 Good afternoon. Welcome to February and to our energy seminar today. The first two talks this quarter, we've had a top regulator policy implementer and a team of lawyers and political scientists who have studied the history of climate policy here in California and around the world. Today we're going to make a jump shift, same subject matter, but a different perspective. We're going to have a top corporate executive from a big innovative company, Sharon Tompkins, who's vice president of sustainability for Sempera Energy. A word about the company, for those of you don't know it, I'm sure she'll give us a little bit more of a perspective and promotional talk. It is a huge, very innovative company that was formed by merging together a couple of previous entities that are divisions now that were also very innovative in their fields, San Diego Gas and Electric, Southern California Gas, Encore Electric Delivery Company in Texas, Sempera LNG, and INOVA based in Mexico. So this is really important, as you can see from Sharon's abstract, she's going to take a holistic view, take the Paris Agreement and its Dizarata, probably the California targets, but also try to be holistic and talk about how we can think about and she will be more directly than most of us involved in architecting the energy system of 2050, including climate sustainability, energy access, resilience of electric systems, and probably a dose of environmental and social justice, if I'm not mistaken. So with that introduction, I'd like to turn it over to Sharon Tompkins, Vice President of Sustainability at Sempera Energy for today's seminar. Sharon, take it away. Thank you so much. I'm truly delighted to be here today and I'm going to share my screen. I am really truly delighted to be here today and share with you the Sempera perspective on what it is going to take to create the energy system of 2050 that is needed, that not only achieves our carbon emissions, but fundamentally creates the energy access, affordability and reliability that's needed for any energy system. As Joan said, I am the Vice President of Sustainability for Sempera Energy and we are the parent company of five operating companies that are listed here and we play into of the United States key energy markets, both Texas and California. Sempera is the largest owner of energy next networks in those two states and California and Texas combined deliver nearly 40% of America's renewable energy. We also have what I like to think about as the 10,000 foot level of the energy system and the 10 foot level of the energy system and what do I mean by that? We deliver energy to 35 million consumers every day. That's the 10 foot level. That's where when you turn on the lights in Southern California or half of the state or you turn on the stove, we're delivering that energy. We also have the 10,000 foot view because we deliver lower carbon energy through our LNG facilities in reducing the carbon footprint of the globe by delivering that lower energy. We also have been a recognized leader in sustainable business practices and this slide here highlights some of the key Sempera metrics and awards we have. We are the only North American utility on the Dow Jones Sustainability World Index and we just today it was announced the Fortune magazine's most admired companies for 2021 and we were named on that list as well. I like to think about that doing right is doing good business and I think Sempera has really been able to demonstrate that from its inception where it really by combining SoCal gas and SCD we're really able to take sustainability from the in step to its current position and in fact this is a 13th year in a row that we have published our own sustainability report and I've been with the Sempera family of companies for over a decade. Almost 10 of that was at SoCal gas and I've been leading this Sempera sustainability strategy and efforts for just about a year. So today this is really getting into the substance of my presentation. I wanted to do a bit of table setting and what is going to be so that I can at the end sort of talk about that energy system of 2050 and what it's going to look like and what its needs are. First we go back to 1995 when 196 I see there's a type of there 196 countries adopted the Paris agreement. The Paris agreement basically broadly is set to limit global warming to well below the two degrees Celsius and this basically means to hit that objective we need to be carbon neutral as a society by mid-century. Fortunately for us we are now back as the United States in this agreement and we in the interim years are have seen an increase of states also looking to be carbon neutral in their own operations. Right now I think probably half the states have established economy-wide greenhouse gas targets. The Paris agreement is an interesting agreement and I thought I'd just spend a couple of minutes there. Over this past year countries have started to submit what are called NDCs or nationally determined contributions and these are at the heart of Paris agreement and basically they're the climate plans that the countries who have signed on the agreement have set for themselves their targets and the policies and the actions they're going to take to achieve their climate objectives. This is a massive undertaking. I was lucky enough last year to be at COP 25 which is the conference of parties and be able to see some of the negotiations that went on this past year. COP 25 wasn't supposed to be a big year. It was basically an accounting process where they were negotiating the accounting system to be able to verify an account for the carbon emissions across the 196 countries and they were unable to reach that agreement and so that's something else that has been pushed to COP 26 which is in the upcoming year. It was supposed to be in 2020 but now will be in November of 2021 in Glasgow. So what does this all mean? It just means it's really difficult to figure out how to act as a country