How Google and Walmart work with utilities to procure clean power
An emerging strategy is drawing companies to red states that previously were not particularly renewables-friendly.
Last year, Google announced it was on track to reach 100 percent renewable energy for its global operations — all of its data centers and offices. Last week, the company confirmed it purchased enough renewable energy to match every kilowatt hour of electricity it consumed in 2017 for its still-mushrooming operations. All told, the company is buying about 3 gigawatts worth of clean power, or more than the output of five typical coal-fired plants.
One key element of last week's announcement is a deal with Georgia Power, approved last week by the state's Public Service Commission, for Google to procure nearly 80 megawatts of new solar to power its Douglas County data center, about 14 miles due west of Atlanta. Three other big companies, including Walmart, Target and Johnson & Johnson, were also part of the arrangement, which totaled 177 MW of solar.
The deal with Georgia Power, a unit of Southern Company, the third-largest investor-owned utility in the United States, is part of an emerging strategy for purchasing clean power in states less likely to have regulatory or legislative mandates, such as renewable portfolio strategies, to increase the deployment of renewable energy. That makes this deal even more notable and continues the acceleration of renewables in red-state markets that until recently hadn't been particularly friendly to renewables, but which have become of increased interest to companies seeking more affordable real estate and labor markets in the United States.
Some, but not all, of this progress is the result of relatively recent policy shifts in the southeast United States. "Leading states like North Carolina, South Carolina and Georgia have enacted strong policies that foster and encourage renewable energy growth," according to a report released in February by the Southern Alliance for Clean Energy.
"On the other hand," noted the report, "utilities in other southeastern states — particularly Tennessee, Alabama and Mississippi — continue to operate in a public policy vacuum. The slow pace of solar growth in these states, and the outdated thinking by utilities, leaves them with solar projections considerably below the regional average through 2021."
A new roadmap
For Georgia Power, the latest move began more than 18 months ago, in August 2016, when the Georgia Public Service Commission approved the company's 2016 Integrated Resource Plan, or IRP. An IRP is a utility's roadmap for meeting forecasted annual energy demand, plus some reserve margin, through a combination of supply-side and demand-side resources over a specific time period — often three to five years. States typically require utilities, by legislation or regulation, to undertake such planning efforts, which are then reviewed and approved by the state's public utilities commission.
Georgia Power's 2016 IRP committed the utility to adding 1.6 GW of new solar and other renewable energy by 2021. In addition, the utility committed to 200 MW of "self-build" renewable projects — those built by the utility itself. (For Georgia, renewable energy typically refers to solar power, as the state doesn't have a viable wind-power market.)
It has only been a few years since solar even made sense in Georgia. The state has relatively low electricity rates, meaning that solar's costs needed to drop significantly to be economically viable. And indeed, since 2012, when Georgia Power began to ramp up renewables deployment, the price of utility-scale solar photovoltaics in the United States dropped nearly in half, from about $1.80 per watt to just under $1 in 2017, according to Bloomberg New Energy Finance.
"The declining costs of the solar technology really helped us to continue to add renewables to our portfolio in a methodical fashion," Hamen said.
Even prior to the IRP, Hamen and her team had been in discussions with Google about "how we could partner with them to help them meet their renewable goals," she said.
But hammering out deals between utilities and large commercial and industrial customers can be an arduous process.
"It took a lot of time and a lot of patience and a lot of hard work" to work out an arrangement with the utility, recalled Michael Terrell, Google's head of energy market development. "One of the things we've learned through this process is that utilities are becoming responsive to customers' demands to have access to cleaner sources of power."
But, he added, "Georgia Power deserves every bit of credit for seeing this through and pulling together a program of this nature."
Communication and collaboration
The growth of deals such as this has been spurred by collaborations among corporations seeking to grow their renewables purchases. For example, Google has been working with groups such as the Renewable Energy Buyers Alliance in the United States and Re-Source Platform in the European Union to facilitate greater access to renewably sourced energy.
Another key player is the National Key Accounts program at the Edison Electric Institute, an association representing U.S. investor-owned electric companies. The EEI program helps "multi-site customers" work with utilities to "develop efficient energy management strategies." At EEI's twice-yearly National Key Account Workshops, utilities and large customers meet to learn about new technologies, policies, products and services.
Walmart is an active member of the Key Accounts program. "From a general perspective, we spend a lot of time cultivating the utility-customer relationship so that when these sorts of things come up, we've broken a lot of the ground that we need to break in order to have the discussions," Steve Chriss, director of energy and strategy analysis at Walmart, told me last week. At the Key Accounts meetings, Chriss said, "It's helpful for the utilities to communicate what their constraints are, what they have to deal with in terms of what we're looking to do as well."
"It's pretty critical that we design our programs in collaboration with customers," said Georgia Power's Hamen. "Once you get into a vacuum and you start designing programs that are not in line with your customer base, you're really just spinning your wheels and wasting time."
In the recent Georgia Power deal, Google, Walmart and the other two large customers wanted to ensure that adding renewables to the grid in Georgia wouldn't raise energy prices for other customers. The four companies agreed to absorb any extra costs.
"About 40 percent of our customer base has a median household income of less than $40,000 a year," Hamen explained. "And so, for us, it's really, really important that we don't create cross-subsidies when we go to procure renewable energy or when we create our programs. We just can't put that upward rate pressure on our low-income customer base."
While such flexibility and customization can be helpful, they also can have a downside, Google's Terrell said. "These programs are encouraging and they're path-breaking, but if you really want to scale this to the thousands of companies, we're not convinced that these individually tailored programs can do that in a way that's fast enough to solve the urgent need we have to address climate change and find cleaner sources of power."
He elaborated: "We need more open purchasing platforms. We need to keep piloting and trying programs like these. I think we need to be looking for ways to take them to greater scale. But we do need to be continuing to look for ways to have more open purchasing platforms, where we can get more companies involved, have more differentiated offerings, have more access and more scale."
Three key steps
I asked Walmart's Chriss to offer some insights gleaned from working with utilities such as Georgia Power to procure renewables. He offered three keys to success:
- Have the conversation. "Utilize the channels that you have, especially on the customer service side, to have the conversation with the utilities that you want to work with. Because if they don't know what you're looking for, it's hard for them to provide it."
- Understand your tastes and preferences around risk. "There's the opportunity to save money, but that opportunity is tied to taking on the incremental risk of that project. The projects aren't always going to be in the money in each billing cycle, but I think everybody, both on the customer and the utility side, are looking to bring the best resources they can to bear to potentially deliver the best economics. But you have to really have a sense as a customer what you're comfortable with in terms of the risk side of the equation."
- Understand what you are willing to sign up for. "At Walmart, for corporate governance reasons, we don't sign contracts over 15 years. So, we can't look at a program that's 20 years because we couldn't sign it. The details matter on this, and so it's important for customers to have a sense of what that is and communicate that to the utilities."
Companies such as Google and Walmart may not be typical — few companies boast their size, reach and appetite for clean power — but they are nonetheless laying the groundwork for other companies to follow. In some cases, intentionally so.
"We not only want to change the way we operate, but we really want to change the world with respect to addressing climate change," Google’s Terrell said. "And we recognize that this is an area where we are a very large power user. That's something that sets our company apart from many other companies. And so we have a very dedicated and deep energy team here that's thinking about these issues every day.
"And we recognize that we can leverage some of what we're doing to help others follow in our footsteps and join with us in trying to take renewables to a greater scale. Frankly, we need more than four companies signing up to programs like this. We need 400 or even 4,000 in a place like Georgia."