Tech Giants Expand Renewable Energy Market
By Mark Kleszczewski
Relatively low-cost oil and natural gas have garnered significant attention in the U.S. energy market in the last decade, but one of the biggest developments in the sector over the past two years has been the increased adoption of renewable power, led by a growing number of large-scale tech companies, manufacturers and retailers. Improvements in renewable technologies combined with greater cost-savings and risk reduction are making direct investments in renewables not only the “right thing to do” for the environment, but above all, a compelling business decision with long-term benefits.
According to the National Renewable Energy Laboratory, installed renewable electricity capacity is now at more than 163 gigawatts (GW), with wind energy and solar photovoltaics (PV) the fastest-growing electric generation technologies in the United States in 2012. Cumulative installed wind energy capacity increased by nearly 28 percent and cumulative installed solar photovoltaic capacity grew more than 83 percent from the previous year.
Renewable electricity has been also capturing a growing percentage of new capacity additions. In 2012, it accounted for more than 56 percent of all new electrical capacity installations in the United States — a major increase from 2004 when renewable electricity installations captured only 2 percent of new capacity additions.
Plunging prices are a major driver of this growth on the supply side. The American Wind Energy Association calculates that the cost of wind power has decreased by more than 40 percent in the last four years, while the U.S. Department of Energy’s SunShot Initiative estimates that by 2020, soft costs should not exceed 65 cents per watt for residential solar systems and 44 cents per watt for commercial systems.
Corporate Renewables Scale Up
The explosion in digital technology and cloud computing requires energy-hungry production lines and data centers, so it’s no surprise that the likes of Intel, Facebook and Salesforce.com have been tapping into renewables to diversify and manage their energy portfolios. To stay on the cutting edge, tech heavyweights in particular have gone beyond trading in Renewable Energy Certificates and are now deploying capital and expertise to buy or build facilities with the help of cross-industry partnerships. This move is not only benefiting them directly, but also helping push renewable sources further into mainstream electric power.
One of the most active companies delving into renewables is Google, which partnered with KKR last November to invest in six solar PV facilities across California and Arizona. Developed and managed by Recurrent Energy, the facilities can generate a combined capacity of 106 megawatts (MW) of clean electric power destined for offtakers such as Southern California Edison under long-term power purchase agreements (PPAs).
Valued at $400 million, the project is supported by capital from both Google and KKR in the form of equity investments and debt financing, while Prudential Capital Group provided construction and term debt financing for the portfolio. This follows a similar deal made in December of 2011, when Google and KKR invested in four utility-scale solar facilities in Northern California, serving the Sacramento Municipal Utility District (SMUD).
“Google and KKR’s continued partnership with Recurrent Energy showcases their strong commitment to a clean energy future,” said Arno Harris, CEO, Recurrent Energy, in a statement. “Their leadership in clean energy investment further validates solar as an integral part of our energy economy.”
This is Google’s 14th renewable energy investment, part of a $1 billion commitment to renewable energy across a wide range of technologies, from offshore transmission to some of the world’s largest wind and solar power projects.
“Investing in renewable energy is core to Google’s values,” said Kojo Ako-Asare, head of corporate finance for Google, in a statement referring to the project. “We believe strongly in making investments that are both good for the environment and good for business. We’re proud to continue our partnership with KKR and Recurrent Energy by investing in these fantastic solar facilities.”
“This partnership is ultimately about growing our clean energy resources in North America,” added Ravi Gupta, a senior member of KKR’s infrastructure team. “As states like California and Arizona adopt high standards for the use of renewable energy, we believe private capital partners can play an important role in helping them meet those goals.”
Another tech giant for whom sustainability and renewable energy investments are paying off is Apple, which has set a goal of completely powering every company facility through a range of renewable sources including solar, wind, hydro or geothermal.
At an industry conference last year, Lisa Jackson, a former Environmental Protection Agency (EPA) administrator who now heads the company’s environmental initiatives, said that Apple prefers to generate its own power, like at the solar power plant built for its Reno, Nev. data center. “If we can’t do that, we look for direct power purchase, and then we look for the highest quality [carbon] credits we can find,” she said.
In 2012, Apple completed the nation’s largest end-user-owned, onsite solar PV array, with another 20 MW facility in the works, at its data center in Maiden, N.C. The company has also built an onsite 10 MW fuel cell installation that uses biogas to provide more than 83 million kWh of renewable energy annually — the largest non-utility fuel cell installation operating anywhere in the country.
Following a similar path in adopting traditional and innovative forms of renewable sources to achieve carbon neutrality and greater energy savings is fellow tech leader Microsoft, known for instituting an “internal carbon fee,” which calculates the cost of internal carbon usage based on current market pricing for a portfolio of renewable energy and carbon offset projects.
