Clean Energy Quest Pits Google Against Utilities

It was the kind of dry roundtable that happens at hundreds of industry conferences every year — until a Google representative decided it was time to go wild.

“It’s personal to me,” Jamey Goldin, an energy regulatory attorney at Google, told attendees of 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 main electric utility, then directed his comments to a lobbyist for the utility’s parent company, also on the sign: ‘You’ve got a lot of coal going around up there, a lot of smoke rising in the air.’

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

But the outburst was more than personal. It was part of a larger campaign by Google to power its operations with increasing amounts of electricity from wind, solar and other sources of generation that don’t emit carbon.

Google, Meta, Microsoft, and Apple, among others, have made eliminating their carbon emissions a major corporate goal — and set not-too-distant deadlines for achieving it. Google wants to buy enough carbon-free electricity to power all of its data centers and campuses around the world without interruption by the end of this decade.

However, companies’ quest to quickly obtain vast amounts of renewable energy faces great challenges, especially in the southeast, one of the fastest growing regions of the country. And Google’s battle in the region, where it concentrates a large concentration of data centers, raises a question that applies to the energy transition everywhere: is what is good for some companies good for all?

At the heart of their campaign, Google and its tech giant 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 to replace it with a market in which many companies can compete to do so.

Such markets exist in one form or another across much of the country, but utilities in the southeast are a strong supporter of the status quo. Senior utility executives say their system better insulates consumers from commodity price spikes like natural gas, promotes reliability and supports the long-term investments needed to develop clean energy technologies.

“We are absolutely superior in every way to those markets over time,” said Thomas A. Fanning, chief executive of Southern Company, the parent company of Georgia Power, in an interview.

A revolution averted

Most electricity in the United States has long been generated and distributed by heavily regulated monopoly utilities in each state. But just before the turn of this century, legislators and regulators, arguing that competition would bring efficiencies, helped build electricity markets and end the dominance of utilities – a revolution that bypassed the Southeast.

Google and others argue that markets have brought cost savings, innovation and the capital needed to scale up clean energy production from wind and solar power. The most recent move to some form of electricity market, in a group of Western states, has saved nearly $3 billion since 2014, according to the market operator.

Self-interest also plays a role: in electricity markets, large companies can enter into agreements with independent producers that give them more leeway to negotiate prices and obtain cleaner energy. Google struck a landmark deal last year to supply clean power to its data centers in Virginia, which is in a sprawling market called PJM.

Now, proponents of this approach have the opportunity to usurp public services in the Southeast. South Carolina passed legislation in 2020 to explore establishing an electricity market, a move considered notable due to the influence of utilities in state capitals; similar legislation did not progress in North Carolina last year.

Tom Davis, a Republican state senator from South Carolina who led the bill, said the current regulatory system financially rewards utilities even when they get it wrong. “It doesn’t entice them to go out there and try to find someone who’s built a better mousetrap and can produce electricity cheaply,” he said.

Creating an electricity market in South Carolina is one option, but Caroline Golin, global head of energy market development and policy at Google, went further during a legislative hearing in July, raising the possibility of South Carolina exiting the Southeast utility system and joining PJM.

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

Markets and renewable energies

Major utilities in the Southeast are now building more solar projects, but those looking for a market in the region say it’s not enough.

In the region, the generation capacity of proposed solar projects is equivalent to just over a quarter of total capacity, which is well below PJM’s 80%, according to an analysis by Tyler Norris, senior executive at Cypress Creek. Renewables, a solar company and special adviser to the Department of Energy under the Obama administration.

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

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

Critics say Texas’ market system led to much of the fragility that caused power outages during the winter storm that claimed more than 200 lives in 2021. But others note that ERCOT was structurally isolated from neighboring electricity markets, preventing it from drawing electricity from them. when the ERCOT Market Factories froze in the storm.

In addition, some experts question the extent to which markets are driving renewable energy growth, saying that some states’ geography and weather lend themselves to wind and solar power. With its vast and gusty depopulated spaces, Texas is naturally set up for wind power.

“We happen to have seen more wind and solar power in areas where markets have been deregulated,” said Severin Borenstein, professor of business administration and public policy at the University of California, Berkeley, specialized in the economics of renewable energies. “But I think it’s more of a geographic and political phenomenon than a market phenomenon.”

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

In North Carolina, where lawmakers have long pushed solar power development, the power source accounted for 7.6% of net generation last year, according to an analysis of Energy Information Administration data by the Institute for Energy Economics and Financial Analysis, well above the national average and double the share of neighboring Virginia, in a market.

“We expect North Carolina to continue to be a leading state for solar,” said Erin Culbert, spokeswoman for Duke Energy, which is a major utility operator in the Southeast.

A question of reliability

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

But Southeast utility executives say their spare capacity is contributing to their higher scores in a national reliability assessment — a growing concern as climate change produces more extreme weather events.

And they say one of the biggest failures of electricity markets is that they don’t support the operation and construction of nuclear power plants, which leaders say will provide uninterrupted carbon-free power that will boost reliability. of their networks as more intermittent renewables are introduced. Revenue streams in the more regulated system provide the financial stability needed to sustain nuclear power plants, they argue.

“We’re the only utility building a nuclear power plant in America,” said Mr. Fanning, the South’s chief executive. “I couldn’t have built it in PJM or ERCOT.”

There have been cost overruns and delays on the Southern, Georgia nuclear project, and a project in South Carolina was scrapped after the two utilities that developed it went well over budget – problems which Mr. Davis, the state senator, said the regulatory system encouraged by allowing utilities to assume that taxpayers would inevitably provide a safety net.

But the operating nuclear plants give the region some of the highest carbon-free scores in the country. More than 60% of South Carolina’s generation was carbon-free in 2021, with most coming from nuclear plants, compared to 35% in Texas, according to analysis by the Institute for Energy Economics and Financial Analysis.

Google includes electricity derived from nuclear power plants as clean energy when calculating carbon-free scores for its data centers, which generally 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 to markets that have basically stopped building nuclear wherever they’ve been implemented,” Mark said. W. Nelson, managing director of Radiant Energy Group, an energy consultancy. “What’s fastest and cheapest for Google isn’t necessarily best for society in the long run.”