as well as a global enterprise to achieve probably one of the hardest things we've had to do which is to limit the rise of global temperatures by limiting our carbon emissions. As John Kerry recently said at the World Economic Forum it is a decade, the 2020s, or a decade of urgent action. If we don't get started really delivering on our objectives we're not going to meet it and that's actually where I think the one of something happened over the last couple years that I actually think is pretty cool and that is companies have really dug in and investors are starting to hold companies accountable for their sustainability goals. Right now nearly 25% of companies have either set a carbon neutral target or 100% renewable power plan. This represents a fourfold increase since the signing of the Paris Agreement and when we measure sustainability of a company we're really looking across three areas the environmental stewardship of that company this is the social governance the social aspects of the company what are they doing across all stakeholders to benefit whether it's the customer whether it is the community that they operate in whether it's employees and then you have governance and I like to think of the governance is if you have good governance you can execute on and deliver your environmental and social goals and create long-term sustainable value across the enterprise. Larry thinks he's one of the larger investors at Blockrock he's the CEO and chairman gives an annual letter to CEOs and he just had one that came out last week and I put a couple of paragraphs on that on this particular slide and basically what he says is there's no company whose business model won't be profoundly affected by a transition to net zero and it's important to recognize that net zero demands a transformation of the entire economy right you know personally I think it's really great that we have companies and investors starting to really deliver and and start to hold themselves accountable for their sustainability goals because I think that's really what's going to help to move the needle so that we can actually execute on and achieve the goals that were set out by in the Paris agreement so that's a pretty big challenge but I think the challenge is even bigger than that and this is sort of the next part of my presentation. First of all we're about 7.7 billion people today but by 2050 when we're supposed to be achieving carbon neutrality we will have three billion more people on this earth than we do today and that is also as our lysing expectancy increases so as we're trying to deliver lower carbon emissions we will have more people to deliver and provide economic success through energy and through the economy. The economic prosperity is directly tied to energy access and I wanted to just read a quote from the World Bank associated with this. Access to energy is essential to reduce poverty. Energy makes possible the investments, innovations and new industries that are the engine of our jobs, inclusive growth and the shared prosperity for the entire economies and what I think people don't realize is right now 13 percent of the global population is without access to modern electricity and even here in California 30 percent of consumers don't have the means to pay their energy bills without some form of subsidization and so if we don't find a way to deliver an energy system that maintains reliability, resilience and affordability we fail if it becomes a luxury item. This is just another slide that really talks about the challenge. So two thirds of global GHG emissions come from the energy sector. It is in essence what drives the economy, what drives you know sitting here today everyone in their homes watching this video game. It's energy that's allowing us to deliver and do that. So we have the largest sector that we have to figure out how do you create that reliable resilient affordable energy but do it in a way that reduces carbon emissions and that's really the heart of my talk which is how do we get there? First let's start with some of the global transition. We've really got two segments that of the energy system that we're going to have to address and we're going to have to address them differently. So we have the developing economies and how do we deliver lower energy so that they have the energy access that they need for their prosperity and their economic development and then we have the advanced economies like the United States. How do we continue to grow our economy continue to deliver on the way we have have come accustomed to whenever the light it works, whenever we turn on the stove it works. We want to be able to continue to do that but we're going to have to deeply decarbonize those systems. So that leaves really to the building blocks and here I really want to talk to you about some of the building blocks that form the basis of that 2050 energy system and I'm just going to go through a little bit and you may know some of this some of you may not know about it the different types of technologies. So I think everyone's familiar with wind and solar and the challenge with wind and solar is they must be used when the sun is shining or the wind is blowing or they have to be turned off and when the sun isn't shining and the wind isn't blowing if we don't have a way to store them they don't work and so you need something that's called baseload. There is electrons and fuels and we've talked a lot about hydrogen and here I've got in that first box green hydrogen. Now hydrogen has become color-coded gray hydrogen is the way hydrogen is produced mostly today which is it takes methane and it splits methane which is one part carbon and four parts hydrogen into hydrogen molecules and it allows that carbon to escape into the air. Green hydrogen is a hydrogen that actually takes that excess energy from the wind and the sun when it is shining and overly shining and actually transforms it into a molecule by splitting a small