Think Power. Think Ahead.

00:00:00 Intro
Welcome to the Power Bytes Podcast brought to you by Caterpillar Electric Power with your host Ryan Karlin. Each month we deliver the latest insights, trends, and cutting-edge tools to keep you ahead in the dynamic energy industry. Whether you're streamlining operations, embracing new technologies, or want to stay informed, Power Bytes is your go-to source. Join us as we explore innovation shaping the future and the resources you need to succeed. Welcome to Power Bytes, where energy meets innovation.

00:00:27 Ryan Karlin
Welcome back, listeners, for another episode of the Power Bytes Podcast. I'm your host, Ryan Karlin, and today we have not one but two guests with us today. And the topic of today is electrification: balancing reliability, economics, and innovation. Thank you both for joining us today.

00:00:42 Bryan Snyder
Thanks for having us!

00:00:43 John Thomas
Yeah, happy to be here, Ryan!

00:00:45 Ryan Karlin
Bryan, I'll start with you and then we'll kick it to John [JT]. Bryan, could you give us a quick intro into your role within Cat® Electric Power and what really got you to the point where you're at in your career?

00:00:56 Bryan Snyder
Yeah. As you said, I'm currently an engineering manager within Electric Power. I have responsibility for our controls and a lot of our advanced power products, looking at the new ECS platform that we've recently launched – and then looking out at some of the energy storage and other products there that my team is responsible for helping deliver on some of those technologies. I've been with [Caterpillar] about 25 years.

00:01:19 Bryan Snyder
[I] worked through – actually started as an intern and worked up through the organization through the engineering teams. I had several different roles and responsibilities, looking at systems and some of our other technologies as well along the way.

00:01:30 Ryan Karlin
Awesome! And [I’m about a] year and a half into Cat, so I've picked up on the acronyms, but our listers may not [know]. “ECS”: energy control system, right?

00:01:37 Bryan Snyder
Energy control systems. Yep, that's our new platform that we're using to control our gensets and our site solutions.

00:01:43 Ryan Karlin
And then, John, quick intro to yourself, could you give listeners background on what “product definition manager” is and how you got to that point in your career?

00:01:51 John Thomas
The simplest way to say it is (and Bryan says this all the time; I'm surprised he didn't say it today) – is that my team gets to dream up all the stuff that his team has to design. My team “product definition” at Caterpillar means that we have a responsibility to define the products that we're going to commercially offer into the market. Looking at market requirements, listening to voice of customer and voice of Dealer, and putting together those requirements for what we're going to commercially offer for a certain group of product. And I'm not “a year and a half,” I'm almost 20 years. So I'm still not – I'm older than Bryan, but I haven't been here as long.

00:02:25 John Thomas
And I started my career, Ryan, on the machine side, actually. So I've only been in Electric Power since 2021. Prior to that, I was on the construction and mining technology side of the business.

00:02:35 Ryan Karlin
Yeah, it seems like everyone you talk to around here, it's – “one year” makes me feel like I just came into the world, when you’ve got people like you guys who are 20 [and] 20 years plus at Cat. It's cool to see, for sure.

00:02:49 Ryan Karlin
Getting into the episode here, again, big topic today is electrification. So first, John, maybe I'll turn it over to you. How would you define electrification?

00:02:58 John Thomas
Yeah. Generally, electrification is when we're taking some asset or some process and we're replacing that traditionally fuel-powered system.

00:03:09 John Thomas
You primarily think about fossil fuel-powered systems with some form of an electric alternative. And as I mentioned in that part of the answer, there's really two main types of it. And most people today think of electric vehicles and asset electrification. But there's also the process “electrification” that’s happening in a lot of industries across the world.

00:03:32 John Thomas
An example that maybe hits home for some people that's easy to understand is a bakery, right? So you've got a bakery that's been traditionally using gas-fired ovens, and they might be converting to electric ovens. And so that's a real-world example of “process electrification.”

00:03:50 Ryan Karlin
Yeah, that then – my kitchen, for example. Going from gas to electric stove, that’s another example there. Bryan, next question to you here: we talked about electrification and a lot of the appeal of electrification is around emissions reduction and what that can do to reduce overall emissions, but have you seen that electrification truly is a silver bullet for emissions reduction?

00:04:17 Ryan Karlin
And what are some of the considerations when looking at electrification for achieving your sustainability goals?

00:04:23 Bryan Snyder
Yeah…I don't think that there's really anything that's a silver bullet, right? I mean, electrification is good for lowering emissions for a lot of customers. If you look at it directly from a “tailpipe” perspective, then, yeah, there are ways that you can look at it and say you're lowering emissions. But, overall, you have to think about that maybe just your scope one emissions, which are what you're developing.

