Apple Doubles Renewable Project at Expense of Duke Energy Customers
A data center in western North Carolina built by Apple, Inc. has now doubled the size of its associated power-generating fuel cell facility, one which in April NLPC reported was a conflict of interest for Apple director and former Vice President Al Gore.
Major technology companies such as Google, Facebook and eBay build these massive server farms to support services such as cloud computing, but in an effort to pacify environmentalists about their enormous energy use, many go to great lengths to make these facilities appear “green.” They’re not.
Chief among the techno-eco-conscious is Apple, which has dropped a bundle on supplemental renewable energy projects – especially one that is adjacent to its new computer server facility in Maiden, N.C. First came a 100-acre solar farm that was built as the result of what you would think would be environmentally offensive clear-cutting, but three years of tree burning didn’t draw a peep from Green groups. A look from an aircraft caused the London Daily Mail to label the project “Apple’s NC iSore” a few months ago.
Then in April NLPC reported the Cupertino, Calif. company’s plans for another renewable energy endeavor at the data center, a 4.8 megawatt, $30-million fuel cell facility, the nation’s largest such project to generate electricity that doesn’t belong to an actual utility. Apple contracted with Bloom Energy, a start-up company with big investor friends (including Gore) in Silicon Valley, to build the power generation project. As The News & Observer of Raleigh reported at the time, fuel cell electricity is not cheap.
“According to a recent report by the U.S. Energy Information Administration,” the newspaper reported, “fuel cells are among the world’s most expensive forms of electricity, costing $6.7 million per megawatt….”
Except now that wasn’t big enough for Apple, as this week plans to double its size were revealed, and thus so is Gore’s conflict of interest increased. He is a senior partner with Silicon Valley venture capital firm Kleiner, Perkins, Caufield & Byers, which in 2002 as the first investor helped launch Bloom on its independent mission to “make clean, reliable energy affordable.”
Unfortunately the only way that Bloom’s energy is affordable for Apple is to make other people pay for it, which is what they will do. At the same time Apple ensures that Bloom, under the wing of Kleiner Perkins, gains a sizable customer for its fuel cells as Gore is in a position to help all the parties.
As for others paying the extra millions for electricity, that’s where Duke Energy and crony capitalist CEO Jim Rogers come in. A few years ago North Carolina enacted a renewable energy mandate that requires the state’s investor-owned utilities (now, for the most part, that is only Duke) to obtain 12.5 percent of their electricity generation from renewable sources by 2021. Partially as a result Duke has been in the process of buying wind and solar projects, as well as power from other sources classified as “renewable.” Duke doesn’t mind paying the extra money for that power since the N.C. Utilities Commission guarantees those costs are covered in addition to the company’s rate of return on investment.
But beyond that, as NLPC reported in August 2011, companies who own renewable projects are entitled to a bevy of federal and state tax breaks and shelters, accelerated depreciation, subsidies, and grants. Former Atomic Energy Commission official Glenn Schleede explained that the accelerated depreciation alone “provides large amounts of interest free cash that can be used for other purposes.” Rogers himself confirmed the big money in wind subsidies to energy expert Robert Bryce, telling him that return on equity for the projects earns Duke 17 to 22 percent, so clearly he is unafraid of renewables.
As for actual power sales, Duke has an ambitious economic development enterprise and thus is at the core of drawing technology companies to the Tar Heel State with the attraction of inexpensive electricity generated by coal, natural gas and nuclear. Besides Apple, those factors also lured Google and Facebook as well. The fossil fuels and nukes so loathed by environmentalists put Duke in the position to offer extremely cheap power to the techno-giants. Meanwhile Duke has sought big rate increases for its other North Carolina customers, in part necessitated by the renewable energy mandate.
“By promising cheap electricity,” wrote Jim Warren, executive director of the NC Waste Awareness and Reduction Network, an anti-nuclear group, “plus years of large discounts in rates for data processing centers run by Google, Facebook, Apple and others, Duke Energy is penalizing residential and business customers while planning to continue raising their rates year after year.”
The wheeling and dealing, and government intervention into what is anything but a free market, redounds to the benefit of companies like Bloom Energy. The fuel cell maker has Kleiner Perkins, which has lobbied heavily for government regulations and “green” energy schemes, going to bat for them as well. The firm spent $50,000 per quarter throughout 2009 and 2010 lobbying Congress on legislation that was heavy-laden with renewable energy government incentives, which would benefit the many such companies in which it is invested. The investment firm’s partners and employees have donated heavily to political candidates as well.
And besides Gore, Kleiner Perkins partner John Doerr has his own relationship with Apple. In 2008 he helped lead Kleiner Perkins’s collaboration with Apple on the iFund, a “venture fund for mobile entrepreneurs,” which provides capital for companies that create applications for the iPhone and iPad. And late Apple co-founder and CEO Steve Jobs was a close friend and former neighbor of Doerr’s, who arranged for discussions about policy and even meetings in Doerr’s home between Jobs and President Obama.
So Gore and Doerr were uniquely positioned to influence Apple’s decision makers about its data center and power generation projects that would enhance their other investments. Otherwise there is little reason for Apple to go to the great expense of building such costly facilities.
This sour deal for the rest of Duke Energy’s customers illustrates how crony capitalism undermines free markets and consumer choice deep below the surface. The monopolistic nature of electric utilities, combined with political favoritism via government mandates and financial favor, and lubricated with campaign and lobbying money, enables otherwise unviable companies like Bloom Energy to exist and even thrive. It’s a complex and powerful system badly in need of dismantling, especially since energy is a resource upon which everyone – wealthy and poor – depends.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.