Does Facebook Solar Pay Its Own Way?

Dominion Energy has announced the construction of six new solar farms — three in Virginia and three in North Carolina – to offset the electricity demand of Facebook data centers in the two states. The 590 megawatts of new renewable energy generation will be enough to power 147,000 homes at peak output.

The partnership will support Dominion’s goal of having 3,000 megawatts of new solar and wind energy in operation or under development by 2022 and Facebook’s goal of supporting its  global operations with 100% renewable energy by the end of 2020. (See the press release here.)

In the abstract, I’m all in favor of generating electricity with clean, renewable energy sources like solar. But I’m still trying to understand the implications of the solar rush for grid stability and ratepayers.

Steve Haner has illuminated discussions inside the State Corporation Commission on the issue of solar “capacity.” Given local meteorological conditions, will solar farms generate as much electricity as Dominion says they will? What happens if solar generation falls short of projections? Who pays?

I’m also wondering how well solar output matches the demand curve of data centers. Solar farms generate electricity when the sun shines, reaching peak output when the sun is highest in the sky and tailing off in the evening. Data centers consume electricity 24/7. I doubt data centers consume electricity at a constant rate throughout the day. Presumably, data-center electric load increases during the day and evening when people are awake and doing stuff. But that’s only a surmise.

There is considerable discussion online about total electricity demand from data centers, but none that I could readily find about the time-of-day variations in electric load. Is data-center electricity consumption relatively steady throughout the day, as illustrated below in Load Scenario A in my crude, back-of-the-envelope sketch, or does it peak during the day, as shown in Load Scenario B? Alternatively, does the load curve look like something else entirely?

Any gap between solar generation and electric load must be made up by other energy sources — nuclear, coal, or natural gas. In Load Scenario B the load curve comes much closer to matching solar output than in Load Scenario A. The smaller the gap, the less the burden on other energy sources. The bigger the gap, the bigger the burden. (As an aside, the sun doesn’t shine every day. The load-generation gap gets wider in cloudy weather.)

One obvious question is, who pays to maintain the back-up capacity to keep Facebook’s data centers running when the solar farms are idle?

Here’s the partial information that the Dominion press release provides:

Dominion said the six projects represent “ring fence facilities” that will operate solely for Facebook, which will pay for them through renewable energy certificates it will purchase from the regional transmission system that operates in the Mid-Atlantic area. The six solar projects will generate 350 megawatts of power, in addition to the 240 megawatts that the two pending Surry plants will produce. …

Facebook is pushing to meet all of the company’s power demands with renewable energy by the end of next year. It pledged $250 million to pay for new renewable energy projects to serve the first phase of a $1 billion data center under construction in eastern Henrico.

Facebook says it is pushing to meet “all” of its power demands with renewable energy? Really? To paraphrase Bill Clinton, it depends on what the meaning of “all” is. It’s one thing to generate enough solar electricity to match the total number of kilowatt hours consumed by Facebook data centers over the course of a year. It’s a very different thing to generate solar electricity when Facebook is actually using the electricity. The value of a kilowatt hour electricity generated depends upon how well it matches up with demand at different times of day and under different meteorological conditions.

Will Facebook-backed solar projects generate electricity when Facebook is using it, or will the projects generate electricity far in excess of Facebook’s needs during certain times of the day and dump the rest into the wholesale electric market while relying upon other sources during periods of low solar output? Will Facebook be swapping low-value electricity for high-value electricity, and will it pay the difference?

Bacon’s bottom line: Is Facebook paying the full cost of its green energy policy, or is it shifting some of the cost to other rate payers? Are Virginians subsidizing one of the world’s most profitable companies? I don’t have a clue. But no one seems to be asking the question, much less providing answers.

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15 responses to “Does Facebook Solar Pay Its Own Way?

  1. Probably rate payers are subsidizing. But that is how our state/ultitity electric monopoly model works. That is also how many solar projects work eg; net-metering is defacto subsidy to solar projects.

  2. The central question is will Facebook’s massive 24/7 demand for electricity be satisfied without massive amounts of fossil fuel and nuke generated power. The answer is NO. The great majority of Facebook’s power will come from fossil fuel and nuke generated power, despite what the “experts” say.

    And the costs imposed by this highly inefficient and unstable system will greatly increase the cost of electricity for Everyone.

