Clean Energy Quest Pits Google Against Utilities

It was the sort of dry panel discussion that occurs at hundreds of industry conferences every year — until a Google representative decided it was time to unleash.

“This is personal for me,” Jamey Goldin, an energy regulation lawyer at Google, told those attending a May conference in Atlanta on renewable energy in the Southeast. He said he had grown up on a ridge overlooking Plant Bowen, a coal-fired power plant northwest of Atlanta owned by Georgia Power, the dominant electricity utility in the state, and then directed his comments at a lobbyist for the utility’s parent company, also on the panel: “Y’all got a lot of coal running up there, a lot of smoke going up in the air.”

Overturning the system that puts nearly all power generation in the Southeast in the hands of utilities like Georgia Power would “get a lot more renewable energy online and a lot of that dirty power offline,” Mr. Goldin added.

But the outburst was more than personal. It was part of a far-reaching campaign by Google to power its operations with increasing amounts of electricity from wind, solar and other generating sources that do not emit carbon.

Google, Meta, Microsoft and Apple, among others, have made eliminating their carbon emissions a prominent corporate goal — and have set not-too-distant deadlines to get there. Google wants to buy enough carbon-free electricity to power all its data centers and campuses around the world without interruption by the end of this decade.

The corporate quest to rapidly secure vast new amounts of renewable energy faces big challenges, however — not least in the Southeast, one of the country’s fastest-growing regions. And Google’s battle in the region, where it has a major concentration of data centers, raises a question that applies to the energy transition everywhere: Is what’s good for a few companies good for all?

At the heart of their campaign, Google and its tech giant allies want to dismantle a decades-old regulatory system in the Southeast that allows a handful of utilities to generate and sell the region’s electricity — and replace it with a market in which many companies can compete to do so.

Such markets exist in some form in much of the country, but the Southeastern utilities are staunchly defending the status quo. Senior utility executives contend that their system better insulates consumers from spikes in prices of commodities like natural gas, promotes reliability and supports the long-term investments needed to develop clean-power technologies.

“We absolutely are superior in every regard to those markets over time,” Thomas A. Fanning, chief executive of Southern Company, Georgia Power’s parent company, said in an interview.

Most electricity in the United States was long generated and distributed by heavily regulated monopoly utilities in each state. But just before the start of this century, lawmakers and regulators, arguing that competition would bring efficiencies, made it possible to set up power markets and end the dominance of the utilities — a revolution that bypassed the Southeast.

Google and others contend that the markets have brought cost savings, innovation and the capital needed to increase clean power generation from wind and solar. The most recent move toward a form of power market, in a group of Western states, has saved nearly $3 billion since 2014, according to the market operator.

Self-interest also plays a role: In power markets, large companies can strike deals with independent producers that give them more leeway to bargain on price and secure more clean energy. Google entered a landmark deal last year to provide clean power to its data centers in Virginia, which is in a sprawling market called PJM.

Now supporters of the approach have an opportunity to usurp the utilities in the Southeast. South Carolina passed a law in 2020 to explore setting up a power market, a move considered remarkable because of the influence the utilities have in state capitals; similar legislation failed to advance in North Carolina last year.

Tom Davis, a Republican state senator in South Carolina who spearheaded the bill, said the current regulatory system financially rewarded utilities even when they messed up. “It’s not incentivizing them to go out there and try to find somebody who’s built a better mousetrap and can generate power more cheaply,” he said.

Setting up a power market within South Carolina is one option, but Caroline Golin, Google’s global head of energy market development and policy, went further at a legislative hearing in July, raising the possibility of South Carolina’s breaking out of the Southeast utility system and joining PJM.

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

The big utilities in the Southeast are now building more solar projects, but those pushing for a market in the region say it’s not enough.

In the region, the proposed solar projects’ generating capacity is equivalent to just over a fourth of total capacity, which is far below the 80 percent for PJM, according to an analysis by Tyler Norris, a senior executive at Cypress Creek Renewables, a solar company, and a special adviser in the Energy Department during the Obama administration.

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

To show how markets can stoke the growth of renewables, supporters sometimes point to Texas, whose power market, ERCOT, is one of least regulated in the country. Last year, wind power accounted for nearly 23 percent of Texas’ generation, up from 8 percent in 2011.

Critics say the Texas market system led to much of the fragility that caused power outages during the winter storm that was responsible for over 200 deaths in 2021. But others note that ERCOT was structurally isolated from neighboring power markets, preventing it from drawing power from those areas when plants in the ERCOT market froze up in the storm.

In addition, some experts question the degree to which markets drive the growth of renewables, saying certain states’ geography and weather lend themselves to wind and solar power. With its vast and gusty unpopulated spaces, Texas is naturally set up for wind power.

“We happen to have seen more wind and solar in areas where markets have been 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. “But I think that’s more of a geographic and political phenomenon than a market phenomenon.”

And in the Southeast there is evidence that government mandates can do more than markets to promote the growth of renewables.

In North Carolina, where lawmakers have long pushed the development of solar energy, the power source made up 7.6 percent of net generation last year, well above the national average and double the share in neighboring Virginia, in a market.

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

One criticism of regulated utilities that lack market competition is that they are rewarded for building unneeded generating capacity because it increases the base on which rates are set. Ms. Golin said a market would remove that incentive and cut costs without affecting the system’s resilience under stress, based on Google’s experience in areas with power markets.

But executives at the Southeast utilities say their reserve capacity contributes to their higher scores in a national assessment of reliability — an increasing concern as climate change produces more extreme weather events.

And they say one of the biggest failings of power markets is that they don’t support the operation and building of nuclear plants, which, the executives say, will provide uninterrupted carbon-free energy that will shore up the reliability of their grids as more intermittent renewable energy is introduced. The revenue streams in the more regulated system provide the financial stability to support nuclear plants, they contend.

“We’re the only utility building a nuclear plant in America,” Mr. Fanning, the Southern chief executive, said. “Couldn’t have built it in PJM or ERCOT.”

There have been cost overruns and delays on Southern’s nuclear project, in Georgia, and a South Carolina project was shelved after the two utilities developing it went far over budget — problems that Mr. Davis, the state senator, said the regulatory system encouraged by allowing utilities to assume that ratepayers would inevitably provide a backstop.

But the nuclear plants in operation are giving the region some of the highest carbon-free scores in the country. Over 60 percent of South Carolina’s generation was carbon-free in 2021, most of it from nuclear plants, compared with 35 percent in Texas, according to the Institute for Energy Economics and Financial Analysis.

Google includes electricity derived from nuclear plants as clean energy when calculating the carbon-free scores of its data centers, which mostly appear cleaner in the Southeast than in Texas’ power market.

“There’s a disconnect between Google relying on clean nuclear power for their data centers while pushing for markets that have all but stopped the construction of nuclear everywhere they’ve been implemented,” said Mark W. Nelson, managing director of Radiant Energy Group, an energy consultancy. “What’s fastest and cheapest for Google is not necessarily best for society long term.”

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