Paula Gold-Williams, president and CEO of CPS Energy, on running the nation’s largest municipally owned gas and electric utility.
We’ve got to keep getting women more ready. It's an odds game. If there's a job and there's 20 people going after a job and there's only going to be one selection, it's an odds game. Sometimes you're going to get it and sometimes you're not. But getting women to feel comfortable with rejection, getting women to feel comfortable with failure, and rebuilding and then putting themselves back out there with that bravery.
Libby Wayman: I'm Libby Wayman. I teach the MIT Energy and Climate Ventures course, and I'm also an investor at Breakthrough Energy Ventures and the president of the board for the Boston Women's Energy Network.
Paula Gold-Williams: Hello, I am Paula Gold-Williams and I'm the president and CEO of CPS Energy, a municipal utility that serves San Antonio, Texas, the seventh-largest city in the nation.
LW: Welcome, Paula. You and I had a great discussion for a live event for the Boston Women's Energy Network, to focus more on your experience in building diverse teams. I'm excited to catch up further today and especially go into electric utilities and innovation. First, tell us a little bit about CPS Energy.
PW: Well, as I started, we're a municipal entity. That means we're community-owned. We've been around in San Antonio for 160 years. We started out as a gas lamp company. We were bought by the city about 78 years ago. For us, our investors are, in fact, our customers that we serve. We both provide electric, which is a certificated area that we solely serve, and then we also have a natural gas system. We do everything from generate power, to transmit it, to distribute it all over San Antonio. We cover all of the capacity needs of San Antonio, Texas. Then we also sell our excess capacity out to the broader ERCOT [Electric Reliability Council of Texas] Texas market. We pretty much get involved in just about everything in the energy utility business.
LW: You came to your role from a finance background. Tell us a little bit about your personal background and how you came to CPS and your current role.
PW: Absolutely. I call myself a unicorn because, in this industry, I think very much it's more STEM-driven, more operational-driven. When I got here I was not in the industry. I got to CPS Energy about 16 years ago. I came in as a controller from the financial aspect. I was a public accounting auditor. I was an SEC [Securities and Exchange Commission] focused auditor. The great thing about my background is it's varied. I've done everything from audit photofinishing, when that was an industry, before you had smartphones that could do everything you need to around photos. I've also been in the foodservice industry, have audited mining companies, communication, health, newspaper, cable, those kind of things. Then I was about to move to Houston. My job at one of the companies I was just working for, publicly traded, was moving to Houston. I got a phone call to come. I took a pay cut and I took a demotion in title but I really love it here in San Antonio. My husband and I, we're raising our daughters, and the energy industry had a great reputation. I consider myself lucky to get in and I learned a whole lot more than I ever expected. I'm really am glad that I got in 16 years ago.
LW: You came through the financial organization, is that right?
PW: I was controller for a couple of years. I had done it in so many other roles, the CEO and the CFO at the time noticed that what I liked probably more so than the numbers were the people. I spent a lot of time with clerks and accountants and managers, but I thought for me the industry is really important, and it’s very infrastructure-driven, but without people, it doesn't matter. They noticed that about me and then I got my first opportunity, they asked me to be the chief administrative officer. At the time we didn't have one. I didn't know what it was, but I figured out a long time ago when a CEO calls you and offers you a job, that it's important to say yes. So I said, yes. Then I asked him, what will I do? My whole career has been like that and that's given me a whole lot more opportunity to learn new things.
LW: I think those are good words to live by, say yes and knock it out of the park. Now you're in the CEO role and you're pushing the boundaries on carbon reduction, carbon neutrality. How did you come at that from a financial background? What did the financial side prepare you to do? How did it prepare you to look at some of those more strategic forward-looking decisions?
PW: That's a great question. I think it's multi-dimensional. The thing about accounting, even engineers and people in the STEM industry, they always need funding and they always have to make a business case. I learned how to triangulate in the technical and operational arenas of just about all the different companies that I was in. Talking to people who had a very different background still translated in spend and the effectiveness of your business model and those kinds of things. So I learned that. The other thing I learned is, again, I audited some industries that are no longer here. I've audited companies that are no longer here. I learned again that you’ve got to be open to the changes that are happening in your industry and the dynamics of customers asking for new and different things and to be foolish enough, oftentimes, to think that things can't change and you can stay where you are. I learned that lesson a long time ago.