amount of water. It takes the hydrogen from that water by using the excess electricity and that's why we call it green hydrogen because there's no carbons associated with it. There's also another form of hydrogen called blue hydrogen which is taking methane but instead of allowing the carbon to escape into the air it actually capture and you sequester that carbon which is the carbon capture use or sequestration and there was a study that Ernie Moniz did about it might be a year and a half ago now where he was looking at what are the technologies needed for to decarbonize the economy in California and he said we're really going to have to have carbon use and sequestration as a critical component of the energy system. We also have renewable natural gas, renewable gases, hydrogen being one of them but also taking and making a more circular economy so figuring out how to leverage our waste streams to create methane that is used as energy rather than having that methane escape into the air. We're also going to need to have infrastructure for transportation and transmission of natural gas and clean fuels. That's where LNG comes into play where over time as we get more and more of a hydrogen economy you can ship hydrogen rather than natural gas or you can ship that natural gas and capture the carbon at the location and actually use that as your fuel source. We're also going to have to advance our hardware and software capabilities as well as distributed energy networks and then we're just going to have to continue to innovate so these are all of the building blocks. I've been thinking about it in terms of almost Legos so these are the Legos that build the system of 2050 but what does a system of 2050 need to do not just the parts but need to function and so this slide really looks at the energy system of today and talks about what it's going to need to do in 2050 to create that reliable lower carbon energy that I talked about. Right now we have mostly separate gas and electric systems and for the most part the energy is one direction and so you have the fuel source and that's delivered by an electron or a molecule to the end user and it's just very one directional. We saw that change a little bit with rooftop solar and so companies like SDG&E had to adapt and start to be able to make their electric system bi-directional so when the sun was shining and the homeowner wasn't using that solar that solar was being transmitted back into the electric system so going into the electric grid and then when energy was needed in that home it would go back and it would deliver that electricity and so the electric system's actually been bi-directional as a result of rooftop solar but we're going to have to think about the electric system as well as the gas system working together and being bi-directional and the power to gas technology where I said you could take an electron it's a solar a wind split water and create hydrogen is a way that it is bi-directional so you're taking an electron and you're creating a fuel a molecule that can be used then as part of the system. We're also going to need to have a complex much more active system to be able to deal with that and as a result we're really going to have to think about it as a power AI powered and dynamic and there's actually technology that so that SEMPRA is a partner with called PICE and I learned about this technology when I came to SEMPRA and it's really a pretty cool technology so electricity for the most part as I understand it has basically a heartbeat and so you have to keep that heart beating at this right rhythm for the electricity to be delivered in a reliable way and so that when you turn on that light it works. PICE is able to keep a constant steady heartbeat to the system when you have all of this bi-directional electricity so that you can really maximize your use of solar and wind and be able to have that heartbeat and that reliability being created and I think that's really where the utilities are going to come into play in a very big way because they're used to being able to deliver and and provide that reliable energy at that very molecular electron level to the home and they're going to be the ones that are going to be able to take those systems and adapt them in a way that gives energy at the right time in the right place and to the right customer and this is where the LEGO analogy sort of comes into play so the energy system that we'll need in California may be very different from the energy system that will be needed in Chicago they'll have the same building blocks but you may need more or LEGOs you may need more of one and less of another here in California we know that we're going to need power to gas or some means to store energy from excess renewables in during peak seasons or long-term and we know batteries that are part of that and SDG&E just announced a really cool microgrid project that they're working on with flow batteries and there are a lot of technologies in the battery world that I think will come into play but also hydrogen and that green hydrogen will allow you to do that and so you'll be able to create and store what is already 10 percent of the time we generate too much solar wind in California here and we have to find a way to store that because what we want to do is be able to deliver every electron of sun and every electron of wind and get it to the consumer when and how they need it and I think and I would have loved to have heard from the regulatory perspective I think there's going to fundamentally need to be some differences in how we deal from a regulatory framework one that was really those individual systems that were very one directional that we made money by building on the system to one that really is more of a platform model that drives earnings from integrating millions of different microgrids or different pieces of legos and making it all work and with that I will open it up to some questions okay we have some good