is to find the best, and then look for ways to take it to scale. And people with these ideas know that no one else can take it to scale better than we can. Yeah. Thanks for the question. I think, actually, it's a very good question. And in all fairness, we struggle as I think many of the bigger companies. I'd say most of the ideas come from a combination from internally, where we have a strong engineering base. I also say, in all honesty, that sometimes that is a little bit against innovation because they're doing both new build, where you have, as an engineer, to make sure that it works. And you don't want to take any risks on your new building. If you then, a week later, ask the same people to think about new ideas and think about sort of what else could you do and think out of the box. It's not sometimes not a very natural set up. But that's still where we get our most of our ideas from. And just like Jim said, we also very sort of consistently work with our known OEMs in order to jointly ideate and think about how we can solve problems, especially when it comes to slow steaming and optimizing our engines and systems for the new operational profile. It's imperative that you have these sessions together with a wide array of suppliers and sub-suppliers. And then lastly, we also getting a lot of requests and invites from companies both big and small that have a new technology that they think is the next thing in energy efficiency where we are sort of the ones that could bring scale but also could bring operational experience and things to the table to say that might work in an operational environment. We get a lot of requests from companies from the shore-based industry where we are added value then is to think with them how that could be applied in the maritime sector. Jim, I'm glad we don't have the same training program you do. I don't think you want me removing your gallbladder or even changing your sutures. So similar to Jasper, I'd say we struggle, frankly, just because of the plethora of ideas and technologies that we're presented with on a constant basis, evaluating them and then deciding what the right time to leap is when they have attained that perfect position in the cost curve. I have one of my friends here in the audience is a surfer. So the analogy I'd use is surfers need to judge the perfect time to catch that wave. And I'd say that's our challenge and it's as much an art as a science in some regards as far as when is the right time to adapt, excuse me, adopt a technology. When is the right time from an economic perspective to get into a certain technology? So we don't have a secret sauce. I'm afraid for that. I would say from a culture perspective what I've sort of been struck with at Kaiser Permanente vis-a-vis the Navy is the willingness, not the Navy's willing to innovate, but something that enables us to innovate is a different approach to hierarchy. Certainly we have a hierarchy. But when I got there, I was introduced to our CEO as Bernard. I still call him sir because old habits are hard to break. But at first I thought that was just sort of a California thing and really the hierarchy was there. But we consciously sort of back to training in corporate culture, we consciously tried to both recruit and then inculcate in our folks the willingness to have an open dialogue around ideas and leave rank at the door. And I think the Navy got a lot better at that through the course of my career but probably not to the extent that I've seen in the corporate sector. Okay, I think Meredith has a question or two from some very, very IT savvy audience member. Yeah, can everyone hear me here? We had a few questions from the audience. The first is evaluating energy efficiency cost savings is relatively straightforward. What value do you place on the mission assurance aspect of energy projects and calculating the returns on investment? Jasper? Well, I'd like to have a first cut on that because I disagree that it's so straightforward. It's actually quite complex to verify in real life or in real operating conditions, I'd say, the effect of energy efficiency. Usually we are confronted with devices or changes to the engine that save energy of a few percentage point. If you really sort of measure the energy efficiency of a big ship in operational conditions, you get huge fluctuations due to wave weather. But even if you have comparable sea states, comparable stuff, it is actually not that accurately measurable, funny enough. So it really takes quite a skill to measure accurately. And that's part of our added value because we are getting a lot of claims from suppliers that this, that and that technology would save you. Our added value most of the time is to really accurately figure out whether this is true and whether it's under what operational conditions it is. To the real question, so once you have figured that out, is there an added value of emissions? If you're talking about CO2, we not internally have an extra kind of business case for CO2 emissions, but there are lots of other emissions that you need to comply with. Emissions. Sorry? The question was about mission assurance. Right. Not emissions. Okay. I'll use the example that Ramay might wanna comment on. If I go to the doctor and he and I or she and I decide that it's gonna be a major operation. I don't care how much energy they're gonna save by going to one source of supply. Reliability is really, really important. So how do we balance reliability and energy security against attempts to achieve energy efficiency? Are they in fact zero sum? Can you have one, but not the other, or just a couple of comments would be great on that? First off, the core mission is primary. So for us, delivery of healthcare is primary and we're not going to do anything that impacts that one iota in terms of energy efficiency. So for instance, there are great opportunities in hospitals to save energy through ventilation reform, through changing some of our requirements in terms of air changes in hospitals. Now we would never do that in so-called