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February 8, 2023

It was the kind of dry panel discussion that takes place at hundreds of industry conferences every year—until a Google representative decided it was time to open up.

“It’s personal to me,” Jamey Goldin, Google’s energy regulatory attorney, told attendees at the Southeast Renewable Energy Conference in Atlanta in May. 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, before his comments aimed at lobbyists for the utility’s parent company also On the panel: “You have a lot of coal in there and a lot of smoke in the air.”

Mr Golding added that overturning the system that puts nearly all generation in the southeast in the hands of utilities such as Georgia Power would “bring more renewables online and a lot of dirty power offline”.

But outbreaks are not just personal. It’s part of a far-reaching campaign by Google to power its operations by increasing electricity from wind, solar and other sources of generation that don’t emit carbon.

Companies such as Google, Meta, Microsoft and Apple have made eliminating carbon emissions a prominent corporate goal — and have set not-too-distant deadlines to make it happen. 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 the decade.

Yet companies seeking to quickly acquire significant amounts of new renewable energy face significant challenges—especially in the Southeast, one of the fastest-growing regions in the United States. Google’s battle in the region, where it owns major data centers, raises a question that applies to energy transitions everywhere: Is what is good for a few companies good for all?

At the heart of the campaign of Google and its tech giant allies is a desire to dismantle the decades-old regulatory system in the Southeast that allowed a handful of utilities to produce and sell the region’s electricity — and replace it with a market in which many companies can participate . Competition does this.

Such a market exists in some form across much of the country, but the southeastern utility staunchly defends the status quo. Utilities’ top executives argue their systems can better insulate consumers from price spikes for commodities like natural gas, improve reliability and support the long-term investments needed to develop clean energy technologies.

“Over time, we have definitely outperformed these markets in every way,” Thomas A. Fanning, chief executive of Southern, Georgia Power’s parent company, said in an interview.

Most of the electricity in the United States has long been produced and distributed by state-by-state monopoly utilities that are tightly regulated. But just in the early 2000s, lawmakers and regulators argued that competition would bring efficiencies that would make it possible to create electricity markets and end the utility’s dominance—a revolution that bypassed the Southeast.

Google and others argue that the market brings the money needed for cost savings, innovation and increased clean generation from wind and solar. The recent switch to some form of electricity market in some Western countries has saved nearly $3 billion since 2014, According to market operators.

Self-interest also plays a role: In electricity markets, big companies can strike deals with independent producers that give them more bargaining power and access to more clean energy.Google hits a milestone trade last year provided clean energy to its data center in Virginia, which is located in a sprawling marketplace called PJM.

Now, proponents of the approach have a chance to usurp the Southeast’s utility. South Carolina passed a law in 2020 exploring the creation of an electricity market, a move considered unusual given the clout utilities have over state capitals; similar legislation failed to make headway in North Carolina last year.

State Senator Tom Davis, Republican of South Carolina, who spearheaded the bill, said the current regulatory system rewards the economy even if utilities screw up. “It didn’t motivate them to go out and try to find someone who made a better mousetrap and could generate electricity cheaper,” he said.

Establishing an electricity market in South Carolina is an option, but Carolyn Goering, Google’s global head of energy market development and policy, went a step further during legislative hearings in July, proposing South Carolina’s separation from the Southeast utility system And the possibility of joining PJM.

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

Big utilities in the Southeast are now building more solar projects, but those driving the market in the region say that’s not enough.

According to an analysis by Tyler Norris, senior director of solar company Cypress Creek Renewables, in the region, proposed solar projects generate electricity equivalent to just over a quarter of total capacity, well below the 80% of PJM’s companies and under Obama. Served as a special advisor to the Department of Energy during the administration.

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

To demonstrate how markets can drive growth in renewable energy, proponents sometimes point to Texas, whose electricity market, ERCOT, is one of the least regulated in the country. Wind power accounted for nearly 23 percent of Texas’ electricity generation last year, up from 8 percent in 2011.

Critics say the fragility of the Texas market system has largely contributed to power outages during winter storms that killed more than 200 people in 2021. But others point out that ERCOT is structurally isolated from neighboring electricity markets, unable to draw power from those areas where plants in ERCOT markets froze during storms.

In addition, some experts have questioned the extent to which the market is driving growth in renewable energy, saying certain states have geography and weather that lend themselves well to wind and solar. Texas has vast, windy, uninhabited spaces that are a natural fit for wind power.

“We happen to see more wind and solar in areas where the market is deregulated,” said Severin Borenstein, a professor of business administration and public policy at the University of California, Berkeley, who specializes in the economics of renewable energy. A geographical and political phenomenon, not a market phenomenon.”

In the Southeast, there is evidence that government mandates promote renewable energy growth more than markets.

In North Carolina, where lawmakers have long pushed solar, the energy source accounted for 7.6 percent of net electricity generation last year, well above the national average and twice the market share of neighboring Virginia.

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

One criticism of regulated utilities that lack market competition is that they are rewarded for building generating capacity that is not needed because it increases the basis for setting rates. Ms Golin said that based on Google’s experience with electricity markets, the market would remove that incentive and cut costs without compromising the system’s resilience under stress.

But Southeast utilities executives say their reserve capacity helps them in the National Reliability Assessment – There is growing concern as climate change produces more extreme weather events.

One of the biggest failures of electricity markets, they say, is that they do not support the operation and construction of nuclear power plants, which executives say will provide uninterrupted, carbon-free energy, as more intermittent renewables are introduced. They argue that revenue streams in a more regulated system provide the financial stability that supports nuclear power plants.

“We are the only utility in the United States that has built a nuclear power plant,” said Southern Company CEO Mr. Fanning. “Cannot build it in PJM or ERCOT.”

Southern’s nuclear project in Georgia has seen cost overruns and delays, and a project in South Carolina has been put on hold after the two utilities developing it were well over budget – state senator Mr Davis said the regulatory system Utilities are allowed to assume that taxpayer support will be unavoidable.

But operating nuclear plants give the region the highest carbon-free score in the country. According to the Institute for Energy Economics and Financial Analysis, by 2021, more than 60% of South Carolina’s electricity generation will be carbon-neutral, mostly from nuclear power plants, compared with 35% in Texas.

Google lists power generated by nuclear power plants as clean energy when calculating this carbon free fraction Its data centers, which are mostly in the Southeast, look cleaner than the Texas power market.

“There’s a disconnect between Google’s reliance on clean nuclear power in its data centers while simultaneously pushing a market that has stopped building nuclear almost everywhere,” said Mark W. Nelson, managing director of energy firm Radiant Energy Group. consult. “What’s fastest and cheapest for Google isn’t necessarily best for society in the long run.”



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