Design Thinking to Electrify Industry

WELCOME

Katherine Radeka (00:03):
Welcome to Accelerate Net Zero, the podcast dedicated to the acceleration of the technologies we need to address climate change. My name is Katherine Radeka, and I've been accelerating innovation for a long time in a number of different industries. And nowhere is that acceleration more important today than in the renewable energy materials, food production, transportation, and other programs to limit carbon emissions so that we can stabilize our climate. So if you are working on these programs as a technologist, as a manager and investor, a public policy maker, an activist, or just a concerned citizen, then you have come to the right place to learn how we can eliminate obstacles and put more momentum into these programs so that we can begin delivering impact on carbon emissions sooner. And we can reach Net Zero faster.

Katherine Radeka (00:56):
Today's interview is with Sarah Williams. Sarah works with Simply Energy where she's an Innovation and Improvement Lead. Simply Energy has joined forces with Contact, one of New Zealand's largest energy companies to accelerate New Zealand's low carbon transition. And I chose it because I think their approach is a very interesting one.

They have chosen a partnership model where they use tools like Design Thinking to build relationships with customers who may not yet be aware of how they can reduce their carbon footprint or even the need to do it, or whether or not they can do it from an economic perspective, and offering workshops that give them opportunities to think more deeply about how they use energy and what they need to do to be sustainable going forward, not just sustainable from an environmental perspective, but also sustainable from an economic perspective. So by doing this, they form relationships with companies that begin to open up new possibilities. And she says that because of that, they believe they can go further, faster together. And they're on a journey to make change happen by helping consumers use energy better and ultimately make the switch to low carbon electricity.

Katherine Radeka (02:13):
Tell me a little bit about this new project that you're doing with contact energy

Sarah Williams (02:17):
Contact. Energy has actually sort of partnered with Simply Energy has become their owner of Simply Energy, which is a smaller organization dedicated to B2B energy solutions. So looking after businesses and the idea of Contact is one of New Zealand's biggest electricity generators and retailers. The idea of teaming up with Simply Energy was to enable a lot more responsiveness and being able to respond to what our businesses need and really being able to form better partnerships. So in particular, the strategy is that we work closer with our big industry, big business in New Zealand and working with them, looking at their energy needs and what the energy mix looks like and how they use energy with the purpose of reducing the carbon footprint. So in New Zealand, we have, we're blessed with a really renewable electricity system. So we have a lot of renewable energy in the electricity space.

Sarah Williams (03:14):
So electricity is a really good option for lowering your carbon footprint, but it's quite expensive. So working with businesses, helping them find the best cost-effective solutions so that they can use more electricity is sort of the approach. So we've called out a big initiative. It's pretty much our strategically underpinning purpose at the moment for our business. It's called #changingmatters. And we've got a really cool approach where we have to change. We all have to change. We have to change our behaviors. We have to change the activities that we're doing, the resources that we're using because our planet needs it really. So change matters.

Katherine Radeka (03:55):
Tell me about the approach that you're taking with your businesses to help them reduce their carbon footprint. What kinds of things do you do?

Sarah Williams (04:01):
It's a really interesting scenario. We've always just been an electricity seller. So we, as a utility, a business tells us how much they need, we say, we can give you this much for this price. And then we go into a negotiating kind of commodity sort of space where we're just having this negotiation around how much you need. And this is the price. We're now saying to our customers and anyone else who wants to work with us, that we want to form a new relationship with you. It's not, we don't just want to have that exchange of utility for cost. We really want to have a partnership where we understand, we work together with you. We work out where you're at, what you need to do with where are you on your journey around reducing your carbon footprint and together work out what the solutions are like.

Sarah Williams (04:53):
We've got quite a list of options, but we don't want to go in there with that shopping list approach and go here, go choose one of these. We want to really get to know each other and understand where we can add value and where we can't add value. Help them find the right partners externally. We've got a lot of experience in energy and electricity. We've got good networks across New Zealand. So how can we use and leverage that, those expertise, those skills, those networks, to help these businesses find the best options for them? It's an unusual proposal. It's a bit confusing for them right now because it's new. And they say, Whoa, what, what we just normally talk to you about price and how many megawatts we need. We don't talk about relationships and partnerships and what do you want to know about my strategic purposes suddenly?