00:04:44 Bryan Snyder
If you're just passing that on down the line to some other – how you're getting your electricity and where that's coming from, that can be a challenge overall in seeing that you're not really lowering the overall emissions because it's going from maybe a coal power plant or something else at a lower efficiency. So you have to look over the entire scope of the project. Also you have to look at it from a lot of different perspectives, from the mix of energy that you're using –

00:05:09 Bryan Snyder
You need to think about other strategies that you might be able to use on site to help improve your overall site efficiencies. So there's a lot of different things that come into it. And I think it's one of those [things] that [it helps in] sitting down with customer, understanding what they're doing, what their process is, or their technologies are that they're working on – and how do we then provide better technologies to help them meet their overall goals.

00:05:29 Ryan Karlin
Bryan, I'm going to stay with you because you said something that that I want to ask [about] further. John mentioned earlier about “process electrification” and “asset electrification.” In your answer there, Bryan, you said certain customers or certain business owners can use process improvements for efficiency gains to help emission reductions; can you give a couple of examples of what [those] process improvements may look like to help achieve those reduction goals?

00:05:55 Bryan Snyder
Yeah, some of the things may end up being as simple as changing the lights that they have within the facility, being able to change to a different technology that's more efficient. So there's also ways that you can look at how you run your processes. Are there opportunities where you [are] able to do things that are more efficient within their systems?

00:06:14 Bryan Snyder
But, overall, we look at the customer’s site and try and understand what are all their different technologies. As JT brought up earlier with the bakery and understanding – yeah, changing from gas to electric may be a way to help with scope on emissions. But [additionally] understanding, “Do you need to have solar on site, or do you have energy storage to be able to help with intermittencies of their loads?” and things like that.

00:06:37 Bryan Snyder
So there's a lot of different parts of understanding what is your process and understanding a little bit more about how different energy sources can help you to meet your overall goals.

00:06:47 Ryan Karlin
And I think a key part of that, too, is – [the] term in our industry “energy management systems.” And really what that means is: first and foremost, you have to understand what is drawing power, what systems are drawing power, what's it – you can look at your meter and say, “I drew 1,000 kilowatt hours this past month,” for example. Well, what exactly makes up that thousand kilowatt hours? You’ve got to break it down so that way you can tackle the right challenges – or the right consumptions of power to get those gains that we talked about.

00:07:19 Ryan Karlin
When I think about when I started my career couple of years ago – I say “a couple;” it's been more than a couple! A decade ago, electrification was starting to get going, and there still is a lot of excitement around electrification. But the adoption process, I would say, has varied across industries.

00:07:37 Ryan Karlin
Some industries are more fully asset adoption. But even you look at EVs, for example, there are fully electric models, but we don't see electric vehicles in the parking lot. (Every single one's not electric.) So there has been an adoption variation between industries. What industries have you seen [that] have really been at the forefront of adopting electrification, and maybe why is that the case?

00:08:01 John Thomas
Yeah! It's really all over the map. The customers and industries that we support as Caterpillar – one of the big industries that's really expressed a desire to move towards electrification – is the mining industry, as an example. They're looking at electrifying the assets (the mobile assets primarily, the mining trucks on their sites) as a means to meet their goals and reduce their emissions on their sites. But they're also doing this blend of process electrification as well as asset electrification. Many mine sites are in remote locations, and in some instances they do not have a local grid or utility to connect to, and so they have to do their on-site generation. And as they're looking at electrifying (their trucks and, say, maybe their crusher on site), they’re having an increased energy need, which means (if they're using gensets) an increased fuel burn. And so they're looking at other ways to offset that energy usage through some of the things Bryan was talking about, right? “Process.” Not just process electrification, but process improvement and process efficiencies.

00:09:07 John Thomas
But mining is one, I think, that through some regulatory pressures – and a lot of mining companies are big companies that are setting big goals that we really see pushing towards electrification, as an example.

00:09:20 Ryan Karlin
That's a great example! And if we take a mining customer, for example (or any customer), how are they – when they start the journey about, “Hey, I want to electrify,” (whether it's processes, assets), what's some of the first questions they ask (or you ask a customer) in that journey to help find the right solution?

00:09:40 John Thomas
One of the big things, especially for these fields – so we'll stick with mining for a second – is diesel logistics (the logistics of delivering diesel to their machines) is something they've done for years and years and years.

00:09:51 John Thomas
They can almost do in their sleep. They don't have to really think about it very much. But forecasting the energy needs that they're going to have (the increased energy demand that they're going to have as they electrify) is really in a lot of cases, the first step. They're like, “First, we got to figure out where we're going to get these electric trucks,” because not everybody has them under development or has them available. But then they ask the question about, “How much energy am I going to need, and is that energy demand going to be the same all day or is it going to come in peaks at different times?”

