Published on April 29th, 2018 | by Joshua S Hill0
Are Google & Apple Really “Powered” By Renewables? Understanding Corporate 100% Renewable Energy Policies
April 29th, 2018 by Joshua S Hill
In the space of a week in early April, technology darlings Google and Apple made strikingly similar announcements. The two companies were proud to announce that they had fulfilled their 100% renewable energy targets in 2017 and were looking to the future to continue their involvement in the renewable energy sector.
Google and Apple are only two of a great number of companies suddenly turning their attention towards renewable energy. The reasons are myriad, and range from a genuine desire to protect the environment, to decrease their electricity costs, or to simply give their company a marketing makeover.
Proof of the increasing attention being paid to renewable energy as a means of powering business operations can be found in the number of companies that have now signed up to the various initiatives flourishing around the world — led by the RE100 initiative. Created by The Climate Group in partnership with CDP (formerly the Carbon Disclosure Project), RE100 is billed as “a collaborative, global initiative uniting more than 100 influential businesses committed to 100% renewable electricity, working to massively increase demand for — and delivery of — renewable energy.” As of this writing, RE100 has over 130 members from around the world, with names as various as IKEA, ABInBev, eBay, Starbucks, and many more.
RE100 is not the only initiative designed to focus corporate attention towards renewable energy and other environmentally friendly, energy-related goals. The Climate Group also formed EP100 and EV100 — initiatives similar to RE100 but focused on energy productivity and electric vehicles. The Climate Group is also part of the We Mean Business coalition and the Under2 Coalition, which is range of initiatives and groups all striving to spur on the global transition to a low-carbon economy.
The drive to revolutionize corporate energy policy is huge and has long since moved beyond being simply a trend for those few interested in protecting the environment. It is now justifiably an economically efficient choice for companies around the world, and one which is paying dividends.
Unsurprisingly, “Companies joining RE100 are strongly encouraged to set a public goal to source 100% of their global electricity consumption from renewable sources by a specified year.” But what does “source” really mean?
First, however, it’s worth understanding the means by which companies go about securing their renewable energy supplies. There are those which of course build their own onsite projects — rooftop solar, a wind turbine, etc. But for the most part, companies rely on what is called Power Purchase Agreements, or PPAs. I could explain what a PPA is, but instead, I thought I would turn to an expert.
“A PPA is an agreement between a generator and seller of electricity and a buyer,” said Zosia Riesner, Head of UK PPA at Lightsource BP, a leading global renewable energy company, and a leading expert on the concept of PPAs. “The buyer can be a utility or a major energy user, this second option is often referred to as a Corporate PPAs. Corporate PPAs can refer to onsite or near site project delivering direct to site via private wire or off-site projects where the project is connected to the grid (distribution network) and power is sleeved to the corporate through a physical supply agreement or alternatively, the PPA is virtual or synthetic with no physical sleeving.”
Not every company goes about adding up their PPAs in the same way, however, and at times companies can end up achieving 100% renewable energy targets via completely different methods. Zosia Riesner explains further:
“At its simplest, the Corporate buyer will have procured renewables certificates or Guarantees of Origin (dependant on the prevailing local renewables certification scheme) with the electricity in the PPA. By securing renewable certificates to match their usage they can demonstrate they have procured 100% renewable power.
“Where the Corporate PPA is private wire and delivers direct to site it is very easy to demonstrate the sourcing of renewable power. Where the renewable project is delivering power into the grid and the major energy user is consuming power from grid this is slightly less direct that private wire, however, the Corporate can still demonstrate that they have procured power and renewables certificates from an identified renewable source. By supporting the development of a project underpinning the funding with a long-term offtake commitment the Corporate PPA is creating additionality, this is particularly the case if the project is unsubsidised.”
This creates a question in some minds, however, as to just what a company means when they say they are “powered” by 100% renewable energy.
Source vs. Matching: Word Semantics
If we bring our attention back to the most recent announcements made by Google and then by Apple, we’ll see a variation in the way both companies go about explaining their accomplishments. Writing on April 4, Google’s Senior Vice President for Technical Infrastructure, Urs Hölzle was very careful to ensure there was no confusion as to what his company’s accomplishment represented. In his blog post written for Google’s The Keyword blog, Hölzle never used the word “powered” — in other words, he never said that Google was “powered” by 100% electricity. An example in semantics, maybe, but one that is very telling.