Katherine Radeka (05:47):
Why is that important? Why is the change from commodity to relationship? What is that going to do?

Sarah Williams (05:53):
This is something that every organization is going to a slightly different approach because we all have our own personalities and characteristics. And so it needs to be bespoke for it to be effective and for it to be sustainable. And the only way to do bespoke, I think is to form a proper relationship with somebody or an organization or other entity, and really understand. And so you need to build trust. You need to understand the bigger purpose. You need to understand the headwinds that you're going to hit, or the difficulties that you're going to hit. And when you bring that partnership approach, this diversity, there's different perspectives, there's different ideas that are going to come up from the different people and organizations that are involved. And with that diversity comes better solutions, better options.

Katherine Radeka (06:42):
In what ways are you positioned to help them with reducing their carbon footprint?

Sarah Williams (06:46):
Part of the journey is that we spend time with our customers. We understand where their opportunities are, where their problems are, and that might be via sort of proposing workshops sort of scenarios. Where we would bring some of our experts who are engineers or boiler experts, or energy experts, transformer experts, et cetera that we have in our business to workshop, or to look at the opportunities with the organization, the business that we're working with and find where the problems are, understand things like their asset maintenance routine, or how long, how much longer have they got for that coal-fired boiler? How can we accelerate retiring that coal-fired boiler, that might bring our finance team in, or some of our asset maintenance people in to help with working out what the best options are there or not, not necessarily finding the best options, but just having good conversations together and teasing out the opportunities and ideas we bring to the table.

Sarah Williams (07:44):
We obviously have a lot of experience in operating big plants — big, expensive, dirty electricity generating stuff. So we've got lots of expertise there. We have these networks across New Zealand with different partners. We've done ourselves a whole lot of work in our carbon reduction emissions space. So we've got science-based targets. We were one of the first energy companies in the world to have science-based targets aligned with Paris goals for 1.5 degrees. And so we've been working in that space for quite a while. We've reduced our emissions by over 50%, since 2012. And we've got another 15% more to go in the next 10 years or so. So we've got that journey. We're big business. We understand big business culture, a lot of risk management that goes on in our industry. So there's lots of things there that we can share with our customers in a different way, which when we had that traditional price / megawatt conversation, all of that extra experience just isn't there, isn't available.

Katherine Radeka (08:47):
Let's say that I've got a large facility that we're operating. We've got a coal boiler. We know we're going to have to replace it because we know that our own customers are going to be demanding that we produce our products with renewable energy instead of coal. How would you approach a program like that? What kinds of things would you be looking at?

Sarah Williams (09:07):
There's a lot of work to do in the efficiency space. And we understand a lot about that and the boiler space around finding efficiencies to reduce and increase the amount of energy that you get out with with the existing carbon footprint, which is another thing we just recently did with a dairy company in the South Island. We helped them finance an electric boiler that they purchased to increase their output. So they, at the moment they have coal, they wanted to increase the output they've got now, they need to create a business case essentially for an electric boiler, where the capital isn't too expensive to buy an electric boiler. It's not too bad, but the ongoing cost was the part that they were really struggling with and trying to get their heads around that. So we were able to offer to work with them to find a 10 year price that they were able to use, that they could take to the issue holders and the end, to the board to make that decision that this was going to be doable and they can do it.

Sarah Williams (10:02):
So aside from some of the technology solutions that we have experienced and we can help with, there's also lots of financial positioning opportunities that we can explore together. That's a really big, exciting thing for us because in New Zealand, our agricultural sector is a big part of our, of our life in New Zealand and is also a big part of our energy profile and our emissions profiles. Agriculture is nearly half of our total carbon emissions in New Zealand. So yeah, so being able to help them work out how to convert to cleaner energy on the industrial side and the processing side of the businesses is really exciting.

Katherine Radeka (10:46):
Okay. And it kind of sounds like a multidimensional approach. One is like saying, okay, how can we eliminate the economic barriers to adoption by helping you with finance, the financing side of things? How can we help you improve the efficiency of what you're using using what we know about our technology space? And with those things working to create a situation where you're helping them reduce emissions and they are becoming better customers for you.