When we were trying to think about all of the stuff we had done for many, many decades, but we were starting to see the discussion on disruption. That was from the distributed energy standpoint. It's moving along, but I think we started to tell ourselves, maybe this thing is for real and it's going to be faster than we think, and lo and behold, it has been faster than we think.
I always tell people that you really can't tell you just have to keep looking back five years, three years, one year. When we saw that, even as an accountant, I said, "Hey, look maybe what's going to happen is we're going to have to do things differently. We're going to have to think about brokering power, introducing new solutions, shorter time horizons." I totally told the team, “We're going to be flexible. We're going to be open. We're going to partner with folks and we're going to be enabled by the intellectual abilities that they have to share, and we're going to build our strategy.”
That's when we came up with deciding to not even maybe think about not building another plant. That's when we said we were going to create the Flexible Path. When I told them that, my team said, “That's impossible. We always build, construct. and operate our units.” I said, "Well, probably, let's say we will, but maybe it will be smaller and more dynamic and more fast responding." I think all that did was, it allowed me to take all the things I had learned financially and in terms of change and accept it and embrace it. I spent a lot of time talking to my organization about that. That's how an accountant approached this transition.
LW: What role does distributed energy play today in your footprint?
PW: It's a pretty good size chunk for what we do. We have a large energy efficiency and conservation program. We spent less than $800 million in the last 13 years. A lot of that was focused on solar. We do rooftop, we do community, we do a solar host leasing model where a customer doesn't have to pay for the system. We surpassed 100 megawatts and it's going strong and it's a big part of what we're doing, we think increasingly so, and we've created a bedroom community here of installers and different people in the industry. We have a new energy economy and we couple that with other programs, like white roof and weatherization and all that stuff.
We see, again, that people do want solutions. They have an appetite for it. Not everybody, but enough to make a change. Increasingly, we know that there's going to be more in terms of EVs and storage and onsite storage and all of that. We feel like we can best help our customers make the right decisions in the future. We can provide them the support and not everybody's going to be able to keep up with their systems and manage when they have outages and things like that. We're just going to try to fit the need as it occurs and not try to force our customers and the things that we think they need.
LW: Just in late September, you announced an 80% reduction in net carbon emissions by 2040, a goal to get to that point and a goal to reach carbon neutrality by 2050. Those are pretty outstanding and industry-leading goals and benchmarks. What drove the utility to those commitments? Do you feel like its experience with distributed solar and community solar gave the utility and the stakeholders confidence that you could get there?
PW: I think all that's true. Additionally, at the same time, we've been in the wind business for over 20 years and we partner with operators that actually operate the systems for us. There are about 7,000 megawatts, over 1,000 come from wind. We had done some pretty phenomenal things in the solar arena. We did a global RFP back in the 2011 timeframe for 400 megawatts of solar to be positioned partially in our service territory and across Texas. We're not afraid. Most utilities have to be really careful about their risk appetite, but we weren't afraid. We also saw that the important thing is the nexus point of how the price comes down and the effectiveness of the technology improves. We know how to read that.
From that standpoint, it did give us the bravery to say that we need to get going and we need to stay active and we need to find real solutions. I would say, what really happened is, when we developed the Flexible Path, we came forward, that was in 2017, in 2018, we announced the Flexible Path. It showed that 80% objective. That we could shape it. That there was going to be a whole lot more solar coming on to our system. Then we started talking about new technology. We even said to ourselves, "We have no idea what it is, but it's coming." By that time, we had nuclear in our portfolio. That's how when you add all that and stack it up, that's how you get to the 80% profile.
We were talking about that in 2018. In 2019, our city created its own climate action and adaptation plan. Our board charged management, they endorsed the CAP and they basically said, “Do that through the Flexible Path strategy and do that through our value pillars, which are reliability and customer affordability, resilience, safety, security, and environmental responsibility.” We had built all of these things. We don't lead with our ideology and we don't lead with declarations. We were talking to the community and said, we're a silent partner. Then we decided that we have to promote it and be more clear. A lot of people are saying, "Get rid of..." We do have coal in our portfolio, but they're a young unit and they have scrubbers on them. We have taken a lot of environmental efforts to control that. But by 2030, that plant's only going to be 20 years old. We want to either repower it or try to rethink it, but whatever we do, even if we close it, we've got to do it in a way that doesn't cause rate shock to our community. What we did do this year is say, “We got to talk about it more.” We think that's important.
LW: Describe the Flexible Path. How does that work for all the stakeholders involved?
