Apple recently launched a subsidiary, Apple Energy, which filed with the Federal Energy Regulatory Commission (FERC) as a supplier of power to wholesale markets across the U.S. for energy, capacity, and ancillary services.
Since the announcement, the media has been abuzz with speculation as to what Apple Energy might mean for utilities, power customers, and Apple, but ultimately, this development is hardly newsworthy. To cut through the hype, we clarify some misunderstandings to explain why Apple Energy should not raise any eyebrows in the energy community:
- Selling in wholesale markets is a common practice for power plant owners. In support of its strong renewable energy targets, Apple has begun to invest in its own power plants, including a ground-mounted solar project near a datacenter in Nevada and a large rooftop solar system at its new headquarters in California. When an on-site power plant generates more than its owner can use – for example, when solar panels are generating at their peak in the afternoon – owners need to sell that excess power back to the grid. For small installations in much of the U.S., net metering provides an automatic structure for doing this; however, larger plants like Apple’s do not qualify for net metering. Becoming a wholesale power supplier is an obvious and ubiquitous solution for the owners of these plants.
- Apple is not going after the retail market. Contrary to numerous reports, Apple’s application to FERC does not request permission to sell power at retail rates to end users. (In fact, by its charter, FERC has no jurisdiction over retail markets, so such a request would be nonsensical.) Instead, Apple simply requests permission to sell power in wholesale markets via a rate determined in the market (a “market-based rate”), as opposed to the cost-plus rates that vertically-integrated utilities use. Therefore, the approval of Apple’s application will not grant it permission to sell electricity directly to consumers as a retail power provider.
- Apple is not alone in this structure. Apple joins several other large power prosumers who sell excess power from their power plants in the wholesale market, including rival Google, which launched subsidiary Google Energy in 2009 with the same purpose.
Companies like Apple and Google may have a big role to play in the grid of the future, particularly as energy grows increasingly reliant on IT. For example, streamlining electric vehicle charging transactions and optimizing home power consumption profiles are existing needs that would fit well with both companies’ ambitions in home and vehicle automation. For now, though, clients should ignore the hype around Apple’s latest move and keep an eye out for the company to do something truly interesting in the space.
By: Katrina Westerhof