Google Proposes a “Renewable Energy Tariff”

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Google wants more options for how it buys its energy and has put out a white paper with a roadmap for how utilities could provide those options.  In short, Google’s detail-light proposal is that utilities develop an optional service to provide renewable energy to commercial and industrial customers, procure the renewable energy needed to support that service, and pass the costs on to the customers who enroll through a new tariff.  (It is worth noting that some utilities already offer services with at least some of the features Google describes.)

Google’s proposal delivers the message that, in an environment where customers have come to expect information and choice to be omnipresent, the market for electric energy services needs to adapt to provide customers with the information and services they want in user-friendly packages.  Google can be an influential advocate, and its challenge to the market may well accelerate change in that direction.

But Google’s proposal glosses over one of the barriers to this type of change:  risk.  Developers may not be able to finance the construction of the renewable energy projects Google envisions without long-term contracts to sell the electricity and other attributes those projects will produce.  If regulated utilities are the counter-parties to those contracts, how would Google envision handling the associated risk (for example the risk that Google’s demand declines over the term of the contract)?  There are many possible answers to that question, but unless risk is going to be shifted to ratepayers more broadly, it seems likely that some of the risk would have to be picked up by the customers (i.e. Google).

Google’s proposal, which seems targeted at service areas of fully integrated utilities, also raises interesting questions in relation to restructured markets where customers can already choose among green products from competitive suppliers to some extent.  Has experience in those markets shown the demand from large customers for green energy that Google describes?  If so, have competitive suppliers in those markets moved to meet that demand?  Has the need for long-term contracts, and the associated risk, discouraged the provision of competitive supply products similar to those to which Google seeks access?  And ultimately, are competitive markets inherently positioned better, or worse, to provide the types of services Google seems to want?

Questions aside, it is a positive development to see influential energy consumers like Google take an active role in addressing market barriers to the realization of clean energy opportunities.