Clean Energy Quest pits Google against utilities

It was the kind of dry panel discussion that happens at hundreds of industry conferences each year — until a Google rep decided it was time to get started.

“This is personal to me,” Jamey Goldin, an energy regulation attorney at Google, told attendees at a May conference in Atlanta on renewable energy in the Southeast. He said he grew up on a ridge overlooking Plant Bowen, a coal-fired power plant northwest of Atlanta owned by Georgia Power, the state’s dominant electric utility, and then also directed his comments to a lobbyist for the utility’s parent company on the podium: ” You have a lot of coal running up there, a lot of smoke is rising in the air.”

Flipping the system that puts nearly all of the Southeast’s power generation in the hands of utilities like Georgia Power would put “a lot more renewable energy online and a lot of that dirty energy offline,” Mr. Goldin said.

But the outburst was more than personal. It was part of a far-reaching campaign by Google to power its operations with increasing amounts of electricity from wind, solar and other non-carbon emitting energy sources.

Google, Meta, Microsoft, and Apple, among others, have made zeroing their carbon footprint a prominent corporate goal — and set not-too-distant deadlines to get there. By the end of this decade, Google aims to purchase enough carbon-free electricity to power all of its data centers and campuses around the world without interruption.

However, companies’ efforts to quickly secure new volumes of renewable energy face major challenges – not least in the southeast, one of the country’s fastest-growing regions. And Google’s struggle in the region, where there is a large concentration of data centers, raises a question that applies to the energy transition everywhere: Is what’s good for a few companies also good for all?

At the heart of their campaign, Google and the tech giant’s allies want to dismantle a decades-old regulatory system in the Southeast that allows a handful of utilities to generate and sell the region’s electricity — and replace it with a market where many companies can compete for it .

Such markets exist in some form across much of the country, but Southeastern utilities are staunchly defending the status quo. Senior utility executives claim their system better protects consumers from price spikes in commodities like natural gas, promotes reliability, and supports the long-term investments needed to develop clean energy technologies.

“We’ve outperformed these markets in every way over time,” Thomas A. Fanning, chief executive of Southern Company, Georgia Power’s parent company, said in an interview.

Most electricity in the United States has long been generated and distributed by heavily regulated monopoly utilities in each state. But just before the start of this century, legislators and regulators, arguing that competition would bring efficiency, made it possible to establish electricity markets and end utility dominance—a revolution that bypassed the Southeast.

Google and others claim that the markets have brought cost savings, innovation and the capital needed to scale up clean power generation from wind and solar. The latest move toward some sort of electricity market in a group of Western nations has saved nearly $3 billion since 2014, according to the market operator.

Self-interest also plays a role: in the electricity markets, large companies can make deals with independent producers, which give them more room to negotiate prices and secure more clean energy. Google struck a landmark deal last year to bring clean power to its data centers in Virginia, located in a sprawling market called PJM.

Now proponents of the approach have an opportunity to usurp the utility companies in the Southeast. South Carolina passed legislation in 2020 to consider establishing an electricity market, a move considered notable given the influence of utility companies in state capitals. Similar legislation failed to move forward in North Carolina last year.

Tom Davis, a South Carolina Republican senator who led the bill, said the current regulatory system financially rewards utilities even when they screw up. “There’s no incentive for them to go out there and try to find someone who has built a better mousetrap and can generate electricity cheaper,” he said.

Establishing an electricity market in South Carolina is an option, but Caroline Golin, Google’s global head of energy market development and policy, went further at a July legislature hearing, raising the possibility of South Carolina breaking out of the Southeastern utility system and itself could connect PJM.

“We can be a model for the rest of the region and actually a model for the rest of the country,” she said.

The major power companies in the Southeast are now building more solar projects, but those pushing for a market in the region say it’s not enough.

In the region, the generating capacity of proposed solar projects is a little over a quarter of total capacity, well below the 80 percent for PJM, according to an analysis by Tyler Norris, an executive at Cypress Creek Renewables, a solar company and special adviser at the Department of Energy during the Obama administration.

“Project developers are attracted to open wholesale electricity markets with price transparency, independent oversight and the ability to trade with multiple potential customers,” Mr. Norris said.

To show how markets can spur renewable energy growth, proponents sometimes point to Texas, whose ERCOT electricity market is one of the least regulated in the country. Last year, wind power accounted for nearly 23 percent of Texas electricity generation, up from 8 percent in 2011.

Critics say the Texas market system led to much of the fragility that caused power outages during the winter storm responsible for over 200 deaths in 2021. However, others note that ERCOT was structurally isolated from neighboring power markets, preventing it from sourcing power from those areas where plants in the ERCOT market froze in the storm.

Additionally, some experts question the extent to which markets are driving renewable energy growth, saying that certain states’ geography and weather lend themselves to wind and solar power. With its vast and gusty unpopulated lands, Texas is naturally built for wind power.

“We happened to see more wind and sun in areas where markets have been deregulated,” said Severin Borenstein, a professor of business administration and public policy at the University of California, Berkeley, who specializes in the economics of renewable energy. “But I think that’s more of a geographic and political phenomenon than a market phenomenon.”

And in the Southeast, there is evidence that government contracts can do more than markets to spur renewable energy growth.

In North Carolina, where lawmakers have long pushed solar power development, the power source accounted for 7.6 percent of net generation last year, well above the national average and double the market share in neighboring Virginia.

“We expect North Carolina to continue to be a leader in solar energy,” said Erin Culbert, a spokeswoman for Duke Energy, a major utility in the Southeast.

One criticism of regulated utilities, which lack competition in the market, is that they are rewarded for building unnecessary generation capacity because it increases the basis on which tariffs are set. Woman. Golin said a market would remove that incentive and reduce costs without compromising the system’s resilience under stress, based on Google’s experience in areas with electricity markets.

But utility executives in the Southeast say their reserve capacity is contributing to their higher scores in a national reliability rating — a growing concern as climate change drives more extreme weather events.

And they say one of the biggest failings of the power markets is that they don’t support the operation and construction of nuclear power plants, which executives say will provide non-stop carbon-free power that will further bolster the reliability of their grids, while intermittent renewables are rolled out . The revenue streams in the more regulated system provide the financial stability to support nuclear power plants, they claim.

“We’re the only utility company in America that’s building a nuclear power plant,” Mr. Fanning, the Southern chief executive officer, said. “Couldn’t have built it in PJM or ERCOT.”

There were cost overruns and delays at Southern’s nuclear project in Georgia, and a project in South Carolina was shelved after the two utilities developing it ran well over budget — issues Mr. Davis, the state senator, said the regulatory regime encourages utilities to assume that ratepayers will inevitably provide backing.

But the operating nuclear power plants give the region some of the highest carbon freedom scores in the country. According to the Institute for Energy Economics and Financial Analysis, over 60 percent of South Carolina’s electricity generation was carbon-free in 2021, most of it from nuclear power plants, compared to 35 percent in Texas.

Google includes electricity from nuclear power plants as clean energy when calculating the zero-carbon values ​​of its data centers, which tend to appear cleaner in the Southeast than in the Texas electricity market.

“There’s a disconnect between Google relying on clean nuclear power for its data centers while pushing into markets that have all but stopped building nuclear power wherever they’ve been implemented,” says Mark W. Nelson, Managing Director of Radiant Energy Group, an energy consultancy. “What’s fastest and cheapest for Google isn’t necessarily what’s best for society in the long run.”

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