Although utilities make up the vast majority of wind energy off-takers, there is a growing trend among major corporations, such as Google and Walmart, to purchase wind energy directly from developers or to host wind turbines at company sites.
The American Wind Energy Association (AWEA) recently reported that new wind power purchasers included at least 18 industrial buyers, 11 schools and universities, and eight towns or cities. In addition to Google and Walmart, industrial purchasers of wind power include Anheuser-Busch, Nestle Corp. and Safeway.
According to AWEA, 174 MW of wind power was purchased by non-utility customers last year. While the overall amount is miniscule compared to the quantity purchased by utilities, there are a few reasons why this development is worth watching. For starters, it could open up another pool of potential buyers for which wind developers could negotiate power purchase agreements (PPAs). Further, it could present opportunities for procurement in states that may have abundant wind resources but not necessarily the regulatory trigger – such as a renewable portfolio standard – to procure wind.
So, what is behind the procurement push? For companies like Google, purchasing wind energy provides cost savings, reduces emissions and demonstrates environmental stewardship. The Mountain View, Calif.-based search-engine giant has been a pioneer among corporations seeking the cost and environmental benefits of using wind power. Google began purchasing wind energy in 2010 to power its Midwestern data centers and says wind energy procurement has helped the company achieve carbon neutrality.
Google says its data centers use only 50% of the energy that many other data centers consume, making them some of the most efficient in the world. This energy efficiency has saved the company more than a $1 billion dollars while lessening its impact on the environment.
“Because energy is a large operating expense at Google, it is beneficial to power the data centers with low-cost wind power,” explains Gary Demasi, Google’s director of operations, energy and data-center location strategy. He says Google has an opportunity to lock in low-cost wind power as a hedge against rising utility costs.
Not to be outdone, Bentonville, Ark.-based retail giant Walmart erected a GE 1.5 MW SLE wind turbine at its Red Bluff, Calif.-based distribution center last year. The GE turbine, which was de-rated to 1 MW to comply with California’s net-metering law, supplies about 20% of the distribution center’s electricity demand. Walmart is buying the electricity generated by the turbine under a 15-year PPA with Foundation Windpower, a Menlo Park, Calif.-based developer, installer and builder of distributed generation systems.
Greg Pool, director of energy at Walmart, says the wind turbine represents the next step toward reaching Walmart’s goal of obtaining 100% of its energy from renewable resources, such as wind and solar. Since installing the wind turbine in 2012, Walmart – which operates more than 100 distribution centers across the U.S. – is evaluating the feasibility of installing wind turbines at other distribution centers. Whether or not each site will be suitable for a wind turbine will depend on the wind resource in the area and the price of electricity.
John Pimentel, president and co-founder of Foundation Windpower, says the potential cost savings of installing wind turbines are too promising to ignore. By taking advantage of net metering and incentives, companies can save between $0.01/kWh and $0.025/kWh on their retail utility bills, he claims.
There could also be a residual benefit of these large corporations’ interest in wind power: Many firms wish to be viewed as eco-friendly and may jump on the wind energy bandwagon if big companies are aboard.
“Having the name value of companies such as Nestle, Safeway and Anheuser-Busch lowers the perceived risk for customers who may be on the fence,” Pimentel explains.
Of course, there may be factors limiting industrial companies’ purchases of wind energy. For example, Foundation Windpower has installed 16 wind turbines at 11 sites, all located in California. Still, even in a wind-friendly state such as California, there are obstacles.
First and foremost, Pimentel explains, is the challenge of complying with the California Environmental Quality Act (CEQA) – an arduous process that requires all state and local agencies to follow a strict protocol of analysis and impact assessment for proposed projects while providing recommendations to mitigate potential environmental issues. CEQA compliance can add years to a project’s timeline, Pimentel explains, adding that CEQA compliance has killed many projects.
A different world?
Clearly, major corporations’ direct procurement of wind energy has created some tension in their relationships with regulated utilities, which are required by statute to serve all customers reliably, safely and at the lowest possible cost.
“Vertically integrated utilities are now being asked to do something that is very different than what they have historically been tasked to do,” explains Kim Zuhlke, founder of Little Blue Ridge Consulting and a long-time utility executive. “Customers are asking for a 100 percent green resource with a 20-year fixed price. That is in contrast to the traditional mission of providing reliable power at the lowest possible cost.”
Although Zuhlke admits that large industrial customers have been known to use the prospect of local job-creation benefits to pressure utilities into giving them more favorable rates, what is happening today represents something totally different.
“In certain markets, where the wind resource is favorable, the ability for a company to meet their customers’ green energy desires and lock in stable energy prices appears within reach,” he says.
However, in fielding these requests, some utilities are entering uncharted territory.
Even if a utility wanted to appease a large industrial customer’s request, how does it prove that other ratepayers are not left shouldering the impact?
“How does the utility prove that no other customer gets harmed? How does the utility allocate costs for that?” Zuhlke asks.
Only some utilities are even beginning to explore the possibility of reinventing their rates to meet new customer needs, Zuhlke notes, adding that some Midwestern utilities are evaluating the merits of a special “wind-only” rate or “wind plus a capacity backup rate” that features not only competitive energy rates, but also price certainty for 20 or more years.
“While creating uneasiness at the utility, the new expectations will also drive new creativity and opportunity,” Zuhlke says. “I’m hopeful that, as an industry, we can get there.” w
Industry At Large
Big-Name Firms Signal ‘Industrial’ Revolution For Wind
By Mark Del Franco
Major corporations, such as Google and Walmart, are beginning to seek wind energy’s economic and environmental benefits.
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