Google surprised a lot of people in 2010 when it received approval from federal regulators to buy and sell electricity at market rates just like a utility. Was Google actually getting into the business of selling you power?
Well, not exactly. The company wasn't really looking to replace utilities. The move was designed to help Google procure more renewable energy for itself by giving it the flexibility to invest directly in large projects and sell the power back to the grid if needed.
Since it launched its renewables investment bonanza in 2007, Google has put over $1 billion into the sector. Its early strategy, called the RE<C Initiative, included investing directly in concentrating solar power and enhanced geothermal companies. But eventually it ditched that R&D-style program in favor of building out commercially proven projects or entering power purchase agreements (PPA).
As the company becomes an influential force in the green energy world, Google is trying to shake things up once again in the utility sector. In a new white paper, Google is calling on regulated utilities to offer new renewable tariffs that would allow big companies to directly purchase renewable electrons without having to enter into PPAs.
Under a renewable energy tariff program, a regulated utility would create a new voluntary rate structure for customers that want to purchase only renewables. It would be set up like any other type of specialized rate for residential, commercial or industrial customers. A company like Google would pay a premium for the electricity, thus soaking up any additional costs of procuring renewables and avoiding passing on costs to other ratepayers. Basically, the utility would build its own plant or enter into a power purchase agreement with a developer, and then set up a simple pricing scheme to sell those renewable electrons and associated renewable energy certificates directly to big customers.
"It lets utilities do what they do best: build power plants, procure power, manage the grid, and deliver electricity to customers. It draws on their ability to employ multiple power sources to better manage the variability associated with renewables," wrote Google in the white paper.
Google currently does the complicated work of managing its own portfolio of renewables. Unlike a lot of corporations that simply buy renewable energy credits, the company actively buys and sells power on the market. While this has allowed the company to procure a lot of clean electricity, Google doesn't exactly enjoy the 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," wrote the company.
These products already exist in deregulated markets where consumers have retail choice. Many customers have the opportunity to purchase 100 percent renewable energy by paying a slight premium. Service providers such as Clean Currents and Ethical Electric -- companies that are actually procuring electrons, not just renewable energy certificates -- are also marketing directly to utility customers with clean power options.
"It's a great idea. The problem is that this only exists in certain states, so Google wants fully regulated utilities to offer the same choice," said Richard Caperton, director of clean energy investment at the Center for American Progress.
It's also not easy. New tariff structures must be approved by regulators in each state, and utilities -- many of which are already surpassing legal targets for renewable energy -- would need to start developing more projects. But the concept is straightforward and elegant. With the backing of more powerful companies like Google demanding more clean energy, perhaps it could gain traction.