Search for clean energy pits Google against utilities

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

“This is personal to me,” Jamey Goldin, an energy regulation attorney at Google, told those attending 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 station northwest of Atlanta owned by Georgia Power, the dominant electric company in the state, and then addressed his comments to a lobbyist for the utility’s parent company, also on the panel, “You got a lot of coal there, a lot of smoke going up into the air.”

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

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 generating sources.

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

However, companies’ quest to quickly secure massive new amounts of renewable energy faces major challenges, not least in the Southeast, one of the country’s fastest growing regions. And Google’s struggles in the region, where it has a large concentration of data centers, raises a question common to the energy transition everywhere: is what’s good for a few companies good for everyone?

At the heart of their campaign, Google and its technology 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 to do this.

Such markets exist in one form or another across much of the country, but the Southeast’s utilities steadfastly defend the status quo. Higher utility companies claim their system better insulates consumers against spikes in the prices of commodities like natural gas, promotes reliability and supports the long-term investments needed to develop clean energy technologies.

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

A revolution avoided

For a long time, most electricity in the United States was generated and distributed by heavily regulated monopoly companies in each state. But just before the turn of the century, legislators and regulators, claiming that competition would bring efficiency, made it possible to create energy markets and end utility dominance—a revolution that bypassed the Southeast.

Google and others claim the markets have led to cost savings, innovation, and the capital needed to increase clean energy generation from wind and solar. The most recent move toward some form of energy 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 energy markets, large companies can make deals with independent producers that give them more leeway to negotiate price and secure more clean energy. Google struck a groundbreaking deal last year to provide clean power to its data centers in Virginia, which is in a sprawling market called PJM.

Now supporters of the approach have the opportunity to appropriate the utilities in the southeast. South Carolina passed a law in 2020 to explore the creation of an energy market, a move considered notable for the influence the utilities have in state capitals; similar legislation was not enacted in North Carolina last year.

Tom Davis, a South Carolina Republican senator who spearheaded the bill, said the current regulatory system financially rewarded utilities even when they screwed up. “It doesn’t encourage them to go out and find someone who built a better mousetrap and can generate cheaper energy,” he said.

Establishing an energy market in South Carolina is one option, but Caroline Golin, Google’s global head of energy market development and policy, went further during a legislative hearing in July, raising the possibility of South Carolina moving out of the Southeast would break from the utility and join PJM.

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

Markets and renewable energies

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

In the region, the generation capacity of the proposed solar projects is equivalent to just over one-fourth of total capacity, which is well below 80 percent for PJM, according to an analysis by Tyler Norris, a senior executive at Cypress Creek Renewables, a solar power company. company, and a special adviser in the Department of Energy during the Obama administration.

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

To show how markets can drive renewable energy growth, supporters sometimes point to Texas, where the electricity market, ERCOT, is one of the least regulated in the country. Last year, wind power accounted for nearly 23 percent of Texas production, compared to 8 percent in 2011.

Critics say the Texas market system has led to much of the vulnerability that caused power outages during the winter storm responsible for more than 200 deaths in 2021. But others note that ERCOT was structurally isolated from neighboring energy markets, meaning it could not receive power could tap into those markets. areas where plants in the ERCOT market froze in the storm.

In addition, some experts question the extent to which markets are driving renewable energy growth, as the geography and weather of certain states lend themselves to wind and solar energy. With its vast and windy, uninhabited lands, Texas is naturally set on wind energy.

“We happened to see more wind and solar energy in areas where markets have been deregulated,” said Severin Borenstein, a professor of business and public policy at the University of California, Berkeley, who specializes in renewable energy economics. “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 mandates can do more than markets to promote growth in renewables.

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

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

A matter of reliability

A criticism of regulated utilities that have no competition in the marketplace is that they are rewarded for building unnecessary generating capacity because it increases the basis on which rates are set. Ms. Golin said a market would remove that stimulus and cut costs without affecting the system’s resilience under stress, based on Google’s experience in power market areas.

But executives at the Southeast utilities say their spare capacity contributes to their higher scores in a national reliability rating — a growing concern as climate change causes more extreme weather events.

And they say one of the biggest shortcomings of energy markets is that they don’t support the operation and construction of nuclear plants, which executives say will provide uninterrupted carbon-free energy that will bolster the reliability of their networks as more intermittent renewable energy is introduced. The revenue streams in the more regulated system provide the financial stability to support nuclear power plants, they claim.

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

There have been cost overruns and delays on Southern’s nuclear project in Georgia, and a project in South Carolina was shelved after the two utilities developing it went far over budget — problems Mr. Davis, the state senator, said was regulatory system was encouraged by allowing utilities to assume that taxpayers would inevitably provide a backstop.

But the nuclear power plants in operation give the region one of the highest carbon-free scores in the country. According to the Institute for Energy Economics and Financial Analysis, more than 60 percent of South Carolina’s generation in 2021 will be carbon-free, 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 carbon-free scores of its data centers, which tend to appear cleaner in the Southeast than in the Texas electricity market.

“There is a disconnect between Google’s reliance on clean nuclear energy for their data centers and its pursuit of markets that have phased out nuclear power construction virtually everywhere they are deployed,” said Mark W. Nelson, general manager of Radiant Energy Group, a energy consultancy. “What’s fastest and cheapest for Google isn’t necessarily best for society in the long run.”