Sarah Williams (11:20):
Well, that's it. I mean, absolutely. When they're going to use more electricity, which is great for us, our business, the sustainability of our businesses, we sell electricity. So getting them to electricity is a great option, great outcome for us. But at the moment it's too expensive. It's too hard. It's a bridge too far for them to go. So we've got to be able to help them find their pathway, find where they can get off the coal and gas, which is a cheaper option in New Zealand.

Katherine Radeka (11:45):
Yeah. And I think that that's an important thing that I think a lot of people miss about the transition to a Net Zero, is that we are going to have these transitional spaces where you going in there and helping them improve the efficiency of their coal-fired boiler as a temporary solution, but yet an important one that also builds the relationship so that when the economics make it sustainable for them to switch to electricity, they already see you as their partner in that.

Sarah Williams (12:14):
Yeah. We know as well that when we go into a relationship with that, where we say we're running Design Thinking workshops to work out where the savings can be made, there's a really good chance that there's going to be opportunities to reduce their existing electricity use. So we have to be cool with that and go that's okay, we're going to have less, we're going to sell them less electricity, but in the long run, this is where we're heading. And we hope that they'll need more electricity in the long run when they get off their gas or their coal. So we're in this for the long game. We have to accept that in the short term, we might have less sales as a result, but that's all part of that partnership-building piece. That's part of that trust.

Katherine Radeka (12:57):
So we've talked about some of the technical sides of things we've talked about, some of the finance side of things, tell me about these Design Thinking workshops. What is that for and how does that play into this model?

Sarah Williams (13:07):
We've been using Design Thinking a lot internally — ideas come from anywhere as is our belief. And so if you can engage your own teams to be thinking about these opportunities and these problems and knowing that they have ideas. right from the C-suite end to their grassroots or coalface kind of places, they know where the opportunities are. But if you can create space, really for them in a workshop as, as one of those forms of space, where they can have a voice and they can really get engaged and excited about the opportunities and being able to see how decisions can get made around. Well, as a business, we've got these ideas on the table, which ones are getting moved forward, how can we make those decisions together? So we use Design Thinking workshops and just sort of process in general. I wouldn't say that we're completely wedded to those five or six stages and roll it out in a, in a very concise and consistent manner. It's all over the place. We sort of borrow it. It's the mindset that's really what we're using mostly. And yeah, we're using that to create the atmosphere, create the space, to get people involved and engaged in this because it's a complex issue for the world. We're all in this together. We've got to keep doing this together. And we find that the Design Thinking approach allows us to bring everybody on that journey.

Katherine Radeka (14:28):
So Design Thinking is typically applied to things more like consumer products or a new product development process where there's a product. And the intention is to design that product in a way that it solves a customer need better than they would have imagined. And so that's the way that those tools have been developed and evolved. What did you have to do to adapt Design Thinking for working with these really large facilities on energy efficiency?

Sarah Williams (14:58):
Well, first of all, you've got to change some of the language, the feelings words get in the way a little bit sometimes in these spaces, but at the end of the day, it's really about helping people recognize that they have the answers and the ideas inside themselves. And sometimes we can't articulate it sometimes, the questions that we get asked, don't allow us to really explore what the opportunities are. So we use that Design Thinking approach to ask, tell me about a time when you had this problem and then what happened and then what happened? So we get to know how they work, how the organization works. And it allows us to be a lot closer to them. And to form that relationship that I've talked about earlier a lot faster, because you it's getting up close and personal, but like I say, you have to leave out some of those feeling words, because that turns people off in those heavy engineering spaces.

Katherine Radeka (15:53):
For one thing, I will definitely observe that when I've done these similar kinds of exercises with more scientists, engineers, they're not going to want to talk about the feeling words so much, right? That's not going to be their thing. The thing is that looking at what Design Thinking is typically applied to is not these large scale, energy efficiency kinds of things. And so how are you scaling it up to accommodate these large scale projects?

Sarah Williams (16:17):
We haven't exercised that prototyping space. We've used it in the empathy, define, ideate space. That's how we've used them in the workshops today. We've developed a few solutions, but we haven't followed that real prototype-test-prototype-test-prototype-test kind of approach. I find sometimes that the prototype is really hard for people who like to work with perfection and have it working. Also really worried about the compliance kind of regulated space. It gets a little bit tricky for us sometimes in that prototype space, but I actually haven't prototyped with a customer yet. So that's my 2021.