critical care spaces, but in U.S. codes, there are air change requirements around non-critical spaces that we think are sometimes overstated. So again, the mission comes first and then the economic analysis for us of energy savings opportunities. I totally agree with Jasper, it's not straightforward. I am constantly having discussions with our CFOs, and we have a lot of CFOs, regarding how we calculate energy savings. My day job is helping to build and maintain all of our infrastructure. We have 70 million square feet and just the discussion around incremental cost to achieve energy savings versus project, total project cost is one that continues as well as what the IRR target should be for energy projects considering back to what Jasper, where Jasper was going earlier that we do have commitments around carbon reduction. So that is the ongoing discussion in our organization and I'm sure in many organizations. Yes. Yes, hi, my name is John Wordman. I work with the American Association of Geographers. We're a non-profit research and education association. We do a lot of work to support education of folks in GIS and UPS has been a supporter of ours in that endeavor, so I just wanna say thank you publicly. My question is actually one of a different nature though. It's probably for Mr. Secretary, but also potentially for Mr. Boston Cool. There was a lot of press a couple of years ago that the Navy might be able to develop technology to power their ships by seawater through catalytic converters. What's the current state of that and is it likely to happen in the next decade or what's the... I would say it was about some work that the Naval Research Lab right up the river and at NRL did some work and actually through the application of a lot of energy to seawater and some catalysts was able to actually produce viable hydrocarbon fuel that was actually flown in unmanned aerial vehicles. And it proved the concept. We learned a lot about the chemistry, the physics if you will, of being able to convert a very, very ubiquitous compound, seawater into something that could be useful for powering things. The downside of course was it required a lot of energy. So if you did the calculation of how much energy must go in to get energy out, energy in one form, electricity primarily, and the energy form liquid coming out, it was a good experiment I would say. In terms of viability of being able to anticipate that we could have this type of capability at a large platform at sea that had some sort of nuclear power on it that was able to be the prime source of energy to do this conversion, I'd say it's more like two decades timeframe on that. In the meantime, we're looking at biofuels primarily additive to our ships and our helicopters and our airplanes and combat vehicles. The challenge there is to be able to efficiently and in a cost effective way convert any manner of feedstock paths into viable ASTM qualified liquid fuels. We are in fact sailing, as we speak, the Great Green Fleet with 10% biofuel for all of those surface ships. It's the first buy of large scale biofuels that was done by the Defense Logistics Agency and they bought 77 million gallons of mixed biofuel for the Great Green Fleet at a cost that was very competitive near par with cost of petroleum even during these times of very, very low global petroleum costs. So we're looking across the board at all kinds of ways to substitute, to augment wherever we can in a cost effective way other sources besides pulling petroleum out of the ground. Not that we don't like petroleum, we love it. We're gonna continue to use it for many decades to come. However, we see in that future security environment that I was mentioning earlier with seven billion going to nine billion people and expectations for economic development and higher quality of life, tremendously greater demand for even with energy efficiency technology and practices, we're going to be glad that in 2016, we are pushing the envelope on developing alternatives to simply business as usual with petroleum. Meredith? Another question from the audience. What are some of the operational benefits your companies have experienced as a result of integrating energy efficiency into systems and processes? Okay, the last part of that was what? What are some of the operational benefits that companies have experienced as a result of integrating energy efficiency into systems and processes? Jim, start. Into the system process? System and processes. System and process. Well, the cheapest alternative fuel out there is the gallon never burned. So energy efficiency is sort of where you start. That's, you know, you pick that low-hanging fruit first. And to the extent you don't burn fuel, you have also not emitted volatile organic pollutants that create health problems. You also don't emit carbon, so it reduces your greenhouse gas emissions. Usually it's easier on the mechanics of the truck or the aircraft. So, I mean, there are a lot of consequences of energy efficiency. I mean, for example, we've added winglets to our 767 aircraft, and I believe that's saving us 6 million gallons a year. I mean, that's an energy efficiency step that's a retrofit, but it has important consequences for the airframe as well. So, I'll leave it at that. Yeah, I think it's a little bit similar for Maersk. I mean, I think that there are mainly three benefits, probably, for having this constant drive of energy efficiently. The one that's very obviously is cost. And any kind of cost-saving we can achieve in a good payback will do, and that drives a lot of our energy efficiency. There's a lot of side benefits too. I mean, one way of the focus of energy efficiency is to increase the capacity. So, what we also do is particularly an older tonnage to literally cut off the bridge and make it higher so that we can stack the containers higher in terms of energy efficiency per container. So, it's driving the cost down, it's driving the capacity of the ships up. And then thirdly, there is this sustainability transparency. We are ahead of the competition when it comes to CO2 emissions. We also are ahead of the competition of being quite transparent and measuring it and being able to document it. That in itself is not a sales argument in the sense that they're willing to pay more for it, but it's a very important conversation with our key customers that also have a similar drive on sustainability. So, it's a prerequisite sometimes and it certainly helps in the commercial conversations that we have with our customers. I'd say our energy program has helped us think about a lot of aspects of our business more holistically. 