PW: It is very much a concept that drives the company. It says, again, when you're in this industry, which is full of long-lived assets. Typically, our assets can last 50 years; nuclear assets, maybe 60 or 80 years, you can get stuck. You can say, "Tried and true. I'm just going to keep building whatever fossil plants over and over again because I know that works and baseload." For us, again, what it did for us by having that Flexible Path that says, “Always check the market.” Not only check it, but our belief is that you think global and act local. When we check it, we check it across Texas, across the nation, across the globe. That flexibility, basically, is what we utilize when we're searching. We've studied energy. We've made contacts with companies across the globe, Australia, Europe, Asia. We have contacts that tell us and they share with us where they think technology is going. Then we put real projects on the ground, which we think is the best way to see what's really being deliverable, what's in the right price point, what's in the right performance point. That flexibility is what we do. Then we engage the community and tell them what we're doing. Why do we make this decision and what do we look at and how do we get there? We believe, again, it's got to be real actions that happen and again, are smoothed into our cost structure so it's real affordable and not shocking.
LW: To reach the 80% reduction in net carbon emissions by 2040 and then carbon neutrality by 2050, what are the key strategies to achieve these targets? Which ones seem straightforward and which ones do you think will be most challenging?
PW: I think the easiest part of the equation is on the renewable side. I say that the pricing is super attractive. The abundance is great. It's a hot part of the industry, particularly on the solar side. Texas has a lot of wind already and I think we definitely can exceed our wind capacity. I think we're approaching 30,000 megawatts of wind energy. I think that part is the easy part. I think the hard part is the storage part. We have done microgrids in San Antonio. We've pooled solar with batteries. Lithium-ion is the base technology to use. It's common, the price is coming down, and it's great.
There are two basic problems I think that we have. One of them is the duration. Even at four hours of storage, it doesn't give you the ability to easily replace a baseload combined cycle gas unit. You need a lot. When you really do think about, we're already in the middle of global warming, the possibility of storm after storm, and the inability to recharge those units become problematic. I always say, what we do is we’ll rack them and stack them, which sounds probably more fun than it really is. The second problem with those is that they're not designed for the way the utility will use them. They're designed for optimization.
The great thing you get is a quick split-second response. That's wonderful. It's designed to fill a gap for 15 minutes easily, maybe an hour easily. A utility optimizes its assets, so it's going to want to what I call “deep cycle” that unit. It's going to want to take the charge all the way down and then it's going to want to fill it back up again. That's not where the technology is, which means the life quoted on these units is really much shorter than what we've got. Not only do you have to rack them and stack them, you have to replace them.
Everybody gets enamored and goes, "It's so cheap, it's so great," but when you have to think about those replacement costs and when you think about how many times you have to replace that battery over a 50-year life, or even a 25-year life, to match a solar farm in its first charge, that's a lot of complexity. Then you have all the issues of disposing the batteries and what can you recycle and what you can't recycle. I do think that there should be, and there is, a development of more technologies and chemistry on the storage side. I think everybody's really hopeful about hydrogen. I think, though, again, it's early and you need a big partner, even at the federal level to really help you do those things.
I always think it's like Star Trek. Our imagination outpaces the reality of things. That's why I love C3E, because they're looking at innovation, and that is the key. The whole research and development arm of the industry is that. When we figure it out, when we have bright, wonderful young people coming in the industry, particularly women, coming in with their ideas, and they think about it both technically and with emotional intelligence, I think that's the solution of what we're trying to get to. We believe that the R&D side of improvements in technology are the key which we want to embrace every time we can.
LW: What are the characteristics that you think would be ideal for storage to help utilities fill the gap between existing storage technologies and what they'll need to do to reach deep decarbonization levels?
PW: When we were first looking at solar, we put together an advertisement in The Wall Street Journal and it said, "Experienced utility looking for a sizzling solar partner." We did it like the singles ads. A lot of the students don't know what those are. Those were a thing. Singles ads. We were trying to attract people. The prices were outrageous. They were just tremendously expensive. What I thought was, as the price would come down, that the efficiency would go up. That's what I thought. What's really happened in the industry is that the price has come down and solar has become a commodity.
Everybody's like, "That's wonderful, it's so cheap and it's great." It would have been the most optimal thing if we could have enhanced the efficiency of the technology at the same time. When I look at storage, I want it to improve technically. I don't want just the price to come down. I want the product to be better. I do want the life of the unit to be extended. Because a community doesn't care that you're switching things in the background. They don't care about any of those things. They don't care that a car hit a pole. They just want consistency. The more that you can really utilize an asset fully and the performance of it gets better, that's what's really important.