Katherine Radeka (17:05):
To find an opportunity to do that. Well, what's interesting about that is, you're right. I mean, the thing is that the kinds of systems that you're looking at are not systems that necessarily lend themselves to rapid prototyping, because even implementing a small scale change in an environment like that is risky.

Sarah Williams (17:23):
Internally at Contact with our geothermal space — geothermal, at the moment, we've got about 17 to 18% of our New Zealand's electricity comes from geothermal and it's considered a renewable resource because we can manage the reservoir, the steam reservoirs underground and use it really carefully and manage it. So it's renewable, the fuel is renewable, but there are carbon emissions associated with it. And it's about 60% better than coal. It's about 30% better than gas. So it's still a really great option. But in a couple of years' time when coal and gas is phased out more completely from our electricity sector, especially in New Zealand, geothermal will be the highest carbon emittor. So we have to start working out how to capture those gasses essentially and try and get geothermal more carbon-neutral. So we are running some experiments.

Sarah Williams (18:18):
I've got these engineers at Contact's Taupo plant and they are working on some NGS, non condensable gas, capturing experiments in the new year. So we're starting to build up that prototype space more in the experimental places in our own plants. If we do something over here in the next plant outage, we can set something up here so we can start to explore what happens when we do this, that is starting to happen. And, we're starting to be able to find them money for that kind of experimentation as well, which is great. We're starting to move the dial on that space. And then it's just about finding people that are passionate to experiment, which a lot of engineers are. They love it, but then how do you create a bit of space for them to do it? Because they're also flat out trying to keep the existing plant running. So yeah, but we are getting there and again, I think that's the sorts of things that we can share with our customers as well when we get into that prototyping space with them.

Katherine Radeka (19:16):
Because you're building up experience in how to run prototypes in environments like this, that will be leverageable when you start working with some of your larger customers

Sarah Williams (19:27):
Yes, including how to get that business case across, to get the funding, to run that experiment, which, maybe 20, 30 grand, whatever we need to be able to do something. It might not give us anything. There's no return on investment, getting a finance team across that and understanding what that means. Because it's quite a conventional business, the electricity industry in New Zealand that has been for a long time.

Katherine Radeka (19:49):
Yeah. And so I I've definitely run into people who were like, yeah, I don't think that the innovation we need is going to come from the utility industry because of how conservative it is. But I look at you guys and I'm like, you have to be part of the solution because of the fact that that's how the majority of people receive their electricity today. And certainly the industry, who receives their electricity, don't see that changing.

Sarah Williams (20:12):
No, certainly not quickly. There's a huge amount of infrastructure that is better — we're starting to get that distributed approach. That's definitely coming on board and that's really, really helpful, especially in the ability to shave out some of the peaks. We have some really big peaks in our electricity use during the day in New Zealand. So there's a morning peak when everybody gets up and turns everything on. And again, the evening that's probably the same around the world. Actually, we're probably all the same. And that peak is when our gas power stations flick on to cover the peaks. So we've got lots of renewable electricity in New Zealand, but during those peaks we don't have enough. So the gas gets turned on. So if we can start to shave out those peaks, then we can start to reduce how much gas we're using during that course of the day.

Sarah Williams (21:00):
So we've got a product that has been developed. At Contact it's called demand flex, which allows our big users to turn off some of their electricity use during those peaks. And so they're helping contribute to reducing New Zealand's carbon footprint, but that also we've set it up so that they can get paid for that service that they're providing to New Zealand's system. So that's proving really, really well. We're scaling that up at the moment. We're hoping at the end of this coming financial year to have five to 10 megawatts of reverse load or negative load in that space from our big users, which is really, really quite helpful for us in New Zealand to be able to do that, shave those peaks off. So there's lots of cool innovation stuff that's happening inside.

Katherine Radeka (21:50):
Could you remind me of the percentage of renewable power in New Zealand, it seemed like it was quite high already.