00:10:18 John Thomas
And so some of the original discussions that we have with those customers is that evaluation level: “Well, let's look at your site. Let's look at your truck fleet. Let's try to estimate your energy consumption. How is it going to increase over time?” And then we start to talk about, “How are we going to manage that? How are we going to make sure that you have that energy [and] that it's produced in the most cost-effective manner, while at the same time meeting your emissions goals?” And making sure at the same time that there's resilient – there's backup, right? Because as they go to electrification…if that electric connection – let's say they do have a utility…

00:10:52 John Thomas
If that utility fails for some reason, they want to make sure that they can still go to work. And another industry that we see electrifying is trucking, on-highway trucks. Amazon, as an example, is electrifying their fleets. It's no secret they've got those Rivian electric vans out there, and I think there was just an announcement in the EU that I think they're doing Mercedes electric step vans as well. And in some cases, they're saying, “Hey, we still have to deliver product. We still have to ring the cash register if we have a utility loss.”

00:11:17 John Thomas
And so Caterpillar – How are we going to – Are we going to have that resilient power as well? It's a lot more than just the diesel logistics that they have to figure out.

00:11:25 Bryan Snyder
If I can add to that, maybe just a little bit, was – The peaks that you talked about there, JT, that's one of the things that we also have a lot of discussions [about] with customers (especially when you talk [to] like mining customers and things), it's understanding how they're getting that power around the site as well. So understanding in a large application, “Do we need to put distributed assets around the site to be able to manage the peak demands so that we're not getting overloaded on different parts of the system?”

00:11:57 Bryan Snyder
So having that different mix of products and being able to work with customers. You talked, Ryan, a little bit about energy management systems and how do we look at not only the creation of energy but where the energy is being created within the site – is also another big part of our second step as we talked through that discussion that JT was saying.

00:12:14 Ryan Karlin
Bryan, can you expand a little more around the distributed energy and how electrification and distributed energy go in-step in how customers are thinking about (or how they should be thinking about) using that in their system to get the goals that they want? Again, resiliency, financial, and economics.

00:12:34 Bryan Snyder
Yeah. As we look overall, in the entire system, electrification is driving distributed energies. It's putting us to[ward] having solar panels that are out around in different spots – and wind turbines and things like that.

00:12:46 Bryan Snyder
So just the grid in general is becoming more distributed. But even at a customer site, it depends on the size of the site. We have some of our own facilities that are thousands of acres that we do testing and validation on. We have to distribute the energy around that site to be able to use it. Also, you don't want to, necessarily, have to put massive power lines that are running…Sometimes that's the challenge to some of our customers. It's not a matter of does the utility have the power available, it's [that having] the lines that they're running (to get the power to them) is a challenge.

00:13:19 Bryan Snyder
So having distributed assets that we can put around in different places – whether that's adding solar or adding energy storage or even distributed generators where we can have natural gas or even hydrogen blends that we could operate on for customers. So that they have different technologies available to them.

00:13:37 Ryan Karlin
And we've mentioned it a couple of times, whether it's finance, economics, whatever it may be (“word that involves dollars and cents”), back when electrification started it was a given that electrification would be expensive. But in the recent years, solar panel prices have fallen drastically. Battery energy storage systems [costs] have fallen drastically. And so it's starting to [be] more of a level playing field. Is that an accurate statement or is it a case-by-case basis, where it actually could be economically advantageous to do an electrification system, as opposed to traditional infrastructure systems?

00:14:17 Bryan Snyder
It really does depend on the site and the location. So working with customers to understand what their utility costs are. There are places in the world where doing your own power and distributed energy is more economical. In some cases, it's just a must. You just have to do it because the grid can't support you. And sometimes those are places here in the US where you would think that there should be a stable, strong grid. So I think that there's a lot of different varieties. We often say that we can solve almost any problem, technically.

00:14:47 Bryan Snyder
It just comes down to the financials in the end of how we make it make financial sense for a customer. “What's the payback?” [Caterpillar] has tools like our Cat AMP system, where we're able to help customers to monetize their assets. So sometimes it's a matter of just reducing their utility costs by taking off peak events and peak days. Sometimes it's a matter of bidding into different markets and being able to have those assets available to bid in and distribute power back to the grid.

00:15:14 Bryan Snyder
So we've got a variety of different technologies to talk through that – you're right, at the end of the day, if it doesn't make financial sense for the customer as a whole, it's really a challenge to help them meet their ESG goals when the financial goals aren't making sense either.

00:15:29 Ryan Karlin
Any new horizon, there's always lessons learned. There's always bumps in the road that that we learn from. And so when we talk about electrification, I'm sure there's instances where we have seen (or we have heard) learning experiences from customers on ways to do things differently. John, [let’s] turn to you, what are some of those lessons learned that you've experienced yourself (or have heard) that you think are important for listeners to think about?