Conversely, five days later, Apple had no such compunctions, with their official press release proudly boasting “Apple now globally powered by 100 percent renewable energy.”
Is there a difference?
Well, on the surface of it, there would appear to be one significant difference. Google’s Urs Hölzle explained that his company was now “Buying 100 percent renewable energy” and that the accomplishment in question that required so much media attention was that Google met its goal of purchasing enough renewable energy that it exceeded the amount of electricity used in its global operations for offices and datacenters — in other words, Google matched its electricity consumption with renewable energy purchases through PPAs. Hölzle went a step further to explain the news:
“What do we mean by ‘matching’ renewable energy? Over the course of 2017, across the globe, for every kilowatt hour of electricity we consumed, we purchased a kilowatt hour of renewable energy from a wind or solar farm that was built specifically for Google. This makes us the first public Cloud, and company of our size, to have achieved this feat.”
Hölzle went on to explain that, as of his writing, Google had contracts to purchase 3 gigawatts (GW) worth of output from renewable energy projects around the world, and that no corporate purchaser buys more renewable energy than Google does.
But what about Apple? What did Apple say in its press release? Apple hedged no bets, and in the opening sentence of its press release crowed, “Apple today announced its global facilities are powered with 100 percent clean energy.”
“We’re committed to leaving the world better than we found it,” said Tim Cook, Apple’s CEO in a statement. “After years of hard work we’re proud to have reached this significant milestone. We’re going to keep pushing the boundaries of what is possible with the materials in our products, the way we recycle them, our facilities and our work with suppliers to establish new creative and forward-looking sources of renewable energy because we know the future depends on it.”
That sounds great, but Apple’s own press release raises a question. Specifically, Apple boasted that its 100% accomplishment included “retail stores, offices, data centers and co-located facilities in 43 countries.” However, three paragraphs later, it explains that “Apple currently has 25 operational renewable energy projects around the world, totaling 626 megawatts of generation capacity, with 286 megawatts of solar PV generation coming online in 2017 — its most ever in one year.” Apple also boasted 15 more renewable energy projects already under construction, which would increase its renewable energy capacity up to 1.4 GW. It’s great work by one of the world’s shiniest companies, but if you have operations in 43 countries but only 25 operational projects, what explains the gap?
Valuable and Vital First Steps
Don’t get me wrong: This is fantastic! We can only hope that all companies have the same drive to invest so heavily in renewable energy. Google’s PPAs have already led to over $3 billion in new capital investment around the world — investment which has not only helped develop the renewable energy projects they subsequently purchase electricity from, but which also feed into the community surrounding said project. But there is obviously a difference between being powered by renewable energy sources — which would essentially require onsite generation, or sleeved PPAs (wherein renewable electricity generated from a project is actively directed through a separate connection point to the source) — and matching electricity consumption with renewable energy PPAs, either locally or overall — if only to assuage confusion (and possibly deception).
The question then is, how do companies go about “matching” their consumption with renewable electricity, especially considering that some countries where they operate simply do not have renewable energy sources to tap into? To answer this question I spoke to Tom Lindberg, Managing Director of ECOHZ, a provider of renewable energy solutions, and an expert on the subject.
“To best understand what ‘matching’ means, the physical electrical grid should be thought of as a common “pool” of energy,” Lindberg told me. “The energy in this common pool comes from both renewable and non-renewable sources.” Think, therefore, of the larger US electrical grid, or the interconnected electricity grids across the European Union. “Matching in this context means that for every [megawatt-hour (MWh)] used, a business (or household) procures [or purchases] one MWh from a renewable source. In this way, even though the physical consumption of energy from the grid is a mix of renewable and non-renewable energy, this consumption is “matched” with the exact same volume of renewable energy production.”
“RECS International, an organization working to ensure good practice within renewable energy procurement, highlights three renewable energy procurement systems that companies (or households) should use when procuring/matching renewable energy: Guarantees of Origin in Europe (GOs), Renewable Energy Certificates (RECs) in North America, and International Renewable Energy Certificates (I-RECs) everywhere else.”