Sarah Williams (21:57):
I think last year we hit about 84% and I was just looking online at the moment today, the 11th of December, it's 91% renewable right now. And so that's our hydropower. A lot of hydro, we've got a bit of wind and a decent amount of geothermal as well. Electricity is a really good option in New Zealand to reduce your cabon emissions. EV - electric transportation, that's a no-brainer for New Zealand. We have to go there. Hydrogen is being explored really extensively for their larger vehicle transportation. We don't have a big rail network in New Zealand. So the road we have, I think maybe 20% of our carbon emissions come from the road.

Katherine Radeka (22:41):
You mentioned that agriculture was also a big part of the emissions profile in New Zealand,

Sarah Williams (22:45):
Nearly half. Yeah. It's not really something Contact and Simply Energy can get involved in. It's not our field of expertise. And in New Zealand, I think not quite 5%, maybe four and a half percent of our total emissions is from electricity generation. So that's not a huge part. And so that's, so that's where we're we go, okay, well, yes, there's definitely some room still there to drop, but what else can we do to help? And that's why we've started to say industrial processes for our customers is actually a good place for us to try and shift that dial. Yeah.

Katherine Radeka (23:23):
Yeah. And as you said, being willing to engage with them where they are, recognizing that they may not be ready yet to fully electrify, but if the relationship is there and they see you as a trusted partner, it might make that process easier for them.

Sarah Williams (23:39):
Some of our customers as well are still trying to work out internally, why they need to have a carbon reduction plan. So that's a place where we need to be able to meet them too. And that's the workshop approach. The Design Thinking workshop approach that I talked about is around bringing as many people from the organization and to that space together and helping them build the culture that they need to have to align on that space. So, yeah, we've had a lot of fun at Contact building their internal culture for their innovation space. And they're being brave as a group to tackle this hard stuff, to find that alignment and find that commitment.

Katherine Radeka (24:19):
What we know is that every product is going to end up needing to address this, at some point in the next 10 years. It's like, you can say right now that it doesn't matter, but it will matter.

Sarah Williams (24:32):
It really does. It really will matter pretty soon. Yeah. So that's another important part for us too, though, is that you can't go marching in there all high-and-mighty. You've got to build a relationship. It has to come patiently from a place of trust and understanding, and we're here to help, support, guide, whatever it is that you need, but not necessarily preach.

Katherine Radeka (24:56):
Yeah. Because no one likes to be pushed into doing things. So you really want to try to show that when you're ready, we're here for you. If right now what that looks like is improving your efficiency, we''re here for you,

Sarah Williams (25:05):
Even calculating where you're at at the moment, what's your baseline? What does that look like? We won't do that, but we've got great networks and we can help you choose a partner that will be able to help you with that. So that's another thing that we've kind of been working out in the spaces we're not consultants, and we don't want to get in the way of consultants that offer some really great services to companies too. So what are we, we sort of see ourselves as the connector that can help our customers navigate their way through those, the myriad of options and of consultants, where do I start? Or even they've got a plan already. They know what to do. They've lost momentum or motivation. And that's some of the workshops sort of thinking that we believe can help

Katherine Radeka (25:46):
The work that you're doing iss very important work in terms of helping to increase the electrification of industry in New Zealand. What's in your way? What are some of the major barriers?

Sarah Williams (25:57):
Cost for sure. And maybe recent investment in coal or gas energy sources. So things that have a reasonable life of 30 years may have just been installed two or three years ago, which is unfortunate, but it is a real barrier. And probably the scale of a lot of New Zealand businesses. A lot of this is mum and dad business kind of style, but they happened to have quite a big processing plant, but it's still pretty small scale — big for New Zealand, but not on the world stage. So that's a reason why I think New Zealand in particular really needed to do it together. We have to roll up our sleeves and share what we can and help each other with that future. And with that transition and change doing it individually is just not going to work for our country. I don't think. Yeah. So I would probably say that scale piece for New Zealanders is tricky.

Katherine Radeka (26:59):
It's definitely harder to work in an environment where you're working with more mid-sized businesses as compared to some of the bigger facilities we might have here in the States for some of these stuff. What are the big things that you think that you need to accelerate the work that you're doing to accelerate this transition?

