Google, Walmart and corporate energy 2.0
For much of the 20th century, vertically integrated utility monopolies owned and controlled the electric generation and transmission lines needed to serve homes, businesses, schools and hospitals within their territories.
This system was paternalistic. Like children, retail customers got security but had little freedom — and became crucially dependent on fossil fuels.
Today we are in the midst of a fundamental disruption of the utility sector, the birth of “energy 2.0,” based on sustainable, renewable fuel sources, smart digital technologies and robust customer choice. The cumulative impact may well be a dramatic reduction in the role of monopolistic utilities.
Among the most recent — and potentially the most disruptive — developments related to this trend is America’s major corporations maneuvering around utilities, going directly to independent wind and solar generators to purchase thousands of megawatts of clean energy.
How are companies doing this, and will it prove to be a lasting shift or a mere blip in the long and complex history of power markets?
The rise of the PPA
Direct corporate renewable energy procurement is possible today because of changes going back 40 years.
U.S. energy policy began to grow up when the oil crisis of the 1970s shook customer faith in energy security. The crisis kicked off two developments which define our 21st century energy ecosystem: the rise of independent power and customer choice; and reliance on renewable energy in lieu of fossil fuels.
In 1978, Congress enacted the Public Utility Regulatory Policies Act, which authorized private, non-utility entities — known as Independent Power Producers, or IPPs — to develop energy generating plants, and to require local utilities to buy their power at a defined price.
The long-term power purchase agreement (PPA) was developed in this era to govern the sale of independent power.
At first, independent producers could not reach retail customers and had to sell all their power to utilities. But federal and state regulators soon began allowing IPPs in some regions to use utility wires to deliver power to, and enter into PPAs with, retail customers directly.