Google bought more than 1.5 gigawatts of clean energy capacity in North America and Europe over the past 12 months using new standardised contracts that closed deals in as little as 2 months. The streamlined approach marks a significant change from the previously lengthy negotiation process that could take up to a year.
The search and cloud company is aiming to scale the amount of ‘carbon-free’ energy currently supplying its data centres. The new approach has already been effective in expediting the purchase of renewable energy for the company’s data centres.
Google said that it managed to acquire the 1.5 gigawatts of renewable energy through a new Power Purchase Agreement procurement process developed in partnership with LevelTen Energy, which has now been released via the energy broker.
Back in March 2023, Google reported that it had developed a new Request for Proposal (RFP) system in partnership with LevelTen Energy to reduce the time required to sign a Power Purchase Agreement (PPA).
The framework developed by Google and LevelTen is known as the LevelTen Energy Accelerated Process (LEAP) and is now available to other companies. . LevelTen said LEAP has reduced the timeline of a traditional RFP and PPA negotiation process from the typical 12 months or longer down to about 100 days.
The first transaction using the new model was a contract with Cubico Sustainable Investments for 100 megawatts of solar power to support the 24-hour seven-days-a-week carbon-free energy goal at its data centre in Council Bluffs, Iowa. The final agreement was made within weeks, instead of months.
Google said:
“Leaning on our risk-balanced PPA template, developed with feedback from LevelTen and the market, we quickly agreed on common contract provisions with Cubico. LevelTen’s click-through UI helped us finalize project-specific terms, and we landed a final agreement within weeks, instead of months.”
The innovative process considerably shortens the usual steps taken with executing PPAs, a type of contract for procuring electricity generated by solar or wind farms. The process involves standardised contracts using a template that addresses the risks associated with this kind of deal between the buyer and the seller. Issues can range from performance criteria to price fluctuation for supplies to grid interconnection delays. By making terms and expectations clear upfront negotiation time has been greatly reduced allowing for faster deal closures.
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Traditionally, renewable energy procurement involved a protracted negotiation process to reach a compromise between buyers and sellers. The new contract model disposes of much of the back-and-forth, making the process more efficient and effective. By standardising contracts for wind and solar PPAs Google has set a new standard for expediency in the clean energy sector.
Amanda Peterson Corio, global head of data center energy at Google said:
"This new way of doing business has become our standard for wind and solar PPAs, and we’re exploring ways to contract for additional types of carbon-free energy generation and storage. LEAP is helping advance our 2030 company-wide goal to run all our data centers on carbon-free energy, every hour of every day. We shared a vision with LevelTen to develop a smarter, more efficient way of doing business in the clean energy industry, and the result has been just that. The approach has already proven a success in both domestic and international markets, and we look forward to expanding the scope soon.”
Although the contracts so far have specifically covered North America and Europe Google is exploring the potential for other geographies.
Companies use PPAs to buy enough renewable energy to match their actual energy consumption. Quite often the contracts cover projects that are located a long way from a company’s actual facilities but businesses can apply the renewable energy certificates associated with these projects to claim emission reductions. Each renewable energy certificate represents the addition of 1 megawatt-hour from a source such as solar or wind farms to the grid.
Google signed more than 80 agreements for 10 gigawatts of power, the generating capacity of 31 million solar panels, between 2010 and 2022. Since then Google’s new approach has already demonstrated its effectiveness with deals closing in the fastest time, laying the ground for more opportunities in the future. By collaborating with renewable energy developers and brokers, Google scaled its clean energy initiatives very quickly. Not only does this process accelerate deal closures but it also frees up resources for other critical projects.
In 2023, Google used the new contract model to negotiate a deal for four solar plants under development in the Netherlands by Kronos Solar EDPR. The energy will directly support the search giant’s data centre in Eernshaven making it possible for Google to operate the facility using carbon-free energy 24 hours a day. Google said that within days of closing the RFP, the company quickly moved to project selection, and had a signature-ready PPA within two weeks. In all, there was only a period of 82 days between RFP launch and contract execution.
Amanda Peterson Corio said:
"In the world of clean energy, that’s fast, warp-factor-10 fast."
Over the past year, LevelTen and Google have issued and completed multiple LEAP procurements in both North America and Europe.
LevelTen said:
“We’ve closed PPAs via LEAP with multinational and small developers, and with owner-operators, including in one of the hardest non-liquid markets: the Netherlands. Going forward, Google plans to transact via LEAP at scale, particularly in wholesale markets where it is relatively easy to structure conventional PPAs.”
Apart from the speed of negotiations, Google's new contract structure offers several other advantages for both the company and its partners. By securing project costs quickly and efficiently, developers can lessen uncertainties and delays, which provides more clarity for buyers. The new contract system frees up resources on its “relatively small” energy team allowing a greater number of deals to be done and the time to focus on other difficult challenges such as interconnection backlogs that have been delaying many U.S. renewable projects. This streamlined and simplified approach also aligns with Google’s long-term goal of operating on carbon-free energy grids by 2030.
Rob Collier, LevelTen Energy’s SVP of Transactions said:
“In this industry, we know that time kills deals. Renewable energy transactions need to scale quickly, we can't wait any longer. There's no reason PPAs need to take a year to get done."
So far, 2024 has seen Google sign Power Purchase Agreements with the Netherlands, Belgium, Italy, Poland, and Arizona. The company has also announced investments into carbon capture and put out an RFP for innovative energy generation technologies. Google is moving to 24/7 PPAs across the board as this ensures that any clean energy paid for is matched by metered electricity used by a large consumer.
Google continues to set the pace for the industry with its commitment to clean energy and sustainability. The company is leading the way by setting new standards for expediency and efficiency in clean energy deals which show the possibilities for rapid transformation in the renewable energy sector. Google’s forward-thinking approach is beneficial for not just them but also for advancing clean energy enterprises globally.
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