Reborn in the Cloud: Talen Energy’s Journey to the Cloud
“We don’t do load balancers anymore, we just do load balancing.” -Bruce Kantor, Talen Energy
I don’t often get the opportunity to learn how the cloud is helping the energy industry rethink the way it delivers IT. There’s obviously a lot of great science behind power generation, but getting to hear about the technologies and strategies that power the business was new for me. That’s why I felt so fortunate to have recently met with a few executives from independent power producer Talen Energy.
With me was James Schinski, Senior Vice President and Chief Administration Officer (overseeing IT, business services, supply chain, HR, security, and others), Bruce Kantor, Senior Director of IT Infrastructure and Security, and Jeffrey Herbine, Manager of Hosting, Cloud Services, and Network.
These three told me about the company’s origins and their motivations for considering the cloud and choosing AWS. We also discussed how they dealt with the regulatory requirements surrounding the operation of a nuclear facility, and they explained why a company should always assume there is a cloud solution that can meet its business needs.
What impressed me about the Talen Energy executives was how mature and consistent their thinking is around IT strategy. Throughout our conversation it was quite clear how well they worked together as a team, and that each of their thoughts built meaningfully off the one before it. Their jobs are not simple, and they were all forward thinkers.
Scaling IT with the Business: Why Cloud?
In June of 2014, PPL Corporation (PPL) made an announcement to divest its competitive energy supply business. The 100-year-old company was a hybrid utility, meaning that it dealt in both regulated and unregulated markets. The unregulated part of PPL’s business was providing the majority of the free cash flow, but was undervalued by investors because of the combined company structure. PPL decided to spin off its energy supply business and combine its competitive generation with plants owned by the private equity firm Riverstone Holdings, and the new entity was born.
In establishing itself as a separate company, Talen Energy faced the challenge of having to rethink the way it delivered IT. The company supported 500 applications for the entire enterprise, with 180 people managing them. This felt inefficient for a fast-moving, competitive enterprise. “As you could imagine,” says Schinski, “a hundred-year-old company that started off as a regulated utility [wasn’t] nearly as efficient as we felt we needed to be with this new entity.” On top of this, they needed to maintain as much free cash flow as possible. Schinski notes, “The value of the [new] stock is based on EBITDA [earnings before interest, taxes, depreciation, and amortization]. We need to keep opex small, and limit capex investments.” The team was quick to point out that it had access to racks worth of equipment that they were entitled to take as part of the divestiture, but it was readily apparent that such a move wasn’t in their best interest. The ongoing opex would have been too expensive and would limit their ability to scale.
“We need a model where we can scale IT with the business. Independent Power Producers (IPPs) typically grow and shrink through acquisitions,” he adds. “Elasticity and flexibility are very important to us.” This is one of those points that I really love to hear enterprises considering as they develop their cloud strategy. If you oversee a large technology footprint that’s going to grow and shrink with various IT assets from acquisitions and divestitures, do you really want to have to manage data center sprawl and bespoke integrations, or do you want to be able to develop mechanisms that will allow you to integrate various IT assets into a consistent platform? I’ve spoken to several companies in addition to Talen Energy who have reaped this benefit. Hess Corporation is one of them.
Talen Energy looked at all of the major cloud providers to determine who could best serve their needs. They decided that AWS was the best choice for a number of reasons, but what stood out the most was Talen Energy’s confidence that AWS could meet their operational, regulatory, and security needs through the breadth, depth, and maturity of the platform and people supporting it. The team had seen this movie before — they previously worked to consolidate much of PPL’s IT assets and operations into virtualized data centers. Now they had a chance to pull it apart and scrutinize each decision on a clean slate. As is often the case in life, their past experience illuminated what they knew — and what they knew they didn’t know. Herbine says, “We knew what to ask and what we didn’t know. AWS passed with flying colors. We had an operating model in place with some successes and some scars and an idea of where we wanted to go. AWS was aligned with that vision.”
