In a new post on Google’s blog, Google Director of Global Infrastructure Gary Demasi has just put forth a plan that could really blow up the domestic renewable energy market.
Since utility companies have long charged different rates (aka tariffs) for different classes of customers, the idea is to establish a special renewable energy tariff for customers that request it.
In typical Google fashion the company is already putting its money where its mouth is, working with Duke Energy to establish a renewable energy tariff for its data center in Lenoir, NC. The question is, with renewable energy on the upswing in the US, what’s wrong with the way things are being done now?
Trouble In Renewable Energy Paradise
Demasi’s post directs you to a white paper on the Google renewable energy tariff proposal, which outlines three general problems that Google perceives in the way that companies buy renewable energy today. Essentially, the white paper reflects lessons learned by Google in the course of its transition from fossil fuels into renewable energy.
As Google sees it, companies have three basic options. One approach is to build renewable energy on site, as Google has already done with a 1.7 megawatt solar array at its Mountain View campus.
However, as illustrated by the Mountain View experience, it is unusual for even a very large on-site system to fulfill all the needs of a particular facility, 24/7 including peak use. Until advanced energy storage technology catches up, there is still going to be at least some reliance on fossil fuels through the grid mix.
Buying renewable energy directly from off-site sources is another approach that Google has engaged in, through power purchase agreements (PPAs). The problem is that a company must put on the hat of an energy manager, which can create a major distraction from the central business of a company:
“The downsides are that these PPAs require us to actively manage purchases and sales of power on the wholesale energy markets, which can be a complex process. This puts Google in the business of managing power scheduling and contracting, when we’d rather spend our resources building products for our users.”
One other option is to purchase renewable energy credits (RECs), which Google generally looks on with favor. The downside here is that Google has set a high bar for itself in terms of renewable energy. The company aims to increase renewable energy generation rather than simply shuffling existing resources around, and since the price paid for RECs does not necessarily correlate to renewable energy investments, that option generally fails the test.
The Google Renewable Energy Solution
On the face of it, the solution that Google proposes for all three problems looks stunningly simple: leave the business of generating energy to utility companies, which is after all what they do best, but create a new category of tariff that provides renewable energy to consumers that request it.
The main hurdle is that a renewable energy tariff, at least for the time being, would typically be greater than existing tariffs based on conventional user categories such as residential, commercial and industrial.
As things stand now, these user categories are all geared toward offering the lowest cost for the best reliability through a mix of any and all available sources, and Google does not propose to push higher renewable energy costs onto other ratepayers.
Nevertheless, Google seems pretty confident that other factors would offset any cost differential. Namely, Google foresees that companies would be willing to pay a little more in order to achieve a more diverse energy supply that provides far more long term stability than the fossil fuel market, which is characterized by periodic price spikes and is vulnerable to geopolitical factors that can (and do) lead to supply disruptions.
Just as importantly, Google cites a growing interest among companies to establish sustainability leadership as a marketing tool, a trend that is particularly evident in the technology sector.
As for Google’s goal of helping to accelerate the adoption of clean energy, this utility-based approach would provide an easy path to renewable energy for companies that don’t own sites that are appropriate for clean energy generation, and that don’t have the wherewithal to manage PPAs.
It’s Crunch Time For Fossil Fuels
It’s also worth noting that Google, with its $1 billion investment in wind and solar projects, would be sitting in the catbird seat as far as an increased demand for, and access to, grid-supplied renewable energy in the US.
That also makes Google a leading player in the squeeze on fossil fuels. By breaking the grid-mix chains that have historically characterized the relationship between US energy customers and suppliers, the new tariff would increase the pressure on domestic fossil fuel companies, which are already seeking new export markets for their products in the face of an inexorable decline in US demand.
Aside from the transference of “dirty” fuels from North America to other parts of the globe, the export trend has already lead to huge controversies over proposed new coal export facilities and the Keystone XL tar sands oil pipeline, as well as a big fight in Congress over proposals to approve increased natural gas exports.
This article first appeared on Cleantechnica. Reproduced with permission.