questions to start with here Sharon thanks very much I guess you just actually did get close to the crux of a number of them let me start with a semi-general question about what will become a sequence of questions on the joint responsibilities and interaction between the private and public sector and achieving the goals of the Paris Agreement but also your personal and personal corporate goals in terms of sustainability from with your company first first cut and we've heard about this from Mary Nichols and several others so far this quarter do you favor a tax on carbon or equivalent cap and trade system if so why if not why not I think you're gonna have to have a carbon price of some sort and I don't I haven't looked at it closely enough to know what is what is the right system I know here in California we have the cabin trade system under ARB and that puts a price on carbon and it'll be an increasing price over time now that we have a focus at the federal level I think we need to figure out how do we price carbon in a way that makes all of the economies work together and you don't have some of the negative consequences where you have that fragmented system approach so that you potentially have businesses going to another state or another country so that they can avoid those carbon taxes interestingly enough Europe is right now looking at border adjustment taxes that are based on carbon and so I think you're going to have to find a way to make it all work globally to make it work and one of the big challenges and I think we saw this at COP25 was getting all of the countries on the same page as to figure out how to have these right pricing and the right emissions is really a big challenge but really really important because we want to make sure that we are doing it in a way that advances both the objectives of climate but also really allows for whether you're in the United States or in a developing economy the ability to grow the economies and deliver on those economies in a meaningful way to all of the populations and so I think it's not only coming up with something in the United States that works but figuring out how to do it in a way that allows us globally to compete. Terrific. Stepping on beyond that question what kinds of government policies have you felt have helped you achieve your sustainability objectives and how might that change as time goes on more broadly not just the so-called price directed policies but other kinds of regulations standards and so forth. I think creating some more federal standards will be good. I think one of the things we've seen and it's worked is that you have very fragmented systems you have very fragmented regulations here in the United States and that I think we have to have a system that works more uniformly and that there's more policies that are similar they don't have to be identical approaches but they do have to be approaches that are complementary so that we don't we avoid having some of the problems of having you know leakage as a result of something one state is doing versus another and so I think there's there is a need for some national leadership. I also think that we have and I think people have forgotten this in some ways but at one time solar and wind were not economic and we had policies put in place to help to create the economics for solar and wind which are now quite economic. I think we need to do the same thing in connection with carbon use capture you know carbon sequestration and use as well as in on the molecule side of the green molecules so that we can deliver both fuels which we're going to need particularly in the industrial sector and in transportation those long-haul transportations and so we have to find policies that make them economic because right now they're not economic. Europe has in its goals wants to have 40 gigawatts of green hydrogen on its system by 2030. We are barely touching the surface right now when it comes to green hydrogen in this country and I think if we're going to really deliver on green fuels we need to advance that and we're going to need to do it in a way that's economic. I think we'll come back to green versus gray hydrogen. Next I don't know how to start this you're probably used to getting questions like this and I think my old friend Jeremy Platt phrased it in a good place to start out. Do you view natural gas as a friend of friend or foe in decarbonization and California 100 percent renewable objectives in as the analytic community now calls it net zero greenhouse gas emissions as soon as possible it's kind of the new phraseology moving somewhat beyond the more pointed Paris descriptions. How do you think about that? At the other end of this there's actually a question on how can you morally keep gas in play given that it itself has both carbon emissions and leaks lead to an even more potent greenhouse gas namely methane. How do you how do you think through all that? Obviously a lot of trade-offs good bads and so on. Is it is it a matter of timing in your review or how do you actually formulate that from your perspective of trying to do the right thing and get your own company working in a significantly more sustainable way as quick rapidly as possible. One I think we will need natural gas for some time right and I think in two different ways one natural gas is going to have to continue to serve as a base load until we can deliver reliable resilient electricity and fuels and so natural gas is the lowest of the fossil fuels from a carbon emitting. And so it is something that's going to continue to be needed and I think a couple of proof points. One if you take a look at the United States admissions from the IEA report what you see is that the United States has actually done pretty well from a carbon reduction perspective and that's really the switch from cold fuel. I mean coal to natural gas in the electric generation and so I think you're going to have to continue to allow that to happen because coal is