Recently, we did an exploration of this, and I think we'll get into this RFI thing that we did on the flex power bundle. We saw some technologies that weren't just four hours. We saw people talking about new things at the 48-hour duration and we thought, "That's great," but when you start thinking about global warming and weather changes and things like that, you can come up with a scenario of, that's not enough.
The last thing I'll say about that is, now with Covid, and many more people working from home, many more people stressed, people don't even like a blink. A lot of us, a lot of folks say, "Well, it's easy, just change it and people will understand." People don't understand. They have lives, they’re going to school, they’ve got families, they're on a strict calendar. I believe that the technology has to take into consideration real improvement at its core so that we can make this transition smooth for them and still keep the prices very affordable.
LW: Do you think you'll need to access technologies like carbon capture, direct air capture, to reach full decarbonization? What's required to get to that last click on full carbon neutrality?
PW: I absolutely do. I will say that, under our Flexible Path, we assume that there are technologies we can't even imagine, but currently, and we were looking at carbon capture significantly in the 2010 time frame. I do think that's still important, and maybe even more important to utilities. What I'm concerned about, as the CEO of CPS Energy, is I can do everything that I can to do the right thing, and the utility industry is critical to the climate goals of the globe, but there are many other industries out there that... food industry, the way that their production works, or in the oil and gas industry and people will go, "That's just going to be replaced by electrification."
I do think that we have to be thoughtful and assume that every aspect of our economy needs to think about their own evolution. I think it needs other parts of our economy, carbon capture may play an even bigger role for them, or some other basis of transition to hydrogen, or those kind of things. I think everybody at the table really should be thinking this through.
The last thing I'll say is, I've sat in big meetings of global meetings with people and a lot of the tech companies. We’re tech-enabled. We're not a tech company. They'll say, "Well, the reason why we're falling behind is because those stodgy oil and gas companies and those big manufacturers are falling behind, and they should be left behind and we should move." Here's my worry. This is what we saw with Covid. They're huge employers. What we really want to do is, we not only want to solve our energy problems, we want to move the economy along, we want to retrain people, reskill them, let them optimize their use of technology, and their new career paradigms.
For us to assume that we're going to skip this evolution by the tough stuff that has to be done, I think, is not responsible. Again, you can see it so great. The air got clearer, cleaner because nobody's driving to work. That's great. Really, the sad part about the whole thing is nobody's driving to work because a lot of those people don't have jobs. We need to rebuild the economy in a way that keeps all solution sets on the table and puts us in a mode where we want everything to improve. That's my passion.
LW: It's interesting to think about the utility as being on the leading edge of decarbonization when you compare across industries. You mentioned steel, oil and gas, there's cement, textiles, food and ag. The list goes on and on. A lot of transportation will be extremely difficult to decarbonize. You can see the electricity generation and distribution sector starting to take on some of that load by electrifying some other industries, but yet that will even go only so far.
It's interesting to think about, if utilities become leaders in carbon capture to meet their full decarbonization goals—because utilities are the leaders in setting full carbon neutrality goals—if that could become a public service that utilities could provide to decarbonize other sectors as well. I think it's a really good point that utilities are, in a lot of ways, leaders when you think about the work that has to be done across the entire economy and how those roles could be leveraged to assist carbon neutrality across the economy.
PW: You have a wonderful point and I am very much in agreement. The way that we look at it is, we want to partner with all of our customers and help them think through that journey. We have had a residential renewable solar tariff, for example, for a very long time. We created a large commercial tariff to get customers to want to think about those things. We also have to, again, think about manufacturing companies that have three shifts around the clock. What are they going to do and how are you going to do it? Some companies in San Antonio are very gas driven. Again, talking about what their evolution looks like matters.
Another example I,s there is a transportation company, that's a bus primarily company. They're our sister entity. What we try to do is be available to them when they want to make and discuss their future. They're creating it but we want to be helpful. They moved from diesel to CNG and now we're talking to them about electric vehicle integration and what that looks like. 2050 is close but far away. As long as we're really actively thinking about that transition, I think we can all hit those Paris Accord numbers.
LW: You mentioned some of your customers and their use of gas. How does the carbon neutrality goal encompass the gas side?
