Should Utilities Care About Sustainability? Takeaways from PG&E CEO Geisha Williams at the Schneider Lecture

GraysonIn February, I attended the Stephen H. Schneider Memorial Lecture, an event hosted annually at Stanford University honoring the renowned climate scientist and science communicator Stephen Schneider. This year, the event’s speaker was PG&E CEO Geisha Williams. PG&E, short for Pacific Gas and Electric Company, is one of the nation’s largest utilities, providing natural gas and electricity to most of northern California. Williams assumed her role as the utility’s CEO and President in 2017, becoming the first Latina CEO of a Fortune 500 company.

When I saw that Williams was speaking at this year’s Schneider lecture, I was surprised. Why was the CEO of a natural gas company speaking at an event focused on sustainability? Her company’s business interests, I assumed, could not be in alignment with values of Students for a Sustainable Stanford, the group hosting the event. During the lecture, however, Williams outlined her company’s sustainability goals and achievements.

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PG&E CEO, Geisha Williams (center), presenting a talk on “Energy Network of Tomorrow: How to Reach California’s Climate Goals” at the 2018 Stephen H. Schneider Memorial Lecture

Williams is passionate about the energy industry, calling the electric power grid “the greatest invention of the 20th century.”[1] The electric grid is a complex system, but at the most basic level it is made up of three components. First, electricity must be generated, traditionally at large centralized facilities far away from cities. Centralized generation facilities include coal, nuclear, natural gas and hydroelectric plants, as well as wind farms and large solar arrays. The next component of the grid is infrastructure for transmitting electricity from the power plant to the consumer. The final component is comprised of the customers themselves. Consumers from large corporations to small businesses to individual homeowners all rely on the power grid.

The issue that PG&E and other large utilities face is that this grid model is rapidly becoming outdated, as is their business model. The utility business model assumes that the utility owns all of the power generation assets and distributes electricity and gas to its customers. As the number of privately owned energy resources increases, utilities see a decrease in profits. This is especially true in California due to the increasing popularity and affordability of rooftop solar panels and in-home battery storage. Many utilities in other states have pushed for regulations that prevent customers from installing rooftop solar, limiting the growth of renewable energy resources while protecting their business model. Instead, Williams claims that PG&E wants to integrate growing private resources into the existing energy grid, since accessing these distributed resources can benefit both utility and its customers.

“Smart grid,” technology is quickly being developed to allow utilities to efficiently utilize their customers’ growing private energy production and storage capacities. This technology includes software that collects and analyzes energy use data, connects customers to their utility, and allows utilities to store and distribute energy more efficiently. With better energy use data and improved connectivity with customers, utilities will be able to draw from reserves stored in residential and commercial batteries at time of peak demand. This will eliminate the need to fire up extra natural gas plants to meet peak demand, as is the current practice. Smarter energy distribution software will also allow private customers to sell excess energy produced by rooftop solar back to the utility, and will allow customers with energy storage capacity to shift their energy use to avoid drawing from the grid at time of high demand when energy is more expensive. A smarter grid will increase energy efficiency in a way that benefits the utility, the customer, and the environment.

As the CEO of a major utility, Williams is in a position to make decisions that can greatly reduce California’s carbon footprint. Williams indicated that, for her company, taking steps to mitigate climate change isn’t just “the right thing to do,” it’s actually a tactical business decision.[1] California isn’t just unique in its liberal politics and support for clean energy. It also has a unique climate that is already experiencing the effects of climate change. In the past few years, California has experienced periods of drought, erratic rainfall, and rising temperatures, all of which have lead to increasing potential for wildfires.[2] Wildfires occur naturally in California’s warm, dry climate, but this past year, the state experienced some of the worst fires on record. Williams noted in her speech that one week of carbon emissions from a major wildfire could be equivalent to one year’s worth of emissions from the entire transportation sector.

Wildfires have obvious impacts on human safety, air quality, and property damage, but they also pose a surprising risk to utilities. Williams explained that under California law, if a wildfire is ignited by sparks from utility infrastructure, like power lines or generators, then the utility could be “infinitely liable” for the fire’s damage.  PG&E is facing numerous lawsuits in relation to their role in last year’s devastating wildfires.[1] The Santa Rosa Fire Department reported at least two fires started by sparks from PG&E’s electrical lines during a windstorm, and PG&E’s own records showed damaged equipment near the ignition points of four major fires in the North Bay.[1] Williams believes that the state should implement policy change to remove the burden of insuring against wildfire damage from utilities like PG&E.[2] She voiced concerns that her company will become “uninvestable” if they are required to continue insuring against wildfire damage. For this reason, unless California changes its policy, Williams and PG&E have as much of a stake as anyone in minimizing wildfire risk by limiting their carbon emissions.

Williams seems to genuinely care about the environment, but she approaches sustainability from a CEO’s perspective. She wants sustainable resources to make economic sense, both for her company and for its customers. She and PG&E are also under significant pressure from the state of California to move away from natural gas towards more renewable energy sources. That being said, PG&E’s sustainability goal are years ahead of other major utilities. William’s target for 2030 is to cut emissions by 40%. PG&E would reach this goal by moving to 50% renewables, doubling efficiency, and putting 5 million electric vehicles on the road. Whether motivated by profit, public image, or genuine concern for the planet, these are admirable goals for a company with whose primary business has been natural gas (they’re called Pacific Gas and Electric for a reason!).

References:

  1. Williams, Geisha. “Energy Network of Tomorrow: How to Reach California’s Climate Goals.” (27 February 2018). [Lecture].
  2. Baker, D. (2018). Fire investigators pin two small October wildfires on PG&E. San Francisco Chronicle. Retrieved April 21, 2018 from https://www.sfchronicle.com/bayarea/article/Fire-investigators-pin-two-small-October-12552946.php.
  3. Pyper, J. (2017).  California Wildfires Spark Utility Investigations and New Regulations. Greentech Media. Retrieved April 29, 2018 from https://www.greentechmedia.com/articles/read/california-wildfires-spark-utility-investigations-and-new-regulations#gs.iUk6o8s.

Cover image courtesy of Jeramiah Winston

 

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