Helping companies procure solutions to their energy needs

JD Schmidt, of CDS Energy, a retail electricity broker, for Business Q and A. (For the Chronicle/Gary Fountain, January 25, 2018) JD Schmidt, of CDS Energy, a retail electricity broker, for Business Q and A. (For the Chronicle/Gary Fountain, January 25, 2018) Photo: Gary Fountain, For The Chronicle Photo: Gary Fountain, For The Chronicle Image 1 of / 3 Caption Close Helping companies procure solutions to their energy needs 1 / 3 Back to Gallery

JD Schmidt, who spent 16 years with NRG Energy, left the company in January. He now works for CSD Energy Advisors, an energy consulting firm based in the Heights.

Q: Tell us a bit about what CSD does and who your clients are.

A: We help customers make informed decisions around energy contracts and energy strategies. That includes retail agreements and when folks procure electricity or natural gas for their business. We help companies that are on the larger side of that spectrum - commercial businesses - that are buying more complicated and complex products.

Q: Does this mean that you effectively help customers buy electricity on the wholesale market?

A: We're doing both - retail and wholesale. But for larger customers, we give them access to wholesale markets. Deregulation power in Texas (and the freedom to shop for electricity) was really supported a lot by the large industrial companies. They wanted access to the wholesale market to get more transparency, and that's very similar to what we provide. We have larger more sophisticated clients - and I've spent a lot of my past working with these clients - you know, the refineries, petrochemical facilities, oil and gas, manufacturing. They have a much higher budget for electricity, and much, much higher electricity bills. They want to have a very close pulse on what's going on with their costs. For example, due to the freeze in January, we provided notices to our customers to say you know keep a close watch on the market and, to the extent they have the ability, cut power use or sell power into the market.

Q: I know you also work with commercial customers to buy renewable energy plans. What is a renewable energy plan, and how does it work?

A: We start with helping customers navigate the market. First step is understanding their needs and their goals: Do they want to finance a new project or buy into an existing one? If they want to procure existing renewable energy, they need to be part of a power purchase agreement. Committing to a power purchase agreement which can be anywhere from the short term, a couple of years, all the way out to 15 to 20 years. The average term is about 12 years now. But if they want to enable new renewable development then they would have to sign up for a new project. And a lot of these projects do not get financing until they have off-takers for them. So what happens is developers look at land and before they can go get construction financing and project financing they need to have off-takers that are credit worthy to go get financing.

Q: So if a business in Houston, say, wants to get involved in a solar or wind project, how do they do it? What does the business get in return?

A: There are two different ways to do this. One is to do the new project the other one is to subsidize, or purchase kilowatt hours from, an existing plant. So what you get out of that? First option is you're enabling a new renewable development project. For the second option of just subscribing to an existing plant. What you're doing in both of these scenarios is you're paying to actually get renewable energy credits. So when that wind farm or when that solar facility generates a megawatt hour of electricity, it creates a renewable energy certificate that can be purchased by another company to "green up" their electricity. Renewable energy purchasing groups have a framework around what the accepted rules are for businesses to be able to claim they support renewable energy. Ultimately, the rules are pretty strict for someone to say that they enabled renewable development and that they're purchasing green for wind energy from a wind farm.

Q: Does that mean that a business technically hasn't enabled a wind farm if it just bought somebody else's renewable energy certificate?

A: That's correct. Texas is flooded with cheap renewable energy credits that customers can purchase. That's not really considered a straight line to supporting renewable energy, but they're still helping to enable renewable development - not new development - but they're still enabling it. Enabling new development typically comes from big corporations specifically IT and others - so your Googles, your Amazons, your Facebooks - are buying 200 megawatt projects and they are enabling renewable development, in some cases taking the power directly from those facilities through the grid. But what's happening now is customers of Amazon and Google are expected to meet renewable requirements. So, your industrial and manufacturing customers that make products that they sell to Amazon and Google are going to need to start buying renewables and they're not going to be able to navigate it.

Q: And that's where you come in? Not at the top level - like Amazon or Facebook - but with the companies that are down the food chain that don't have money or the experience to manage the market?

A: Big companies like those have energy teams. Walmart has its own retail electric provider in Texas and they have a staff to help them just buy electricity nationwide. And the same thing with Amazon - they have a staff of folks that just do just renewable energy. They've already kind of figured this out and they have the in-house expertise. Where we come in is when it's a manufacturing or chemical operation, where they still spend a good amount of electricity, but they don't have the deep staff there to help them. We are their staff.