still a source of electricity even in the state. There is some coal resources that come into play. I think similar to the way that not all electricity is solar and wind and actually in California one of the things that has allowed us to be able to really ramp up and develop and create the economies of scale for wind and solar solar in particular. Natural gas has been sort of the back supporting player in that story and so I think that's an important component. I also think that we're going to need fuels and we have to figure out a way to make those fuels green and clean and that's where carbon capture use and sequestration come into play and that is where green hydrogen comes into play. And similar to what we've seen on the electric side we need to work to decarbonize the fuel side of the business and so it's not natural gas forever. It's how do we create green fuels taking what we have today and creating the green fuels that hydrogen economy everybody talks about for the future and sometimes I think we solve for the wrong problem which is that it's fossil fuel elimination as quickly as possible. The goal is to reduce carbon emissions and limit global warming and that may take in the short term the use of natural gas and particularly in the developing world where they're still looking for access to clean energy that's where natural gas can serve as that base load for electricity so they get the reliable electricity that we have come to depend on so that they can really advance their economies. Great actually just to push on one side of this debate because I think you're in a particularly good position to comment on it. We have a few faculty members here at Stanford actually who have been trying to do a better job of monitoring gas leaks from natural gas distribution systems production facilities and whatnot. How are you feeling about that now? Are you getting more confident? I probably shouldn't but I will recall the Aliso Canyon I'm sure this is not something you probably you've you've learned a lot from that experience where that was natural reservoirs and you're probably more or less at least partially responsible for such things that that have I got your chronology right. How do you think about it? Are we improving? Is it now is the system tighter now because there is this you know high global warming potential that we get from the methane molecules which does concern people so it does I think require care and monitoring and you know leak detection and fiction so on. How do you think about that side of the gas debate? I absolutely agree. I think that when we look at whether it's a molecule or an electron every molecule and every electron is precious we need to gather collect it and deliver it. That's in some sense the heart of energy efficiency and that includes the natural gas stream. We want to clean up the production side of the business so that we're capturing as much of the natural gas as being produced and that we're delivering as much of that as we can to the home and so one of the things I'm really proud about with SoCal gas is that they're really taking innovative technologies to deliver on a tighter and tighter system and I'll just give a couple of examples. They're using for example aerial drones to be able to monitor the system so that they can develop and identify and detect the leaks and fix them as well and also we have what is referred to as advanced meters. They're not quite as smart as a smart meter so on the electricity side and then we talk about on the smart meters but on the gas side we talk about them as advanced meters and SoCal gas has advanced meters on its system so the meter pings about four times a day to a central station and we've actually created algorithms and to the AI that I was talking about in my presentation where you can actually identify leaks not only on the system but leaks in the home. So for example if you have a leak in your water heater it has a different signature than a leak in the system and so we can actually through this algorithms be able to identify and detect leaks through that it leveraging that advanced meter system and so that's just some of the work that SoCal gas is doing as well as SDG and E is doing on their gas system but you know ultimately the goal is to capture as much of a molecule and deliver as many of those molecules to the end user. So I have a question from a person known to be a business school student also interested in environment we have some brand of relatively new programs on that here which is kind of exciting on assume you probably recruit folks like this so here's the the precocious question by this individual do you find internal resistance to pushing business model changes or regulations that may render some of Semper's assets today less valuable e.g. pipelines or LNG if so how do you navigate this if not how does the organization stay competitive today if it is deep prioritizing today's assets I think this individual wants to become someone like you and they're not too distant future so these eagerly awaiting your response. It's interesting so Semper is in the infrastructure business and I think in a lot of ways that is the result of the decoupling in the 80s and I don't know when the electricity but I know the gas side was in the 80s where the commodity is decoupled from the delivery of that energy and that makes Semper for the most part agnostic as to what it is delivering in its system so it's not necessarily having to say oh well I have you know so many renewables and so I need to deliver these renewables rather I what we're doing is delivering and creating that infrastructure and Semper is in its DNA is sustainability and wanting to achieve and be a key partner in the policies whether they're national policies whether they're state policies and I think if you look at the record of both SDG&E and SoCal Gas and Semper they're really looking to support state policy and state policies right now are how do we