Given that a company like Apple, for example, has more operating locations in countries than there are renewable energy sources, it would therefore need to rely on these various certificates. For example, as Lindberg explains, “in principle a corporate buyer can cover (match) their consumption at multiple locations in Europe from one renewable power plant located in the European market.
“It also means they cannot purchase from power plants outside this market. Meaning that it is not accepted to match European consumption with renewable power from plants in North America, Asia or any market outside of natural boundaries.”
So when a company such as Apple claims that it is using 100% renewable electricity, but does not have access to locally generated renewable electricity, “they are either sourcing from another country within the same ‘natural market boundaries’ as the country of operation.” In the case of securing electricity within the same “natural market boundaries,” it is best practice that companies secure their purchases from renewable power projects as close to their operations as possible, and often, as Lindberg explains, “it is at least required that there is a grid connection between the renewable energy power plant and the corporation or household that wants to procure the renewable energy from that source. This is to ensure the free flow of power between the locations.”
Given the market boundaries in Europe and North America, for example, where companies like Apple and Google and Microsoft often do business, there is the opportunity to make the claim that they are purchasing renewable electricity — even if the grid connection between production and consumption is tenuous at best. The Guarantees of Origin in Europe (GOs) and the Renewable Energy Certificates (RECs) in North America ensure the validity of the transaction, even if the reality is a little flimsy.
The recent announcements made by Google and Apple are in no way isolated incidents, nor are they restricted to these two companies. There are numerous other big-name companies that are making similar strides towards 100% renewable energy targets — including Microsoft, IKEA, and Amazon.
As can be seen below, Google has secured PPAs all over the world as part of its ongoing effort to ensure its operations are powered by as much renewable energy as possible. “We’re building new data centers and offices, and as demand for Google products grows, so does our electricity load,” a Google spokesperson told me via email. “We need to be constantly adding renewables to our portfolio to keep up. So we’ll keep signing contracts to buy more renewable energy.” Will Google again be able to say that it was able to match its electricity consumption with renewable energy purchases this year? “We won’t know if we’ve sustained the match until early 2019 when we have analyzed our consumption with our online capacity of renewables.”
Looking forward, Google has a straightforward and simple goal: “The goal for our company is to purchase renewable energy on every grid where we operate. We also think every energy buyer — individuals and businesses alike — should be able to choose clean energy and are working with groups like the Renewable Energy Buyers Alliance [in North America] and Re-Source Platform [in Europe] to facilitate greater access to renewably-sourced energy.”
Another company that serves as a good comparison to the efforts being made by Apple and Google already highlighted is Microsoft, and it has been a busy few months for Microsoft. But first, we have to go back a bit.
In May of 2016, Microsoft announced to the world that not only were its datacenters 100% carbon neutral, but the company wanted to begin increasing the amount of renewable electricity powering those datacenters. Specifically, Microsoft President Brad Smith explained that the company’s “goal is to pass the 50 percent milestone by the end of 2018, top 60 percent early in the next decade, and then to keep improving from there.” Fast-forward through several fairly important PPA announcements, and in the past couple of months alone, Microsoft signed two significant Power Purchase Agreements. The first, for 100% of the 60 MW output from Singapore’s largest solar project, and the second securing 315 MW from the 500 MW Pleinmont I and II solar farms in Virginia, US.
In total, Microsoft currently has 1.2 GW worth of renewable electricity secured through long-term Power Purchase Agreements, as well as a (reportedly) 480 kilowatt rooftop solar array atop the company’s Silicon Valley campus (above).
I spoke to Brian Janous, the General Manager of Energy at Microsoft, to understand a bit more about what the company had accomplished, and where it was headed, and it is clear that Microsoft is relying more on “matching” renewable energy to its electricity consumption rather than seeking to build onsite generation to power its operations.
“When sourcing renewable energy, it is vital to determine the most efficient method to meet the power of the facility,” Brian Janous told me. “For smaller facilities such as a retail location seeking to power refrigeration and lighting, this might take the form of rooftop solar, but large datacenters require significantly more power — a need that can only be met by utility-scale power plants. Thus, the renewable energy needs of Microsoft (and other cloud providers) are typically met through PPAs, which allow us to meet our energy demands while helping to green the grid.”