PW: I think, to the point you raised earlier, there's got to be innovations on that side as well. We're not there yet but we are looking at things like... I mean, not there yet in terms of solving the problem fully, but renewable natural gas and, again, conversions of hydrogen and different types of chemistries. Again, we are comfortable thinking we don't know. Again, maybe there's a student out there who's going to think about something we hadn't thought about before. When that happens, we are open with our gas system to make that conversion. We're starting in the renewable natural gas space. We think that's just the beginning. We think again, there are innovations that can happen on the gas side.
LW: Even well before this announcement, this goes back years, you started a way of working with startups. As innovators, as a new source of innovation, it's been notoriously challenging for startups and utilities to work together. Can you describe how you set up that kind of collaboration and things you've learned through those efforts?
PW: Absolutely. Again, my predecessor, Doyle Beneby, came from the IOU [investor-owned utility] world. We were talking again about, how do you leverage? The thing about utilities is, they usually have scale. We can reach economies of scale and we can create attractive offers out there. “Come solve this problem for us, and help us in the journey.” We were looking at the whole element of trying to bring a more... the big solar bid, 400 megawatts. We were looking at our lighting, moving to LED lighting across all of San Antonio. We started to put together this ecosystem, the new energy economy ecosystem, and we created an organization called EPIcenter.
It in itself was a startup. We hired the CEO, the first employee. She created everything; policies, hired staff, all that kind of stuff. At first, like for the first three years, while we were looking at innovation and all the partners were informing and infusing things that our perspectives, we did the wrong thing. We were trying to rebuild an old gas plant. We were trying to remodel it and make it a beacon for convening globally in San Antonio. After we thought about it, we were spending too much time trying to raise money to redo a building.
Then eventually we said, “We don't even need brick and mortar. This is about innovation and technology and really helping companies.” We released her from—her name is Kimberly Britton—we released her from the obligation of a capital plan and we said, “Go out and do the good work.” What we've done is we've done some external competitions, just public. Pop-up competitions on innovation. We've done pop-up competitions inside the organization where we want people to come in, and then we ask this entity to start helping this ideation type. We didn't even ask them to prototype it at first. Just come up with the idea and the concept, like baby Shark Tank. She helps us. We actually have competitions and judges—I’ve been a judge multiple times—where we find these companies and then we start to help them. We help them, some with prize money, then we also help them with angel advisors who come in and spend time with them as they're trying to think and build out their thoughts. We help them with incubation. We help them in different ways. That's what EPIcenter does. Then they look, again, for other organizations across the nation to help partner. We believe hugely in the partner concept.
When you're running a utility, you can get really busy, 24/7, 365, really trying to run the business. What Epicenter is, is a constant pressure on it. They come to our meetings, they sit in our strategy sessions, they go look at these other companies, they vet them for us. They force us to let go and be in this space where we can be more creative and sit down with potential partners and they can help us vet that.
Between that and then also helping us think, again, how do we bring in other industries to help think through? How do we make it all a huge ecosystem? One that reaches. We always say, think globally and act locally. How can you keep doing that? That's our approach to trying to do that and EPIcenter is critical. Our partnerships across the nation are critical. MIT is. We think that the dialogue around exchanging ideas and thoughts and really putting more collaborative effort into this transition matters versus fighting. Fighting about, is it 2030? Is it 2035? Is it 2045? Is 2047? Why do that? Why don't we get some work done? That's our philosophy here.
LW: You mentioned previously one of the truths that utilities grapple with all the time, is their need to think through risk very carefully. Because they've got a lot of value propositions that they have to balance. Certainly, reliability and safety are huge things that they need to deliver on every single day. Yet, sometimes risk aversion makes it much harder to take risks on technology, particularly innovative technologies. Are there strategies utilities could use to balance their need to minimize risk, but also allow them to take some risk on innovative technologies to help them meet their goals, particularly around carbon emission reductions?
PW: A lot of it is I think you have to be a lot more willing to talk to your board in the community about the dynamics of new technologies. I'll state it here, we put out a big RFI globally in 10 languages. We got close 200 responses, 25 of them were from other countries. It's a design where we're trying to attract 900 megawatts of solar, 50 megawatts of batteries. Again, because of the limitations on duration. Then we're open on the 500 megawatts of firming capacity. The interesting thing is, being open, that's where the innovation piece is. There's some in lithium, but we said, it could be anything but we want it to perform.
