Will Tech Companies Forward Thinking Drive Utilities Out of the Energy Market?

Apple and Google getting involved!

Within the period of one day, two of the most recognized brands in the world have possibly changed the corporate energy landscape forever.

Earlier this year, Apple announced it was signing a “direct access” deal to purchase clean energy directly from a 3^rd party provider. They will spend almost $850 million over the next 25 years for this energy endeavor. This agreement for solar energy allows Apple to bypass the traditional route of receiving the energy from Pacific Gas and Electric (PG&E). This deal has not only set a precedent for renewable energy purchases for corporations but could also have huge financial ramifications for utilities.

The following day, Google announced that they have signed a 20 year wind contract to power their “Googleplex” in Mountain View California. This move will also effectively bypass the local utility and allow them to operate “off the grid”.

Hedging energy is not a new practice for large corporations.

Years ago, Southwest Airlines famously hedged their fuel costs to protect themselves from $90 barrels of oil. Many other corporations have attempted to mitigate risk by finding a cost they could live with and locking in long term. However, the latest plays by these two technology giants may not only change the way all businesses look at their energy strategy but also fuel the drive towards corporate sustainability without the need for the local utility operator any longer.

Can corporations really go “off the grid?”

In some places like Florida it is actually illegal to disconnect from the power grid. In other places like Nevada there are companies like Tesla developing mega-batteries that will allow households that want to live ‘off-grid’ to power their entire homes for only $350 a year. Many businesses are planning to attempt to follow suit. If successful, this will basically render the utility company business model obsolete.

Our current power grid is an aging, ailing infrastructure. Depending on location, many businesses pay a large percentage of their energy bills each year just for the energy grid maintenance. With regulatory costs increasing every year to allocate funds to improve our energy infrastructure, more companies as well as individual consumers are looking for alternative solutions.

In addition to renewable projects, Micro-grids are another possibility to distribute energy in lieu of the aging grids we now utilize. Microgrids that provide localized self-generation of electricity have been around for decades.

A microgrid utilizes multiple electrical generators placed in strategic locations. It can operate as a generator placing energy on the macrogrid or as its own self-sustaining infrastructure taking the place of the traditional macrogrid.

Whether it be renewable options or microgrid technology the way that commercial energy budgets are handled is changing. Other large corporate groups are looking to find cleaner, more efficient and cost effective ways to buy their energy. Whether it be promoting new legislation or aligning with alternative generators, big business is thinking outside of the box.

While the majority of the new energy options set to bypass the traditional power grid, Independent System Operators and Utility companies are charged with changing with the times, or being left behind.

Matt Helland
Sr VP of Client Relations

Sources:
http://www.greenbiz.com
http://www.edf.org
http://www.ibtimes.com