Security, Regulations, and Compliance
Talen Energy is subject to the same security, regulatory, and compliance standards as many Fortune 500 companies, though its nuclear plant sets a unique bar. The plant is responsible for more than 2,500 of the 15,000 total megawatts the company generates, and is one of the most profitable assets in their business. The plant also makes Talen Energy subject to approval from two regulatory agencies, the Nuclear Regulatory Commission (NRC) and the Federal Energy Regulatory Commission (FERC). On top of this, the Department of Justice was also involved in the approval process.
“Because we combined assets with someone else, [the FERC and the Department of Justice] wanted to ensure that we wouldn’t exercise market power in those markets where we own a lot of generation,” says Kantor. “We have to mitigate our market power through several means, one of which is [that] ultimately we will sell some of those assets so that we don’t maintain too much market power here in the [Mid-Atlantic States].”
Talen Energy ultimately needed to find a provider that would meet its technical needs and also those of the NRC and the North American Electric Reliability Corporation (NERC). It’s current relationship with AWS serves as a good example of how companies with complicated regulatory requirements are finding solutions in the cloud. Part of Talen Energy’s decision to go with AWS was because they could meet the appropriate 10 CFR 810 (similar to ITAR) requirements for a subset of Talen Energy’s applications through AWS GovCloud.
Data security and governance are essential. Generating nuclear energy, as you might imagine, produces extremely sensitive data, and managing that data needs to be done carefully and (rightfully) scrupulously. “We were looking for the ability to manage encryption where we control the keys [to it], rather than having the provider have they keys,” says Herbine. The company uses CloudHSM to encrypt their data and meet the NRC and NERC regulations. “Choice in who manages the keys was a key capability that AWS provided,” he adds.
Ultimately, Talen Energy concluded that they have a much better chance of securing their systems in AWS than they would in an on-premises environment. Says Kantor, “Having on-premises control makes you [feel] secure and compliant. That’s false. Having services like AWS make you more secure and more compliant.” Hearing the team talk through their perspective on this was encouraging, and it echoed the perspective that I outlined in A CIO Perspective on Security in the Cloud.
Some Advice for Your Journey
Talen Energy and PPL will eventually operate as two separate companies, but the transition won’t happen overnight. After spending years trying to integrate and unify applications across the business, they need to pull them apart and start again, though for this exercise they’re armed with great experience and a growing ecosystem of support. They found AWS Professional Services to be a particularly strong partner from the community. “It’s been very useful to have ProServe sitting next to us to help us evaluate decisions” says Herbine.
Like most enterprises developing their cloud strategy in the context of their existing IT investments and cultures, Talen Energy is on a Journey that will allow them to dedicate more of their resources to their core business. And, for those worried that their needs may be too complex, remember that Talen Energy faced and overcame challenges in a well-scrutinized industry. “We knew so much and we wanted to ask so many questions,” says Schinski. “We were very deliberately scrutinizing everything, because sometimes it sounded too good to be true.”
As we wrapped up our conversation, I asked this team what advice they’d have for other companies who are on or considering the Journey. I found their answers to be thoughtful and, dare-I-say, universally applicable to enterprise IT:
“When we were supporting our own infrastructure, we would spend 80 percent of our time on 20 percent of the issues, says Herbine. “A good example of this would be with load balancers. When we need to do load balancing now, we go in and configure what we need, and we’re done.”
“Yeah, we don’t do load balancers anymore, we just do load balancing,” says Kantor. “AWS has done a very good job of integrating the services they offer and building them out on a consistent platform, so that automation is relatively easy and integration between the various services is much simpler and easier. You’re not just dealing with a bunch of screens, a bunch of separate screens and figuring out how to integrate it all together, it’s fundamental to your plumbing.”
“Don’t assume it hasn’t been done before,” Schinski adds. “Even if you think you’ve got some ridiculous, esoteric requirements, don’t assume there’s not a solution. We were delightfully surprised that AWS always had one for us.”
James, Bruce, Jeffrey — it was a pleasure meeting you, and thank you for your time and words of wisdom. We’re rooting for you, and I have every reason to believe you and Talen Energy are going to outperform.