Apple Energy deeper dive: Is this Apple running its own microgrids or more?

Yesterday, 9to5Mac.com reported that Apple Inc has founded a new, fully owned, subsidiary known as Apple Energy and that this entity had applied to the Federal Energy Regulatory Commission (FERC regulates power companies) to be able to sell electricity and other power grid services to anyone that is not a public utility. Does this mean that you can now buy clean electricity made on the roof of the Apple Spaceship? Unless you are a large corporate electricity user within 10-30 miles, probably not. However if we step back and take a broader view, something interesting is happening – the likes of Apple, Google, Ikea and others including even Walmart are showing us a small piece of the future of much smarter electricity grid owned by many instead of the few.

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The most probable business structure that Apple will assume is more similar to an Independent Power Producer (IPP) than a pure electric utility. An IPP will produce electricity on their own and sell energy to a local group at a discount – like a business or, as in the case of Community Solar, to many individuals, but won’t have the very serious legal responsibility to build power lines, keep the broader grid up, produce power 24/7, etc. The application specifically points out that Apple is not looking to become a regular utility when it states, “(Apple) does not have market power in transmission and cannot erect barriers to entry to competing suppliers through the control of inputs to electric power production.”

If Apple builds a solar power plant that will balance out 100% of their annual energy use in a certain region, it is without a doubt that at high noon – from March through October – Apple is producing more electricity than it is using at that moment. “At that moment” is key because if Apple cannot use the electricity onsite, immediately when produced, then the electricity has to be shipped onto the broader power grid, owned and operated by the utility companies, and Apple will pay fees for that. Net Metering laws around the country have shown instability, meaning Apple’s cost to move that energy can suddenly change. Having a classification of a utility will give Apple stronger abilities to have access to the local power grid at consistent and lower prices regular consumers cannot. This will save money and add stability.

Truth is Apple probably wouldn’t want to be an electric utility – margins are much lower for utilities (8-15%) and nowhere near as cool.

The fun speculation part is where Apple also has the ability to sell “capacity, and certain ancillary services.” Ancillary services, in our brave new world, can come from things like batteries in electric cars that are parked while waiting to head to their next customer. If Apple ever actually builds and owns cars, this could be of value. However, reality is that these requests are more likely in place to gain additional revenue from the built out electricity generation resources – for instance, if the power utility needs extra electricity pumped into the grid at a certain moment guaranteed, it can contract with Apple directly instead of ‘hoping’ extra energy will be produced and schedule it. Scheduled energy is worth a little more than ‘random energy.’ Accountants love extra revenue from hardware already paid for.

Apple has shown that it will put its money where its mouth is when it comes to clean energy. Last week we broke that Apple’s Union Square store in San Francisco was using a walkable, building integrated solar panel.  In early 2015, Apple signed the largest solar procurement deal for a company that isn’t a utility, an $850M solar development contract with First Solar to build a 130MW, 1,300 acre solar power plant to offset all of its California electricity usage. Many other clean energy developments have been undertaken – including biogas and solar plants in North Carolina, Nevada, and to balance out their supply chain solar plants and more in China. The new Apple Spaceship will will be powered by 100 percent renewable energy, generated by 4 megawatts of baseload biogas fuel cells and 16 megawatts of rooftop solar. One of the neatest things is that the site is designed as a microgrid—which allows Apple to disconnect from the local grid and power the campus autonomously when grid power goes down, providing energy resiliency. In February of this year, Apple issued a bond for $1.5B to invest in renewable energy globally.

And of course, CEO Tim Cook famously told investors questioning Apple’s renewable energy investments, “If you want me to do things only for ROI reasons, you should get out of this stock.” Integrating solar power directly into the structure of future Apple Stores would clearly align with Tim Cook’s saying, “We take the same innovative approach to the environment that we do with our products.”

Apple has the street cred.

And its not just Apple that is pushing hard like this. In 2009, Google Energy was founded to help manage their very respectable energy portfolio. Google’s goal, like Apple, is to be 100% Renewable Energy powered. To meet these goals they’ve invested heavily in projects and long term purchase agreements. Ikea has a goal to become 100% clean energy fed. Wal-Mart leads the country in solar power installations.When your company’s cost for ‘energy’ could be billions of dollars a year – you can bet there will be creative solutions.

When we combine the two factors of corporations coming to own and ‘sell’ their own electricity – we get more pressure on the utilities to evolve (and clean) their product offerings. When corporations see that their rooftop is an asset worth at least $5/sq ft/year – they’re starting to realize that it would be a disservice to the bottom line to ignore it. This is hopefully part of a broader trend toward making our energy resources work for an advanced economy in the 21st century.