“As the market for cloud services continues to grow, our business will become increasingly more dependent upon energy,” says Josh Henretig, director of environmental sustainability, Microsoft.
“Consequently, we are pursuing investments in both utility-scale and distributed solutions that will insure that Microsoft has greater control over the supply of low-cost, sustainable energy solutions.”
As one example, Henretig points to how mounting fuel cells directly onto a data center’s server racks allows Microsoft to distribute hyper-efficient generation solutions that radically reduce the amount of energy required to deliver cloud services. “If this approach were scaled up across the United States,” he says, “fuel cell stacks could double energy efficiency while cutting out numerous points of failure that occur in traditional electrical transmission.”
This model is part of a blueprint at Microsoft for finding new ways to power data centers that are independent of the grid and designed to take advantage of alternative fuel sources, much like the company’s biogas-powered data plant in Cheyenne, Wyo. Henretig anticipates that such advancements could be a future “game changer” in how energy is delivered and managed.
Close cooperation and support from state and federal resources has also proven essential in accelerating the private sector’s adoption of renewable energy.
“By going beyond the traditional renewable energy certificate market, companies like Google looking for environmental benefits and energy savings, are setting a new standard and approach in utilizing renewable energy,” says Kylah McNabb, renewable energy specialist, Oklahoma Department of Commerce.
“What’s gotten us excited is that the renewable resources, business-friendly environment and market conditions here in Oklahoma match up very well with the business case for investments from companies like Google. Not only is this good for the economic development that it brings to the state, but it’s also having a positive effect on energy prices,” McNabb says. “With the growing market for our wind power — which we’ve also begun exporting to neighboring states — we’re seeing local utilities make rate adjustments that are helping Oklahoma customers save on their utility bills.”
At the federal level, one of the most successful initiatives has been the EPA’s Green Power Partnership thanks to the agency’s collaboration with industry.
“In addition to reducing their greenhouse gas emissions, our institutional and corporate partners have many opportunities to voluntarily engage in long-term, fixed-price procurement of renewables which buys themselves a volatility hedge with real value,” notes Blaine Collison, program director of the Green Power Partnership.
Partnering with the EPA not only allows companies to develop credibility and recognition as an environmental leader, but also receive up-to-date market information and expert advice in navigating numerous green energy options, which is important as technology and the market evolves, Collison adds.
“Our stakeholders, which include over 1,500 partners of all shapes and sizes, are taking a very long and serious look at the environmental and economic opportunities — especially price certainty, which is one of the biggest value propositions of renewables,” Collison says. “The fact that they continue to find value in doing so, indicates an ongoing growth market for the sector.”
Getting directly involved in renewable energy often requires deep pockets to deal with upfront installation costs, relatively long payback periods and the need to bring in specialized staff. Yet dropping prices, improving technology, growing energy savings and the increasing value of sustainability credentials in the marketplace mean that even smaller companies and communities can follow in the footsteps of tech giants in benefiting from renewable energy.
“Seeing everything coming together is something that those of us who’ve been in the industry for a while have always hoped and thought would happen,” McNabb says. “New tools and technologies from smart grids to smart meters are pairing up with alternative energy sources and energy efficiency measures that are also cost-effective — which is making the decision easier for businesses. No matter what, the one thing that’s not going to change is that they’re always going to be interested in their bottom line — renewable energy can definitely help them with that.”
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Large-scale adoption of renewable energy is hardly limited to Silicon Valley’s tech giants, notes Blaine Collison, program director of the EPA’s Green Power Partnership. National retailers such as Walmart Stores Inc., Ikea and others are increasingly turning to renewable energy to help reduce expenses and meet ambitious corporate sustainability goals. A national standout in this area is Whole Foods Market. In pursuit of its goal to reduce energy usage by 25 percent per square foot by 2015, Whole Foods hosts or owns solar energy systems at 16 locations, has contracted for up to 20 more, and features a fuel cell at four of its stores. New store designs include energy-efficiency upgrades that have saved more than 20 million kWh annually. In February of this year, SunEdison — which has jointly deployed 1.5 MW of solar projects with the company since 2004 — completed a 306-kW system for Whole Foods’ new store in Brooklyn, N.Y. It is designed to be 60 percent more energy efficient than the average grocery store. “Working with a partner like SunEdison has been a tremendous benefit for us as they’re continuously willing to create innovative designs that help us achieve our renewable energy goals,” said J’aime Mitchell, green mission specialist for Whole Foods Market’s Northeast Region, in a recent statement. “Whole Foods Market is an exciting relationship because we are always being challenged to help them improve their business and innovate,” added Bob Powell, president of North America, SunEdison. “This kind of innovation is driving our growth in the commercial distributed generation solar market.” For additional details, visit SunEdison at www.sunedison.com and Whole Foods Market at www.wholefoodsmarket.com.