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Dive Brief:

  • Google and NV Energy on June 7 asked Nevada regulators for permission to enter into a power supply agreement based on a proposed “Clean Transition Tariff” that would allow large energy users to pay a premium for 24/7 clean energy from new resources.

  • Under the supply agreement, NV Energy would buy electricity from Fervo Energy‘s 115-MW Corsac Station Enhanced Geothermal Project, which is under development, and sell it to Google for a set rate. Google would receive credit for the project’s energy and generation capacity on electric bills for its data centers in Storey County, Nevada, offsetting demand charges associated with those facilities.

  • The tariff is intended to spur the deployment of more carbon-free dispatchable energy resources, like geothermal or nuclear generation, by allowing energy users to make up the difference between the cost of these capital intensive resources and low-cost options like solar or natural gas, said Caroline Golin, Google’s global head of energy market development.

Dive Insight:

Interest in the next generation of renewable energy technologies has boomed in recent years, but most experts agree that these technologies are years decades away from being deployed at scale, primarily for financial reasons. Golin believes the business model put forward in Google’s proposed tariff could speed up the process.

Under the tariff, Google will pay the difference between the cost of geothermal energy from Fervo’s project in Nevada and the lower-cost resource — solar or natural gas, in most cases — that NV Energy would have deployed under regulatory least-cost constraints. In exchange for this fixed rate, Google will be credited for the energy and generation capacity on its electric bills

By using the tariff as a hedge against rising fuel costs and demand charges, Google should come out ahead financially, Golin said. But NV Energy should come out ahead as well, she noted. Instead of having to overbuild solar and add new natural gas to keep up with customers’ desire for renewable energy while ensuring firm supply, the utility will gain access to firm, dispatchable renewable energy without running afoul of least-cost regulatory requirements.

“Nevada has a net zero goal, and NV Energy has a 100% renewable energy goal, and right now their plan is to overbuild solar and backfill with firm gas. That is going to create tons of stranded assets, but they are constrained by their regulatory box,” Golin said. With the tariff, she said, “the overall system comes out ahead because we have accelerated the commercialization of a resource that everyone wants.”

Golin said Google began exploring the concept for the tariff about a year and a half ago, after reviewing NV Energy’s long-term resource plan. The utility had identified some interesting opportunities for providing dispatchable, carbon-free energy that it did not include it its current resource plan because of the cost. The company worked with NV Energy and the Public Utilities Commission of Nevada to develop a framework that would help bring these opportunities to fruition on a much shorter time frame, Golin said.

While this energy supply agreement in Nevada will only provide enough energy to supply Google’s data center, Golin said the goal for the tariff was to create a framework that other customers and other states could replicate. The company is already in talks with Duke Energy and several other tech companies about a creating a similar tariff in North Carolina and South Carolina, Golin said. Google has also explored opportunities to apply the framework to everything from advanced nuclear generation to distributed resources and virtual power plants with other as-yet unannounced utilities, she said.