The benchmark is gas. We might pay a premium for a less effective technology if it does the right things in terms of the environment. We can have a conversation with the community that says, that premium matters to us. When you look at being able to blend in—this is why it's a bundle, we call it the flex power bundle—when you can get the pricing advantage on solar and you can get the fast response of energy storage, you might be willing to take a little bit of a premium cost and let that risk ride in that firming capacity. It's a tricky perspective, but it also starts to educate your community about price variation.
We did a presentation at the board meeting and we were talking about the differences in pricing and people are going to rush to quick conclusions. “If solar is so cheap, why don't you make the whole thing solar?” Because you will have reliability problems. That premium you pay for fast response, that premium you pay for long-term reliability matters in the grand scheme of things. I think you have to bring your customers and your public along in that discussion so they can understand it and they know the risk you're taking.
The last piece I'd say about that, though, is the trickiest part about this is, if this was all what we call in the industry a greenfield site, they were slammed out there and we were going to recreate San Antonio all over again in the best way, you're adding capacity. You're making that investment right then and there. What's really happening is, you already have capacity that's performing. You have a particularly baseload generation that can run around the clock and has a high-efficiency factor. You've got to be careful about how much risk will you take on the technology side when you've got so much assurance of performance currently.
It's constant and one way that we're doing it is, we might take a little less risk in the first flex power bundle, but we'll take some and then maybe again, we'll take increasing. Then what we also want to do is invite pilots, so people can start to see the different types of technology. We're going to support pilots across San Antonio. Again, to get people more comfortable that innovation doesn't happen without trial and error and to get from version 1.0 to try to get to version 5.0 takes bravery and an appetite.
The last thing I'll say is, usually, utilities are big enough to blend in. If you blend in these solutions when you're taking risk, it's usually very affordable for customers, but the problem becomes the velocity. If everybody says, “You've got to make that change by 2030.” That's where it gets tricky. Ten years seems like a long time. It's like a blink in this industry. These are the things that keep us up at night as utility executives, but it's the good work. It's the stuff that we have to do, it's the stuff that our customers expect us to do.
LW: Bringing all of these experiences together, experience working with startups, this really innovative model on the Flexible Path and the new layer of your targets on carbon neutrality, what are your lessons learned and thoughts about actually working with startups? Do you have advice for startups or visions about how utilities can best work with startups?
I think some of the challenges that startups have are really long sales cycles with utilities. But then some of the challenges utilities have is, you often run RFPs and there's a process. You have to take all of the competition into account and you can't just deal with someone necessarily who just walks in the door. What are some strategies for bridging those challenges from both sides?
PW: I will say that when you're a municipal, it’s even more red tape. Those are very fair observations. I will say this, I think from the utility standpoint, an unfair generalization, but because we've dealt so long with such proven technologies and reduced our risk appetite, I think utilities have to spend a whole lot more time really thinking the big risk. The big risk is, if you don't do something, you're going to be left behind and you will be boxed out by people who are finding real solutions. If you think you're protecting yourself by not taking the risk on new technology, you're probably actually taking the biggest risk on your entire business model.
It is those companies that are effectively embracing change, integrating technology, partnering, that I believe are going to be the biggest winners. I think an organization has to, on the utility side, rethink more broadly its view and perspective about really understanding and believing how much this industry is going to change. It's not lip services, it;s for real. Accordingly, I think when you start to do that, you'll begin to say, "This risk that I take, it's actually insurance, it's not risk. It's actually prudent."
Again, also thinking about things in terms of size. When I came to the industry 16 years ago, we were in this mode of bigger is better. We had a 400 megawatt plant that was great maybe 30 years ago and then we made it 500 megawatts and then we made it 700 and then we’re like, we should go 800. We were trying to over-access the value of size when, in fact, I think where we're at is, you can start smaller with a smaller investment, more manageable. When I say smaller, 50 megawatts, 100 megawatts, 200 megawatts. Those things I think are a lot more palatable and affordable and blendable in openness. I think there's a lot of onus on utilities to rethink how they do it.
Again, I think they should also think about legislative changes that help them with additional flexibility. Municipals in reality oftentimes are restricted and precluded from doing certain things. You're right, you can't just make strategic procurements where you're really trying to find and support that growth. I think we've got to do some things on the policy informing side to get that flexibility and make people less afraid.
On the innovation side, and the people who are really trying to think these ideas through, look, I think the real thing is, sometimes what I see is, they're so excited about this wonderful technology but they forget that they're also creating a business model and a business model imbalance. That means you've got to be good at marketing. You’ve got to be good at quantification of your investment. You have to be able to talk about what your cost structure is going to be in and where do you see the ability to improve that technology.
