Smith MBA Students Gauge European Shift to Renewable Energy

The entire Smith group, including Professor Charles Olson (fifth from left), pose at the main entrance of the WHU Otto Beisheim School of Management near Koblenz, Germany.

A portion of the Smith group on the Bastille, a fort overlooking Grenoble, France. The Frech Alps are seen in the background. (Dave Hosford)

Smith MBA students react during a tour of an "Eco-Village" in Grenoble, France (photo by Dave Hosford)

A Smith study abroad program recently placed 14 MBA students at the front line of a global energy movement to clean, renewable sources.

The Business of Energy in Europe, a three-credit winter term course, culminated in a spring break journey to France, then Germany, where a $263 billion initiative, including a 5,000-turbine, offshore wind farm plus about 2,800 miles of new and upgraded power line, represents a reconstruction of its energy market on a scale not seen since World War II, according to Bloomberg.

"Europe appears decades ahead of the United States when you look at the energy industry, so visiting France and Germany and studying those markets could be viewed as looking into the future of the U.S. energy market," said Dave Hosford, one of the participating students. "But significant hurdles remain (for Europe), like phasing out nuclear power, which has political and popular consensus, but no ready solution.”

Led by Professor Charles Olson, the Smith group settled first in Grenoble, France for classroom activity, including discussions with academics and energy industry leaders in that country, whose government recently committed to an offshore, 100-turbine wind farm. The course concluded with three days in Koblenz, Germany and meetings with energy industry leaders from the likes RWE and E.ON.

The two nations and their economies have drawn heavy attention as they move according the European Union’s “Energy 2020 Strategy” that calls for reducing emissions, improving energy security and competitiveness and keeping energy costs down.

While Maryland leaders mulled adding a fee to citizen electric bills for a billion dollar offshore wind farm, the trip was timely in a wider context, said the course’s developer, Bob Krapfel, associate dean of MBA and MS programs. “We have a sweet spot here for this study,” he said. “Our metro Washington location, plus the Smith School’s focus on innovation and entrepreneurship, and energy as an emerging economic sector places us at a three-way intersection of technology and innovation, public policy and capital investment.”

“Bob was far-sighted in developing this program a couple years ago,” said Olson. This year's trip confirmed this as the students received state-of-the-art presentations from academics and industry leaders who knew what they were talking about," said Olson, himself an internationally respected and longtime energy industry expert.

RWE CEO Peter Terium, who met with the Smith group, had, days earlier, told Bloomberg, “The German energy transformation is as challenging as the first moon landing.”

Though the German government has subsidized the move to renewable energy via feed-in tariffs, Der Spiegel recently reported the country’s energy industry under significant stress. Companies, by moving away from their customary business models, are implementing cost-cutting measures that could eliminate about 20,000 jobs.

	“Witnessing the liberalization of the energy industry in Europe gives me invaluable perspective for returning to Japan and advancing my career,” – Ryota Kawaharam, who also said the “the proximity to Washington,” plus the “opportunities to experience and study global energy markets,” drew him from Japan to the Smith MBA program.

"The E.U. influence over its member nations and energy industry of stakeholder-based companies (beholden equally to consumers, stockholders and government) is a major factor to the commitment in these countries to renewable energy," said another of the students, Charles Bushong.

Hosford elaborated on his classmate’s point. “While U.S. and European societies all want safe, reliable and cheap energy, the Europeans are looking to government to dictate its energy policy, whereas in the U.S., we're more about looking at cost drivers,” he said. "In other words, it appears the U.S. is waiting on Europe to eat the upfront costs of research and development to make large-scale renewable energy at least marginally profitable."

Reflecting Hosford's view, Maryland's proposed offshore wind farm -- which would be just the second such development in the United States -- has stalled for a second straight year in the state’s legislature, reportedly due to lawmaker concern about the cost factor.

Regardless of the Maryland wind farm legislation, Olson said a substantial renewable energy movement in the U.S. appears far off, and right now, Europe - with its subsidy-heavy approach, provides no effective model for Americans. "Governments like those in Germany, and even China, have invested a great deal in renewables, and especially with solar, these subsidies do not appear to work," he said. "For Germany, its cold climate makes reliability on solar questionable, and there are problems related to transmitting renewable energy from collection to service point."

While the United States has no federal mandate, nor blueprint, for industry-wide renewable energy, Japan is phasing out nuclear power in the aftermath of its tsunami tragedy and is expected to soon announce a new energy plan. This factor added significance to the course and trip for another of the students.

Ryota Kawaharam, an employee of Japan’s Osakagas Co., Ltd., -- one of the world's largest natural gas suppliers with its 6 million customers -- said the course exemplifies what drew him to the Smith MBA program: the proximity to Washington and opportunities to experience and study global energy markets. “Witnessing the liberalization of the energy industry in Europe gives me invaluable perspective for returning to Japan and advancing my career,” he said.

About the Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.