decarbonize the system how do we reduce our global emissions how do we how are we a player in that and that because we're in the infrastructure business as opposed to being in the production business on the electric side or on the gas side we can really help to support and deliver on the technology that are needed and I think you've seen that at SDG&E with its innovations in delivering on you know the solar that is in the southern part of the state I think you see that with the commitment at SoCal Gas to 20% renewable gases by 2030 as well as its innovation and really driving down methane emissions in its system. So we're continuing to get a lot of questions about how can companies like yours work together with government which you just partially answered so I'm going to ask you an unfair question suppose you were a new mayor already be for all I know brought in as a top advisor or even participant say top advisor I don't want to have you leave your your job where you're doing such important work you were brought in to the White House to advise the new Biden team which is growing rapidly and within the White House the climate team and the sustainability team what advice would you give them from your perspective about how the private sector and the public sector could do things that are mutually you know reinforcing and synergistic? Governments in business are going to have to work together I mean fundamentally to achieve this we're going to have to work together to solve the problem and so I think you know it's one where we all need to roll up our sleeves and I would certainly roll up my sleeve to help to find a way to make our energy systems lower in carbon achieving the carbon neutrality that we want by 2050 and delivering on that energy system that is both reliable resilient and affordable and so it's really one where what I was trying to do in that last slide is really think about the system and what's needed in the system because right now part of my concern is that we're thinking about this in a very siloed way so we're thinking about it as I as a company will buy 100% renewable electricity and so I have offset my production because I have now bought 100% renewable electricity but that company doesn't have to deliver on that reliable electricity and so they can purchase it and they can offset what they're doing which is really good I'm not I'm not suggesting that's not a good thing but the utilities are uniquely situated on having to deliver that energy 365 days a year 24 hours a day and make sure it's all working together and so it has to take those purchases of renewables and bring them onto the system and I think that what we need to do is start thinking about the system more holistically and what is needed from an infrastructure perspective to deliver that energy system that we all want great we're unfortunately running out of time with a lot of good questions queued up but so let me ask a version of my normal transition question to the after after event press conference with the students and that is what advice would you offer the students in in this case suppose they did want to be in your group or working for you and trying to achieve your objectives what advice would you give them about what things to study what kind of skills to develop what kind of you know let's say internships and what not what what do you look for in hiring new employees into your group at your company I do think sustainability parts of big companies have are 10 times larger than 10 years ago from all I can tell unlikely to be 10 or 100 times larger say 10 years from now I'm hoping that the position of vice president of sustainability goes away in the future and this is why I say that I say that because at the end of the day if we are if I'm doing my job if our company is doing our job then sustainability is embedded in everything that we do and I know that wasn't the specific answer to your question and I will get there but I do think it's important that we as companies hold ourselves accountable to create that long-term sustainable value in every respect I think for people coming into the workforce I think it's being you know continuing to think creatively thinking of how do I solve the problems what can I do to help deliver in whatever organization I am doing to solve the problems how am I working as a team and I think that's one of the things I really love about the Semper family companies and I think it doesn't matter who is in the administration it doesn't matter you know what side of the aisle you are we pull up our sleeves and work together and that's true in the company and that's across companies and I think one of the best things you can do as somebody coming into a business is really or a non-governmental agency or working for a regular state agency or the government is being willing to roll up your sleeves trying to understand what are the problems what are the potential solutions and how do we work together to achieve the various goals and I'm you know I'm hopeful that that we can we can do this in a way not only across the aisles here in the United States but globally because if we're not all working together we're going to all set goals and we're not going to achieve them with that said thanks for those words of wisdom I really like that as you were talking about doing away with your job I would say a nice way to do that it would be sustainable is for you to move into being the chairman CEO of your company but that's just me so thanks Sharon thanks once again for a those words of wisdom and a truly inspiring seminar we look forward to welcome you to campus as soon as we are able our county has loosened up in the last week as the students are overjoyed to hear so hopefully you'll be able to make it up here before too long thanks once again absolutely I hope everyone stays safe and you know hopefully soon we'll be able to see each other in person because I do personally miss them great thanks again thank you