95% of our carbon emissions are due to the energy we consume, electricity and natural gas. So, and in order to meet those goals we set and to meet the new goals, we're gonna announce this week in regards to that. We couldn't look at a hospital at a time, our 38 hospitals individually. We needed to treat it as a program. And of course, look at the total health impacts of that program, not only the resiliency, not only the cost. So, that mindset can really be applied to a lot of what we do and is being applied to a lot of what we do to try to improve the outcomes as well as our cost structure. Let me ask about another special partnership, community relations. I'll give you an example that we are pursuing in the Navy and one in the Marine Corps. The whole idea of resiliency or energy security is that if there's some sort of a problem with the grid caused by mother nature or cyber terrorism or mechanical failure or what have you, that you wanna be able to be resilient and to continue your mission, perhaps unlikely at a degraded level, but to be able to come back and get back to business as usual as quickly as possible. So, up at the Naval Submarine Base in New London, Connecticut, we are developing eight megawatts of distributed generation. And what this does is it puts the ability to produce power close to where your critical load is. And in order to do that in a really effective way, we're putting in a microgrid. But it's not a microgrid that simply stops at the fence line around Naval Submarine Base. We are partnered with the state of Connecticut, with the city of Groton, the two small utility companies that provide power. And we're going to extend that microgrid out to first responders, medical facilities, as well as a commercial corridor so people can get gas for their cars and food from the grocery store at a diminished level, but better than nothing in case of the next Superstorm Sandy. In the case of Marine Corps Air Station, Yuma, we are pursuing with APS, the local utility provider, an ability to put a peaker plant right on the air station on federal property, which has the benefits of force protection and security. But what it will do is it will not only serve to take up more than what is required for the whole load of Yuma in case the whole grid went down, but importantly, it serves a role with our community of being able to help prevent and reduce the risk of a grid outage because it is a peaker plant that can be brought online and prevent brownouts or blackouts. So Jim, we'll start with you and any thoughts about or specific initiatives about what you are doing with the various communities that you have such great presence? Well, you've got about three questions wrapped in there. In terms of communities, some of you may have heard of the UPS Foundation. We do a whole, that's all related to our founder and his wife, and we make a lot of charitable contributions, but the other thing is we do a lot to try to get our employees involved. Our employees, and there's over 400,000 of them, keep track of their volunteer hours they do for community service. That matters to us, so it's not just money, it's time. And I would also add that in terms of community service, well, I know our particular office does that, we keep track of it, and we engage in a lot of special projects. I know my office went to China and built in two days a school laboratory with computers in it, in a remote part of China where we would never do business, and the Chinese knew we'd never do business there. So we think that's important to get our own people to work together, and this is people from the bottom all the way to the highest levels of the company, and we think that engagement with the community is good for us as well as good for them. Right, Merck also has a quite big charitable foundation, the APM Merck Fund, whenever you come to Copenhagen, you go to the Opera House, that's one of the buildings that the fund gave to the city to do something back to the community, and there's actually a lot of these initiatives, some of them well known, others are less known, where the Merck family has put to use the money that they make from the company. But also as a company, I guess, many of the initiatives that we're doing are centered around one of our core values is preparing for the future. That means that both for a company, we need to prepare for the future, but we also see it in a broader context of making sure that we have this voluntarily commitment of reducing the CO2 emissions, not necessarily only as a cost drive, but certainly something that we do for the community and the welfare. I'd like to add one more thing very practically, what we're doing for the community. We're working a lot and trying to stimulate a lot with the community, the interest for the maritime sector as a whole. That's at universities, that's trying to sort of make it known to the public that the maritime sector is one that requires engineers, that requires jobs, that brings jobs to both Denmark and the rest of the places that we operate in. It's not that obvious. And many people often are not aware that the maritime industry requires a lot of technically skilled people. So we work also a lot with the universities to get the attention for the maritime industry, but also to drive the topics on there and to get the interest for the maritime industry. A couple things real quick, in particular with regards to energy. In response to the California drought, we've