There is a military saying, when faced with a discrepancy between the map and the terrain, trust the terrain!
In a similar way, when faced with a discrepancy between what a company offers and what the customers want, trust the customers!
According to Utility Dive 71 of Fortune 100 companies and 215 of the Fortune 500 have now defined targets for clean energy or sustainable energy. Many of them seems very determined to achieve their targets.
The large technology companies like Microsoft, Apple, Alphabet, Facebook, Amazon etc. have taken the lead with ambitious and elaborate targets. For example, Microsoft targets to have wind, solar and hydro to power 50% of their data center and campus by the end of 2018, and 60 % by early next decade. Microsoft has become one of the nations largest buyer of green energy, mostly by signing power purchase agreements (PPAs) like the 20-year PPA (2013) for 110 MW from Keechi wind farm in Texas. Microsoft has also an internal carbon fee model, which helps fund investments in renewable energy, carbon offset community project and climate grants.
With 2.6 GW of renewable power through 20 PPAs Google claims to be the world’s largest buyer of green energy. For its facilities Google is using 100 % renewables. What amount may still be fossil fuel power from the grid is offset by purchased green certificates. Google has also committed $2.5 B for investments in 3.7 GW renewable energy projects.
Apple has now reached 96% renewable energy for its own plants. In addition, they are working with their supply chain to cut down on greenhouse gas emissions. As stated in their 2017 Environmental Responsibility Report: “As part of our clean energy program, Apple and our suppliers will generate and procure more than 4 gigawatts of new clean power worldwide by 2020, including 2 gigawatts in China alone, and use it to reduce emissions associated with manufacturing. Already, commitments made as of April 2017 represent a total of 2 gigawatts. Once completed, the 4 gigawatts of clean power will represent 30 percent of our current manufacturing carbon footprint.”
The technology companies are followed by many other companies. 116 global companies, including Walmart, General Motors and Johnson & Johnson, have signed up to RE100, committing to go 100 % renewable energy. In GMs and J&J cases the target is set for 2050. Walmart targets to produce or procure 7000 GWh of renewable energy by 2020. By 2025 Walmart target to have 50 % of the power for their operations by renewable energy. This year Walmart also launched a collective goal with its supply chain to eliminate 1 gigaton of CO2 by 2030. 1 gigaton of CO2 is three times the annual amount of California’s CO2 emissions.
In states without retail markets, the push for more renewable energy from those and other customers does not come without challenges for electric utilities and regulators. For example, there may not be enough green energy to meet the demand and, if there is, it may trigger requests for stranded investments recovery.
Trying to respond to the renewable energy demands there is a growing trend of “green tariffs” to enable regulated electric utilities to provide green energy, while at the same time make “neutrality adjustments” in order to protect existing customers from cost shifts.
An interesting example is a pilot in Virginia by Dominion Energy, designed to better serve customers like Amazon Web Services. The pilot, Schedule MBR (Market Based Rate), was approved last year (2016) and capped at 200 MW. Through this tariff, Amazon can pay for power from Dominion at PJM wholesale market rate and sell fixed-price, PPA-acquired renewables electricity into the market. Depending on PJM pricing and usage levels, net MBR charge could result in either a credit or a charge.
Dominion Energy filed in May this year for a new green tariff program with firm prices, Schedule CRG (Continuous Renewable Generation). The proposed structure is that Dominion executes PPA for renewable energy resources in the PJM wholesale market, which may take the form of a single PPA or a bundling of differing resources. Customer and utility work collaboratively to identify the type and location of the renewable energy resource, which must be within PJM’s region. Second contract is entered into with the participating customer, “Requirements Contract.” The Requirements Contract establishes an all-inclusive price for retail electric supply service based on the underlying wholesale renewable portfolio price that will be in lieu of the customer’s generation billing under its standard tariff. This is a negotiated all-inclusive tariff rate.
Similar developments of green tariffs can be seen in other states. The alternatives for customers demanding renewable energy are more radical like the case of MGM Resorts, who decided in October last year (2016) to pay Nevada Power $87 M to become independent from the utility, driven by long-term economic benefits and a desire for more renewable energy, according to Cindy Ortega, SVP and Chief Sustainability Officer at MGM Resorts. The same year MGM commissioned the largest rooftop solar in the U.S. with 8.3 MW at the Mandalay Bay Convention Center.
In summary, when faced with a discrepancy between what a company offers and what a customer wants, trust the customer! Especially, if the customer has leverage!
More about green tariffs see World Resource Institute: Emerging Green Tariffs.