Bacon's Rebellion

Democracy Thrives in Sunlight

Amazon-Dominion Renewable Energy Deal a “Game Changer”

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by

James A. Bacon
in , ,

Amazon data center. Photo credit: New York Times
Amazon data center. Photo credit: New York Times

An energy-services deal between Dominion Virginia Power (DVP) and Amazon Web Services (AWS) is a “first-of-its-kind agreement” that could accelerate the integration of renewable energy into the electric grid, according to a recent analysis by the Rocky Mountain Institute (RMI), an organization dedicated to unlocking market-based solutions to combat climate change.

“This is a turning point in the electricity industry,” says Hervé Touati, head of RMI’s Business Renewables Center, which streamlines and accelerates corporate renewable energy procurement. “By offering these services to Amazon to help the company manage its purchased power, [Dominion] is . . . working directly with a corporation like no utility has done before.”

Amazon, the world’s largest cloud provider, has set a goal of supplying its data centers with 40% renewable energy by the end of 2016. The company has signed power purchase agreements (PPAs) for four utility-scale renewable energy projects in the Eastern U.S. In the past, electricity generated from these projects would have been fed into the PJM regional grid at the wholesale market price, while data centers in Northern Virginia consumed energy from a different part of the grid, paying the retail rate of electricity based on Dominion’s power mix, which includes coal, nuclear, natural gas and renewables.

Now Dominion may administer the scheduling and settlement activity related to Amazon’s wholesale market activities, while Amazon pays a market-based retail rate that closely matches the wholesale market rates of its renewable energy projects. Aligning the production and consumption of renewable energy more exactly reduces market risk for Amazon.

States the analysis:

This arrangement allows DVP to accommodate AWS’ renewable energy commitments without shifting costs to other customers. And most importantly it helps AWS bring renewable energy to the same regional grid that supplies its data centers in Northern Virginia, meaning AWS can reach its ambitious sustainability goals while encouraging local economic development. “With this agreement Dominion is evolving its business model and putting its customer first,” says Letha Tawney, director of utility innovation at World Resources Institute. “This unique agreement shows the importance of corporations working with utilities to come up with solutions to their goals.”
A similar proposal before the State Corporation Commission would allow other qualifying customers  to enter into similar arrangements. States the analysis: "This could dramatically change the way that corporations enable large-scale renewable energy projects in Virginia, allowing them to work with their utilities to tailor solutions to the companies' unique energy needs on the regional grid." There could be big benefits for Virginia as well, said the Rocky Mountain Institute. The deal could pave the way for the state to win new data center business and build its renewable energy industry. -- JAB

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15 responses to “Amazon-Dominion Renewable Energy Deal a “Game Changer””

  1. LarrytheG Avatar
    LarrytheG

    the times – they are a changing…

    Solar Beats Coal for Entire Month in UK for First Time

    https://ecowatch.com/wp-content/uploads/2016/06/total_electricity_750.jpg

    https://ecowatch.com/2016/06/08/solar-beats-coal-uk/

  2. TomH Avatar
    TomH

    This is an excellent step in the right direction. Now they just need to open up the same opportunities to third parties. It is very proactive for Dominion to meet this need before it is met by others.

    It is still missing energy use optimization, but it is far better than meeting the load with a significant contribution from fossil fuels. Doing it this way still gives Dominion the chance to make money building transmission.

  3. TBill Avatar
    TBill

    I am not sure the RMI has all the pertinent background about the SB 1349 suspension of utility regulatory reviews, which in return Dominion promised the Gov it would do a few solar projects in exchange for the deal. But we can use some good PR in any case.

  4. LarrytheG Avatar
    LarrytheG

    I wonder how many solar panels could be put on that 5.1 mile powerline corridor to the Amazon site?

    😉

  5. John B Avatar
    John B

    LtG, a lot but that’s where the trouble might arise. The profile of such a corridor is long and narrow as opposed to a more square footprint. Voltage drop and/or larger required wire sizes could be an impediment.

  6. LarrytheG Avatar
    LarrytheG

    true if the panels are at ground level.

  7. Acbar Avatar
    Acbar

    What’s the big deal? Amazon has hired DVP to handle the wholesale marketing of Amazon’s owned or contracted-for solar generation. Given where the units are located, the obvious wholesale market is PJM’s. PJM will take instructions from Amazon or any agent authorized to act on Amazon’s behalf; DVP had no special “in” here. In a separate (?) but obviously related deal, Amazon, which is buying lots of retail power for its data centers, has cut a special deal with DVP for that retail power which reflects, we are told, a wholesale market based rate. The only innovative thing here is that DVP is doing the marketing for Amazon, instead of any of the many third parties that would love to get that job. This is good? Dominion locks out the competition in yet another way in Virginia’s electricity markets and people are excited?!

    1. LarrytheG Avatar
      LarrytheG

      Do we know – after all is said and done -how much Amazon is paying for the electricity -at their door? Are they paying more than if they just bought plain old grid power?

      1. TooManyTaxes Avatar
        TooManyTaxes

        Given the level of crony capitalism in America, Larry’s question should be investigated at the SCC. I would not be surprised to see ordinary ratepayers carrying the overhead for this deal.

      2. Acbar Avatar
        Acbar

        DVP’s retail rate schedule for sales to Amazon MUST be filed as a public document at the SCC. It’s s probably a formula rate: that is, the PJM energy market rate plus some adder, and a fixed (or maybe variable?) demand charge. It could be a one-of-a-kind contract with Amazon but it’s probably written in generic terms so that anyone operating a data center and meeting its criteria could buy under it. DVP already has a schedule on file authorizing retail sales to big commercial loads on a market rate basis.

        Remember, this is supposed to be entirely separate from Amazon’s deal with DVP to sell Amazon’s power to PJM.

        1. LarrytheG Avatar
          LarrytheG

          Acbar – how would we find that?

          1. Acbar Avatar
            Acbar

            Here are all of DVP’s commercial rate schedules in Virginia: https://www.dom.com/business/dominion-virginia-power/rates/business-rates-schedules

          2. Acbar Avatar
            Acbar

            And, it appears that DVP itself does not have an SCC-approved schedule authorizing retail sales to big commercial loads on a market rate basis. Instead, the customer must find a ‘competitive service provider’ (somebody other than DVP) willing to sell to the customer on that basis, which DVP will allow under Schedule GS3 or GS4 if the customer meets DVP’s criteria for retail access.

  8. John B Avatar
    John B

    LtG, if E=I*R isn’t still in effect no matter whether at ground level or not, maybe I’ll have to send back my degree.

    1. LarrytheG Avatar
      LarrytheG

      I was thinking of tree cover and where the panels would have to be located to get full sun without being shaded.

      since the corridor appears to run west-east – then it would matter how wide the corridor is and how much of it is shaded from vegetation or am I thinking about this wrong or you something different?

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