PALO ALTO, Calif. — The words are stenciled on the front of the Apple Store, a glass box sandwiched between a nondescript Thai restaurant and a CVS pharmacy in downtown Palo Alto: “This store runs on 100 percent renewable energy.”
If Apple’s plans play out, it will be able to make that claim not only for its operations throughout California but also beyond, as the company aims to meet its growing needs for electricity with green sources like solar, wind and hydroelectric power.
Like other big companies before it, including Wal-Mart and Google, Apple recently received a federal designation for its energy subsidiary that allows it to become a wholesale seller of electricity from coast to coast. In effect, Apple is creating its own green utility company, although the main customer is itself.
The motives may be economic as much as they are environmental. As a wholesaler, Apple could reduce the cost of its electricity load, which reached 831 million kilowatt-hours in the last fiscal year — enough to power about 76,000 homes for a year.
But like a growing number of corporations, Apple is intent on reducing carbon dioxide emissions from electricity production — one of the biggest sources of greenhouse gases that contribute to global warming.
In one ambitious venture, Apple has contracted with First Solar to begin buying a little less than half of the power later this year from California Flats, a solar energy farm now under construction. Under the terms of the deal, Apple will pay $848 million for the electricity over 25 years and receive the farm’s total output by the end of the agreement. It is one of largest commercial clean energy contracts yet.
Lisa Jackson, the former administrator of the Environmental Protection Agency who is now the Apple executive overseeing environmental policy, social initiatives and worldwide government affairs, said she hoped Apple could serve as a model for the many other big corporate power users that are now embracing clean energy.
“This is just another sort of innovative way to get that power onto the grid so we don’t have to take the California grid-mix default, which still includes fossil fuel,” Jackson said.
Although much of Apple’s manufacturing is done offshore, it still has extensive needs for electric power in the United States — and not only for the sprawling new corporate campus it is building at its headquarters in Cupertino, California, and its 270 retail stores around the country.
One of Apple’s biggest demands for electricity comes from operating the computing cloud through which it sells apps, music and videos to users of its iPhones, iPads and Mac computers.
Apple’s move comes as prices for renewable energy continue to plummet. And signing long-term contracts allows businesses to shield themselves from potentially higher, more volatile charges from a power company. Apple would not say how much it was paying for California Flats’ energy, but Jackson said last year at a Wall Street Journal conference that it was less than what it paid for commercial power. She said she expected the company to save hundreds of millions of dollars over the life of the contract.
Google, which received its federal energy wholesale designation from the Federal Energy Regulatory Commission in 2010, is a big proponent of the approach Apple is now taking.
“Running any kind of business, having predictability in terms of your operating costs can be very important,” said Gary Demasi, director of operations for data center energy and location strategy at Google, which has been a leading investor in and user of clean energy. “Renewable energy, from a cost perspective, is now competitive with other forms of energy, much more so than it was a few years ago.”
In the United States, the generating capacity of corporate clean energy projects has more than doubled each year since 2013, according to the Business Renewables Center at the Rocky Mountain Institute, which tracks publicly announced deals. In 2015, 11 companies signed up for 3.23 gigawatts’ worth of projects, roughly the equivalent of five coal plants and up from 1.18 gigawatts the year before.
Executives face greater pressure from shareholders and customers to show that they are doing their part to fight climate change. At the same time, corporate energy use has exploded, driven in many cases by the ravenous demands of the data cloud.
“We are all becoming very large energy players, and this is a shift,” said Brian Janous, director of energy strategy at Microsoft. “Energy is not something that Microsoft or Amazon or Google really ever had to think much about prior to the advent of the cloud.”
Helping drive that shift are environmental groups like the World Resources Institute. In May, it helped create the Renewable Energy Buyers Alliance, a coalition of nonprofits that has more than 60 corporations in its network, including McDonald’s and General Motors, as well as Google and Wal-Mart.
Electric utilities have begun to respond by creating products and services to meet the corporate demand for clean energy, said Letha Tawney, the World Resources Institute’s director of utility innovation.
One such product is a green tariff. It was pioneered in North Carolina by Duke Energy and is now under consideration in about a dozen states. It allows companies to designate that they are paying for a renewable energy supply.
Another is a synthetic or virtual power purchase agreement, under which companies contract to buy the output of a clean power plant, as Apple is doing with California Flats.
Although the companies say these arrangements mean they are running their businesses on renewable energy, in reality the clean power often does not flow directly to their facilities. They typically buy the renewable energy in amounts to match what they draw from the grid — a system of swaps that Jackson of Apple likened to using an ATM.
“The dollar you deposit in the bank might not be the exact same bill that you get out,” she said.
Robert F. Shapiro, a partner at the law firm Chadbourne & Parke who focuses on project finance and energy, describes it as meaningful symbolism.
“They’re actually getting power from their local utility, which may be coal,” Shapiro said. “But they’re deemed to have put into the world carbon-neutral energy, which they are deemed to have used for their load.”
To keep track of the clean energy credits, power generators work with registries to issue numbered certificates.
“The power flows into the grid. The electrons go where they go,” Tawney said. “But because there’s a renewable-energy certificate, no one else can claim the same zero-carbon benefit.”
Such complexities are necessary, executives and clean energy advocates say, because it is not often feasible to install enough renewable-power generators at corporate sites to meet companies’ full energy needs.
Wal-Mart, despite having installed solar panels, wind turbines and fuel cells at stores and distribution centers, can nonetheless meet only about a third of those operations’ energy needs. So it also buys renewable energy from generators and utilities, said David Ozment, director of energy at Wal-Mart stores.
Procter & Gamble, another member of the energy buyers’ alliance, has arranged to purchase all of the steam from a biomass generator under construction at a plant in Georgia where it makes Charmin toilet paper and Bounty paper towels, said Jack McAneny, the company’s director of sustainability.
But that was possible, he said, only because of the plant’s location near a source of waste wood and pulp for fuel and the cooperation of P&G’s partners. Among those partners are the local utility, Georgia Power, which will buy the electricity from the generator for its customers from Constellation, the company that developed and will own and operate the generator.
At Apple, where the purchase or production of renewable energy has more than tripled since 2012, the company would prefer to not have to go to great lengths to ensure a clean energy supply, Jackson said. But the public energy grid is simply still too dependent on carbon-based fuels to make that possible.
“If we had our preference, we’d just be able to say, ‘We want 100 percent green power everywhere we use power,'” Jackson said. “The best would be if we could run every one of our stores, every one of our data centers, every office complex, every building we have, on 100 percent renewable — and if we didn’t have to spend a whole bunch of our time and energy figuring out how to get that done.”