What a utility thinks about is a partner for a long time. A lot of people in innovation want to think of an idea and move on. Think of an idea and move on. When you're in the utility industry, my advice was, we're trying to build relationships with people who are going to help us care for those units or give us advice or set us up for success.
I always tell my folks, look at it from the other person's position and understand that. I think that helps you when you're trying to partner, get to a better solution. But if you say, “I can't be flexible,” if the utility says, “I'm scared,” you're out. If the innovation company says, “I don't want to spend time helping them dotting the Is and crossing the Ts,” you won't get there. Know what you're stepping into, being able to have candid conversations about that, being able to understand where the drivers are in the organization that you're dealing with. Usually, a CEO can point you in the right place, because a CEO is always really curious about this stuff and doesn't want it to fall through the cracks.
That's some of the advice that I have that I think is critical. Then, utilities have to go in learning mode. We don't know what we don't know, we do know a lot of things, but we don't know what we don't know and we've got to be open to our own learning in this industry to help it move along.
LW: What would be helpful for utilities to accelerate their learning, open up the ability to experiment a little bit? For example, some financial flexibility to pilot new technologies, obviously in a way that doesn't jeopardize the rest of the service territory. Is there a way to carve out some capability to take more risks in a controlled manner, either physically, financially? What would be helpful to utilities to be able to experiment a little bit more and move faster to try out some of these new technologies?
PW: I would say, absolutely there is, with a big if. Covid has, I think in many ways put a ton of pressure on utilities currently. It's put pressure on everyone. Pre-Covid, I would say, there's always choices in your budget. I typically find, in every company that I have, people create more items in their wish list. It always irks me to get to the end of the year and notice that I have money leftover because our people have redirected funds to something that wasn't in the original plan. Talking to the financial people to make sure that they're keeping a really great eye on reallocated funds and then popping those funds back up all the way to the top, so you're making the very best choice. The leadership team saying, “The next dollar, what would we get if we spend it on innovation? How much of that?” Then challenging the organization to say, maybe there is something that we can slow down to actually put more money in this place.
The one tough thing for R&D, though, is usually it's—this is geeky stuff—usually, you expense it right away. You can't capitalize it and being able to capitalize it is critical. But I also think that there are technologies out there that are proven that can be capitalized, they're just new to us. Being able to be on the scale to prove effectiveness so that you can create a capital funding strategy is the most optimal way to do that. To your point, you need to bring your financial people in.
The way we do it here is, every part of our organization talks about innovation. All our senior chiefs all have time and we spend time on innovation. To encourage it, we bring in additional speakers to help us think through what to do. I think a lot in the university space, it stimulates our brain to have a strategic conversation about the possibilities and create that appetite and interest and then the predisposition to say, “I want to get into that. That's super exciting.” That's my thing. You got to force yourself. It needs to create a system to start carving that money for that purpose. Even in Covid. I think we're finding a way, maybe it's not as much as we thought it was going to be pre-Covid, but we're finding a way to keep it going here.
LW: Perhaps a way to talk to regulators too about, maybe capitalizing some of those things that would otherwise be cast as expenses.
PW: Absolutely. Absolutely. It's a catch-22 situation. With so much gas and natural gas, shell gas on the market that really has suppressed pricing, which is great for customers, but unless there are some things that inform policy to help us find ways for funding, you won’t get there. That is the one thing I am worried about. That we're going to put a lot of renewables on the grid. We won't have a great optimized long-term duration solution that is non-emitting and we'll just assume again that we can take the fossil plants off the grid. To your point, I think it is regulators. I think it is policymakers being informed, not to just be in love with the idea, but to help us effectuate real steps to make it happen.
LW: Paula, switching gears a little bit, our last discussion was around overcoming adversity and building diverse teams and you yourself are such an incredible exemplar as a black woman leading an amazing business and having had tremendous leadership roles in several other businesses. You give back as well. You're an ambassador to the C3E organization. C3E is a partnership between the U.S. Department of Energy, MIT Energy Initiative, Stanford Energy, and Texas A&M Energy Institute that recognizes outstanding women leaders for their accomplishments in clean energy.
Can you talk a little bit about your outlook on building diverse teams and the benefits that come from diversity and maybe just some of the things, because I know you do so many things, to enhance diversity broadly at your organization and across the industry and in your community?