Sarah Williams (27:17):
Probably more curiosity. So I mentioned earlier that our customers are a bit confused about why we're talking to them about this and why we're trying to create this relationship. So I'm looking for more curiosity, more people willing to go, Oh, okay. That sounds interesting. I don't really understand what they're on about, but let's give it a go. Let's see, let's explore. There's no certainty in any of this. So we'd just have to get out there and start feeling our way of finding out what it can do. I believe wholeheartedly that together we can do this, but that curiosity piece needs to fire up

Katherine Radeka (27:53):
The curiosity piece. And maybe also like, how do I fit into this overall bigger puzzle, of the climate goals that New Zealand set for itself.

Sarah Williams (28:00):
Yeah, yeah. That is often hard. How can I make a difference? I'm just this tiny little blip, even New Zealand, our contribution to global emissions is a tiny little blip. Why should we bother that kind of thinking? Yeah. Do we need to get going on that, that way? That all makes a difference.

Katherine Radeka (28:23):
That is the thing that I've really come to understand this year as I started to talk to people about it is that yeah. Every bit makes a difference because of the exponential nature of these curves that we're on.

Sarah Williams (28:36):
Yeah. And if all of us had shifted the dial a little bit, then collectively collaboratively, that's a big shift. I also like that theory of chaos where you can make one small, tiny change and the ripple effect of changes that have to fit in around that can be surprisingly impactful.

Katherine Radeka (28:56):
In this interview, I especially appreciated how Sarah Williams talked about using Design Thinking as a way to bring partners along in evolve, their thinking around how they use energy.

So if you don't know what Design Thinking is, it's basically an approach to innovation that was pioneered by IDEO. IDEO is a design firm based in the United States that looks at three things. They look at desirability, feasibility and viability. So that's where those feeling words come in. When you talk about desirability, because if you're building a consumer product like a coffee maker, a lot of it is about the experience that you're giving that consumer and how they're going to feel about that experience. Now, of course, in the energy business, it's much more about efficiency and the economics and, ultimately the carbon emissions, which are all very quantifiable things, but at the same time for a partner that is moving into the space for the first time, really working with them to understand what is desirable for them apart from that is important.a

For example, is it a value that they be seen as an environmental leader, or is there a competitive advantage to be gained by using renewable energy when a competitor may be still using fossil fuels? And then also looking at feasibility, which in their environment is critical because they are dealing with these massive industrial processes that are not easy to prototype. And in fact, one of the ways that she's had to adapt Design Thinking is that she cannot do just very simple, rapid prototypes that prove out all that much. They can do some engineering analysis, they can do some modeling, but at the end of the day, they're going to have to invest in things like new boilers to demonstrate that this is something that's going to work. And that is something that's going to require a significant investment. And then also looking at viability. So what's going to be sustainable for them?

And that is going to be largely around the economics. At what point is it cheaper for them to electrify versus use coal or gas? And Sarah brings up an important point here, which is that if I'm a medium sized company with carbon emissions that are not great, but not terrible in comparison to things that are much larger than me. And if my country overall is recognized as a leader, because they're actually doing really well, what incentive do I have to change? And yet we know that every bit of emissions matters. We know that because of the exponential nature of the curse and because of the decay rate of carbon dioxide, that every bit of carbon dioxide that we prevent from getting into the atmosphere is ultimately going to make a big difference in what kind of world we live in in the year 2100. And this is why the work that Sarah is doing is so important because it's not just energy.

It's also materials and supply chain and transportation networks that these companies are going to need to think through because the world is changing around them. And we know that every bit of emissions matters. And so the day will come when their products won't be competitive, if they don't make this change, even if the only reason why they make it is economic. So if we want to accelerate Net Zero, we have to figure out how do we accelerate the economic incentives, but also how do we give them the support that they need through programs like Sarah's? So that they are poised to do the revisiting of their business models and all of that, that they will need to do in order to reduce their carbon footprint down to a sustainable level.

Katherine Radeka (32:52):
Thank you for listening to Accelerate Net Zero. If you want to help Accelerate Net Zero, please leave a rating or review with your podcast provider so that other listeners can find us and subscribe so that you don't miss an episode yourself. For links, resources, transcripts, and additional information about this project, visit our website, acceleratenetzero.com. The Accelerate Net Zero project is sponsored by the Rapid Learning Cycles Institute. We help innovators change the world faster. To learn more about the Rapid Learning Cycles framework, and how it can help you accelerate innovation, visit rapidlearningcycles.com.