“Our approach is unique in that we also make an effort to localize our renewable energy procurement, whenever possible, by signing PPAs in the regions where our datacenters are located. This helps minimize the impact of our datacenters’ energy pull on the local grid, since we’re adding clean electrons back into the same regional energy pool from which we’ve removed them and, in many cases, bringing additional clean electricity to the power pool above and beyond our own needs.”
Microsoft also uses its massive corporate weight to shape regional policies towards renewable energy.
“As part of our company-wide commitment to carbon neutrality, Microsoft’s datacenters have been carbon neutral since 2014 through the purchase of RECs,” Janous continued, referring to the North American Renewable Energy Certificates mentioned above. “Since then, we have been continually working toward powering all of our datacenters with local, clean power through strategic long-term PPAs that help bring more renewables online in the regions where we operate globally.
“Rather than purchasing all our clean power through a massive PPA in just one region, where a large amount of clean energy is already available, our goal is to use our purchasing power to expand the availability of renewables in new markets. To do that, we approach our energy purchases thoughtfully, so that we can make agreements that not only benefit Microsoft, but help accelerate a clean energy economy that benefits the countries and communities around our datacenters as well.”
The attractiveness of companies like Microsoft can move mountains — alongside, arguably, mounting global political pressure. Countries and regions are no longer able to simply sit on the sidelines. More and more, the fight to prevent global warming is becoming subnational — moving away from national targets and being driven by local, state- and regional-level targets and ambitions. This has an immediate effect on the global renewable energy market.
“The global market is closing on 1,000 [terawatt-hours (TWh),” Tom Lindberg explained to me. “In many regions, corporate demand is pushing governments and producers to move faster. When a country becomes a part of a renewable energy procurement system (GOs, RECs or I-RECs), they become more attractive operating areas for large companies like Google or Apple that wish to procure renewable energy globally.” Microsoft’s policies, alongside those of Google, Apple, and others, are driving renewable energy uptake.
Steady declines in prices are helping as well. “Corporate demand is also slowly outpacing supply,” said Lindberg. “This means prices are increasing. Although still considered “low,” GO prices are now at 0,9 to 5 euros. This is a huge difference from just 2 years ago.
“These prices mean that many new solar and wind projects that would be unprofitable before or would not be realized, are now profitable due to the extra revenue they receive from the sales of Guarantees of Origin, RECS, or I-RECS.”
There is a massive road ahead of us, and even though it is becoming easier to point to laudable examples — many have been shown already — much more needs to be done.
“I feel this is a daunting task, which most of these leading companies take very seriously,” Tom Lindberg cautioned. “Many work to tailor their renewable sourcing strategy to their operational needs, across diverse regions. Tracked renewable power — GOs, I-RECs, and RECs — need to be used to provide transparent and consistent documentation of all renewable claims. The documentation is needed whether these claims come from corporate own renewable assets (IKEA, Google),or from PPAs, or from purchases make from their local power supplier.
“What needs to be understood is that until 100% of the energy in the common grid is produced by renewable energy, corporations wishing to use renewable energy will have to use renewable energy attribute systems to match and document their energy consumption with production from renewable energy sources.”
The doom and gloom doesn’t necessarily fade away if you’re inside a company like Google or Microsoft, either.
“Achieving 24/7 clean energy for the grid is a long term goal; getting there will require a mix of technological development, transactional innovation, and changes in the way energy markets work today,” Google’s spokesperson told me.
“Many large companies are now making renewable energy commitments to meet the demand of their own operations — this is a positive trend,” said Microsoft’s Brian Janous. “However, even if all of the world’s largest companies achieve one-hundred percent renewable operations, it won’t be enough to reverse the course of climate change. That’s why Microsoft’s goal is to meet our renewable energy commitment in a way that also helps to decarbonize the grid by making clean energy more affordable and accessible to others.”
There’s a long way to go, and even if big-name companies like have been mentioned above are hitting some impressive milestones, the hard work will be for similar policies to be common business practice across all sectors. But, as they say, the hardest steps are the first ones, and the most important steps the next ones.
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