reduced our water use about 15% in the last two years. And at the same time, we've brought on 150 megawatts of renewable energy that we're purchasing. And I'm sure this audience is aware of the water, energy nexus and the fact renewable energy uses a lot less water to produce energy than its competitors. So we've contributed to the California drought response, which has been quite successful. Also just Friday we had a meeting with the state of California regarding the Aliso Canyon crisis. You might have read about the natural gas leak that occurred, very bad news for climate change, but also bad news in terms of natural gas storage in the LA area for the summer and following winter. It's very problematic whether or not Aliso Canyon can or will be brought back online. Obviously politically contentious now with its neighbors, whether or not it'll ever be brought back online. But at peak demand seasons, that means there's less natural gas capacity in the LA basin than demand. So we met with the state of California about what we could do to expedite a couple of things I've already talked about, microgrids and ventilation reform, in other words, for the non-critical spaces of hospitals reducing ventilation requirements. Okay, I'd now like to just ask our panelists take a couple of minutes. We'll get on the line, any closing thoughts and we'll wrap it up. And I would also point out that I believe our panelists will be available. If you have questions you'd like to engage them with afterwards they'll be able to hang around for a little bit. So, Jim? One thing I didn't get into, but if we go back to the first question, the issue of our mission and energy, we've had to think decades out and we know we're gonna need energy sources that we could buy alternative fuels for an alternative fuel vehicles that will have a low carbon future. And it's very clear to us that for now, at least, for the heavy trucks, batteries are out unless you're talking about a tractor that moves around a local yard. It's natural gas, liquid natural gas, compressed natural gas, and we have thousands of trucks, heavy trucks, over the road running on that now. But as good as natural gas is, it does not have the carbon potential you'd like. So we're buying landfill gas, which is natural methane, and converting that into fuel, which gives us a very low carbon for the future. That's, so natural gas today is the transition fuel to the low carbon future. Similarly for the packaged cars, the holy grail for us is hydrogen-powered fuel cell trucks, delivery vans. And we're actually kind of interested in your submarines that tie up in a way that these reactors are running constantly, they could make hydrogen. We might be interested in that hydrogen. So that's the holy grail for us, is low carbon across the board for our fleet of trucks well into the future. I mean, as a closing thought, I think one thing is for sure, the energy efficiency drive will continue, no matter what. I think it's also clear, increasingly clear, to MERSC that the low-hanging fruit is already being harvested. So we now have to sort of look even further and harder on means of energy efficiency. I think the challenge for MERSC as well as for our competitors is to do two things at the same time. One, we will continue our constant drive of small and incremental energy efficiencies, improvements that will continuously be there to drive down our energy consumption. And at the same time, we need to be able to look further ahead in the future like 10, 20 years out, which is for shipping a long way out, and form an opinion and scan for energy efficiency technologies that might or might not develop, but at least that we are focusing on seeing when it will impact and how we could benefit from it. So I think going forward, the energy efficiency drive will continue to be there, but we need to distinguish between the incremental here and now things that we do on a continuous basis and combine that with the more longer-term radical ideas that are out there and continuously scanning for means of radical energy efficiency technologies. Those are very wise words, I completely agree. I'd also offer that I think Kaiser and the Navy are similar in a couple of regards. Very large scale for us, that's limited primarily to California for the Navy, it's in locations, geographies around the world, and credit worthy up till now the US government has always paid its debts. And thirdly, we both have a commitment to a greater good for us, it's total health. So we've been able to leverage those I think to get very good pricing in the market and have a lot of very willing counterparts who are currently seeking us as a valued customer. I think the Navy has that same capability and I trust and hope you're taking full advantage of it. By way of closing thoughts, I will say that the similarities of edging the competition among these three great companies and the United States Navy and Marine Corps are just very, very strong parallels. A lot of folks attribute, rightly so, this look at energy efficiency and alternative forms of energy across the board to October of 2009, Secretary Ray Mavis at a Navy energy conference made some very bold pronouncements and set some very, very aggressive goals that we are going to meet. And so folks could rightly say, well, what happens in change of administration? And the answer is, we're probably going to see an acceleration beyond what we are doing now and have done because it is a very, very strong business case. Going back to what I said early, energy security, economic security and environmental security are all inextricably linked, the business case of what the costs, the benefits and the risks of business as usual in our energy portfolio versus doing things differently better and taking that long-term view, we're going to see an acceleration of efforts in the Department of the Navy and I think in the kinds of good and successful companies that we have here represented today. So please join me in thanking our panelists and they're welcome to say. Thank you.