PW: Absolutely. We take a little bit different view. The first thing I'm going to say is, C3E, I was fortunate to go and actually go to a conference and watch the students talk about their technology, I went in the display area and sat there and I was blown away by just the intelligence and the sharpness of the women to be able to talk about their technologies and everything from the technical side of it to the practical side of consumption. I think that is one of the best organizations in terms of helping women and coupling that with support of continued education. Then what I love about the organization is it looks at women at different stages in their career. Early on, mid-career, fully accomplished, and everything in between.
Now I'm actually on the council. I think we're 99% women. We're all sitting there talking about, how do we help people? How do we encourage the good work? It has to be that effort, it has to be that passion for it. Then when I translate it back to San Antonio, we don't use quotas or things like that. We want it to be real. What we want to encourage here is encouraging women and having real career conversations with them.
I was talking to a woman—and this happens quite often, or it's happened to me—I was talking to a woman about her career. She was going after a new job. I could see the pain that she had. She goes, “I've tried this multiple times and it really hasn't happened.” I could see the discouragement. But then she said to me, “There were years I wouldn't even apply because I didn't think I was ready.” We’ve got to keep getting women more ready. It's an odds game. If there's a job and there's 20 people going after a job and there's only going to be one selection, it's an odds game. Sometimes you're going to get it and sometimes you're not. But getting women to feel comfortable with rejection, getting women to feel comfortable with failure, and rebuilding and then putting themselves back out there with that bravery. I was listening to a university president. She says, “We build our young boys for bravery but we build our young women for perfection.” I think we absolutely have to change that paradigm in every way and bring the emotional intelligence that I actually think women on average naturally have and support that.
We do a lot of career conversations. A lot of talking. We do it through a SWOT [strengths, weaknesses, opportunities, threats] prism. We pump them up with recognizing their strengths. We look at the things that we think are their weaknesses, which are targeted at their actual execution. The way they approach work. We look at their threats. Which means, are you keeping up with your peers or are they outpacing you because the way that you embrace your development is slower and more tentative? Then we take it and we say, "Here are the opportunities for you. Projects, mentoring, coaching, buddies, exploration, and to do your own research. Offer things to senior chiefs. Make proposals." All those things we keep tailoring.
Somebody else said to me, "What does that mean? Does that mean if I do three assignments then I'm going to get promoted?" I said, "No. It doesn't mean that.” What it means is, somebody's going to take, at CPS Energy, an active interest in your career even if it's the CEO. She's going, "I'm going to challenge you and say, ‘Are you doing what you're supposed to do? Are you taking constructive criticism? What did you do with that failure? How did you turn that around to improve performance? How are you bringing your ideas at the table? Are you hesitating when you're talking or do you feel like you're a real valid member of the team, because that has to start in you?’"
I think there's a whole lot that an organization has to do to build that confidence, that expectation of bravery and accountability. That it's okay to fail. That's another thing of innovation. It's okay to fail. Now you've found out how not to be successful and you x that out. We do that and then we also value technical competence with emotional intelligence. We value that over and over again. You could be the smartest person in the world but if you have no ability to talk to a customer or to lead, you're going to struggle here.
We want to build leaders that can go anywhere in the country. In Texas, and you can get it elsewhere, we have this thing called Blue Bell Ice Cream. Blue Bell Ice Cream says, "We eat all we can and we share the rest." We understand that our organization—even though it's big, 3,100 employees—we know we can't promote anybody who's on fire and they're doing all the right things. Sometimes we say, "You've got to go somewhere else.” But we're okay with that because we think that builds the industry and that puts great women out in the industry doing wonderful things.
A lot of it is the support system that you have to create and pay attention to. I had one person say, "I don't know that person very well. I don't know if they're that good." I said, "If you don't know them that well, part of the issue is you. You can't tell me anything negative about that person until you go down and sit down and talk to them and give them a shot.” Those are the ways that we talk to each other here. Those are the ways that we continue to expect men and women to build talent behind them. That takes effort. You can't ignore it. Even when you're trying to work on technology, you better be working on your people.
LW: Paula Gold-Williams, CEO of CPS Energy, just a tremendous wealth of expertise and advice on innovation, utilities, and careers and building diverse teams. Thanks so much for talking today. Congratulations for your announcement on 80% reduction in net carbon emissions by 2040, carbon neutrality by 2050. Thanks again, Paula.
PW: Thank you all. It was such a pleasure and I'm a big fan so call me anytime.