As tech companies and other large energy consumers are increasingly focusing on shifting toward a cleaner power supply, they face a choice to work with utilities or directly with developers.
Microsoft announced on Thursday a deal with developer Invenergy for a new 74 MW solar project in North Carolina. The company has been aggressively investing in renewable energy to power 60% of its data centers with renewable energy by early 2020.
On Wednesday, the Tennessee Valley Authority (TVA) published a blog post to promote the addition of 674 MW of new solar capacity to serve data centers by Google and Facebook, procurements that had already been announced.
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"There's quite a few utility programs that are rolling out right now, so there's a lot of momentum there," Lori Bird, director of renewable energy in the U.S. at the World Resources Institute, told Utility Dive.
Based on regional offerings and depending on the service territory, companies increasingly face attractive offers to buy renewables through a utility.
That momentum is mainly driven by newer products and "more favorable terms" for existing products, with utilities introducing more programs with increasing volumes, Bird said.
"We are uniquely positioned to leverage economies of scale and the public power model, which offers flexibility, reliability and competitive pricing," Scott Brooks, spokesperson for TVA, told Utility Dive via email.
Utilities also face additional constraints compared to third-party developers, Bird said. "They have to have products approved through the commission and so forth, and they have to be careful about not harming other customers."
Green tariff programs, offered by some utilities, offer less risk as they typically have less variable pricing, although some rates are market-based, Bird said. Virtual power purchase agreements (VPPAs) are also popular as there could be potentially more savings, with the added risk of wholesale power market price volatility, she said.
"What's happening now is that the cost of power of PPAs is remarkably low," Eric Gimon, senior fellow at Energy Innovation, told Utility Dive via phone.
He pointed to LevelTen Energy's latest quarterly report on PPA index prices: although prices were mostly rising for solar and wind PPAs between Q3 and Q4, the ERCOT market was competitive with prices as low as $24/MWh in solar and $13.80/MWh in wind.
Tech companies, specifically, will "look pretty carefully at the numbers," Gimon said, working "with a set of intermediaries that look around" for the cheapest offers.
If prices are good, why isn't the grid greener?
The lower prices that have been driving corporate renewables investments to an all-time high don't necessarily reflect the long-term visions of the utilities partnering with them, according to Gimon.
Utilities have to grapple with the "cognitive dissonance" of offering cheap renewables to large customers, such as tech giants, as opposed to adding it in their Integrated Resource Plans (IRPs), he said.
"The utilities have been speaking a little bit from two sides of their mouth," Gimon said.
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TVA's draft Integrated Resource Plan, released at the end of February, specified 30 scenarios in which solar capacity was not added before 2023, due to the lack of immediate need for capacity. However, the utility expects solar opportunities to expand in order to support the renewable goals of customers.
"[O]ur solar commitments will continue to increase in real-time" by working with customers on near-term opportunities for private, mid- and utility-scale renewable developments, TVA's Brooks said.
"The IRP is a long range plan that uses scenario analysis to evaluate future generation portfolios that optimize costs, risks, reliability, and flexibility across the entire system," Brooks said, not to issue decisions on behalf of the staff and Board on which projects to open and close.
TVA does not wish to impede homes and businesses from putting solar in their home, offering to pay "above market rate for generation we purchase," Brooks added. "However, the cost of solar has come down enough that we still pay for it under our programs, but just not at the kind of rates we used to. We will purchase the excess power under one of our programs at any time."
Particularly in the Southeast, utilities are "really not exploring" the capacity value of solar in their IRPs, Gimon said, deeming the resource uneconomic on energy cost alone.
"They're really dragging their feet," he said.
Part of that is having "assets in the ground that are becoming uneconomic." Another part is the utility's culture.
"When they start offering attractive green power, then that's going to throw their IRPs in a bad light," Gimon said.
Utilities shepherding solar developments
While big companies can create teams and find the best deals for them, it's a lot of work, "so it's natural for the utility to approach them" and offer to provide green power, Gimon said.
Those offers are becoming more sophisticated, from green tariffs, to PPAs, to Xcel Colorado announcing last summer the addition of 240 MW of behind-the-meter solar on-site for its large industrial customer, EVRAZ Rocky Mountain Steel.
TVA sent an request for proposals (RFP) more than a year ago to build over 375 MW of new solar power, which was intended to be dedicated solely to Facebook, almost a year before Facebook's November announcement of its new data center in the Valley.
"Top-tier businesses like Google and Facebook choose to invest in the Valley because TVA enables customers to achieve 100 percent renewables," John Bradley, senior vice president of TVA's economic development, said in a blog post.
Many large developers make deals directly with companies like Microsoft and also answer utility-guided RFPs. Invenergy, for instance, won a contract through TVA for a 147 MW solar farm for Google's Tennessee data center.
Invenergy declined to comment about the different types of offerings for large-scale renewables due to commercially-sensitive information.
The developer's 15-year deal with Microsoft is slated to begin operations in 2019. The new 74 MW will put the tech giant's renewable energy portfolio at over 1.3 GW.