00:15:56 John Thomas
Yeah. So that's a great [question]. And I've got a good example. It's more in the construction arena than mining. But one of the things – as people will do the initial evaluation of if they're going to electrify their assets is they'll say, “OK, I'll run some estimates on how much more energy I'm going to need, how much more electricity I'm going to need.” And they'll look at their current rates that they're paying for the utility. And they'll say, “OK, I know that I'm paying ‘X’ per kWh, and so I'm going to multiply by the additional energy usage, and that's going to be my cost. I'm not going to have my diesel costs, but I'm going to have this additional electricity cost.”

00:16:30 John Thomas
What they haven't had to manage, maybe, in the past, depending on their facility, is what is called a demand charge, right? Where the utility has to reserve a certain amount of power for them based on their measured usage at certain times. And so what we've seen happen to a couple of customers is they've ran those numbers and said, “OK, well, the total cost of ownership does work out.”

00:16:49 John Thomas
Right? But then they get their electric bill, and their electric bill is four times the cost per kWh that they were paying two months ago. And it's because they didn't realize that at some point the utility will take a snapshot of that peak usage and say, “Oh, I've got to reserve all of this demand for you. And so I'm going to charge you more cost per kilowatt hour.”

00:17:08 John Thomas
And so there are some “gotchas” from a standpoint of: if you haven't had to manage those kinds of things with your electricity/your energy in the past, [then] you just don't know, right? And so that's where it's important to have a partner that is familiar with those markets and those things and that has the kinds of solutions (like we have) that could help manage that peak.

00:17:29 John Thomas
Right? We could have put energy storage on that site and trickle-charged that battery, keeping the energy usage low, and when that big peak demand for charging that asset (or assets) came, we could have dispatched it from the energy storage instead of the utility seeing a big peak usage. So those are some of the things I think – is that people just think, “Oh, it's just going to be more power.” They don't think about the fact that, well, your power might cost you more six months from now or that – or they don't know anything about these demand charges.

00:17:54 John Thomas
So I think it's important for customers to talk to folks that have either gone through it or that are familiar with what the challenges might be, so that they know what may lie ahead for them.

00:18:02 Ryan Karlin
Yeah, that's a great and powerful example of thinking how one action will lead to a result of the other and compounding effect. “What is the end game by having these actions along the way.”

00:18:14 Ryan Karlin
As you talked about: having that conversation with someone that you trust and can give you that insight is pretty critical. We're wrapping up here, but I want to ask one more question to both of you, John and Bryan, before we go. Put yourself in the customer’s shoes, what questions would you be thinking about right now – but also having a forward-thinking approach in the next three to five years, what do they need to be thinking about? Not just as they make decisions today, but how those decisions will play out in the next three to five years.

00:18:44 John Thomas
Bryan, you want to go or you want me to go?

00:18:45 Bryan Snyder
You go first.

00:18:46 John Thomas
OK. Well, as far as what I would be thinking about now (or what I'd be telling them to think about now) is, first – and we hear this from a lot of people that are going through the electrification process – if you've got a local utility, talk to your local utility as early as possible and let them know about your plans. Second would be: find a good partner that has experience in this space and that can help you answer the questions you're unfamiliar with. Those would be the first things is: plan, plan, plan. And you really almost can't do it too early. Ryan, how about you?

00:19:16 Bryan Snyder
Yeah, I think I would say that (just like you said with the planning) one of the big things we see a lot is: understanding your loads, getting good load data is really important. So what you have currently and then understanding what are the things that you're trying to electrify and what do those loads look like. We often get people [who] come in and want to electrify, and they say, “I have no idea what I currently have on my site.” And so gathering that load data is a real big part of our early planning stage.

00:19:48 Bryan Snyder
And then I think the other thing – as you said JT, looking long term  – is looking at some of the other technologies that are coming in, the ability to have technologies that are able to adjust with those. So, “If hydrogen becomes a thing, is that something that we're able to adjust to? What are the other technologies that are out there?” And working with somebody that's investing in those areas – so that that you're prepared when you know that they're prepared to help work with you.

00:20:09 Ryan Karlin
Great thoughts there by both of you guys, but unfortunately we're going to have to wrap up here. I want to thank you both for coming on today. It's been insightful for me to listen to you all who are on the ground with customers, talking about electrification day in, day out. And I'm sure our listeners got the same value out of this conversation. So thank you both for joining today. It's been awesome.

00:20:29 Ryan Karlin
Thanks for having us.

00:20:30 John Thomas
Yeah. Thanks, Ryan. Appreciate it.

00:20:32 Ryan Karlin
All right. Well, that does it for another episode of the Power Bytes Podcast. I'm your host, Ryan Karlin, and [I’m] looking forward to talking to you all next time.

00:20:41 Outro
Thanks for tuning into the Power Bytes podcast. If you enjoyed the show, head on over to cat.com and check out Electric Power for more exciting content. Let's power tomorrow together.