    Much of that increased cost will surely be shifted onto the ratepayer. These additional rate payer costs will be the result of many additional costs that will imposed to try to handle the increased grid instability imposed by solar power, and the duplicative power generations systems it requires, and a vast new bureaucracy, and technology infrastructure necessary to operate this vastly complicated system.

    As a result of all this, a very few people with special skills and knowledge will be left making huge amounts of money at the direct expense of John Q. Public who will be left with a huge bill to pay monthly, along with living in a despoiled landscape. This is crony capitalism at its very worse.

    • Jim says; “Are Virginians subsidizing one of the world’s most profitable companies? I don’t have a clue. But no one seems to be asking the question, much less providing answers.”

      No, I have been asking and answering this question for many months now?

  3. Crap-a** regulation. All of the revenues, expenses and investments, including overheads, should have been removed from the regulated intrastate books of account for Dominion. All profits or losses should flow directly to Dominion’s shareowners.

    Again, where are the progressives? This could be a big transfer of wealth from ordinary people to Dominion and Facebook. And the MSM, still trailing Democrats to see how they can help.

  4. So a question is – do larger users of electricity already get a discounted price?

    Can large companies buy power direct from PJM and not Dominion?

    Are current existing large users of electricity from Dominion paying a separate fee for 24/7 reliable grid?

    So do we need to understand the current rate structure before we decide what exactly Facebook is getting versus other companies in terms of de-facto subsidies from other ratepayers?

    Steve does a good job of reporting the specific intricasies of the current environment but I’m not as clear on the bigger picture.

    My perception is that Facebook is hindered by the monopoly that Dominion enjoys in Virginia and perhaps one in which they might be
    persuaded to go to other states if it gets too onerous.

    Does ANY utility in the US charge extra for 24/7 Grid access/reliability right now?

    How much do we really know if we are going to form opinions on this?

    • We read and study as many books, articles and studies as we can written by people who know what they are talking about, and who are not trying to sell something, and who speak truth to power. Then, as best as we can, we try to get to what is true, and what is not. By that I mean we form our own opinions as best we can.

      Often one spends weeks before one can write a single paragraph.

  5. My guess is that the server farms have a relatively stable 24/7 usage, unless they have banks of servers that are used only during peak periods. That would make the data writing, mirroring, etc. more difficult to manage, however. Don R would know more about this.

    There seems to be a misconception about how the data centers claim to be 100% renewable. This comes from having Renewable Energy Credits equivalent to their total usage. These are transferred to the data centers and retired by Dominion ( so they can’t claim them for meeting the voluntary RPS standards). The RECs are created as part of the construction of a new solar facility and are included in the new solar tariffs that Dominion created for the data centers. I am not very familiar with all of this, so if someone can explain this better, please do.

    We have discussed before that there is no way to tell how and from where the electricity that you use was generated.

    Variations in solar output are covered in the same fashion that variations in supply and demand anywhere in PJM are met – with the turning on or off of the next lowest cost source of generation. The penetration of solar is still so small within PJM that our existing system is well equipped to handle it.

    During the sunny times of the day, after enough solar units are built, they will generate more than the data centers need. Then other facilities will provide the necessary energy during the evening.

    Years from now, when renewable penetration approaches 25-30%, PJM might need to add more flexible, rapid-response units such as gas-fired peakers or batteries to deal with variations in renewables. But it is much more stressful on the system for a large fossil-fired or nuclear unit to suddenly go off line than it is to deal with very predictable variations in solar output. Unforced outages of conventional units happen all of the time and PJM is well-equipped to deal with it. Nervousness about lower reliability of our system due to installing more solar is unfounded.

    The experts will adjust as I described, as our system evolves.

    What is really happening is that lower cost solar is displacing fossil-fired units during the sunlight hours. Those existing units remain available to run as needed during the day and after the sun goes down.

    The reliability of the system remains the same, but the economics for the intermediate load generation is affected because it might not run as often when more solar is added. About half of our daily peak usage occurs 24 hours a day (the base load). Intermediate, or cycling units, run from about 6AM to 11PM, with peakers filling in for a few hours during the highest demand during hot and cold days.

    If the solar was developed using a PPA, it wouldn’t matter what the capacity factor of the solar facility was. Customers (or the utility) would pay only for the kWhs produced. The risk would be on the developers to be certain that the unit would generate enough electricity to make the facility profitable for the developers.

    When a utility builds a solar facility, the cost of the unit, its financing costs, and a guaranteed profit is repaid by the ratepayers to the utility. This is why the SCC is concerned that Dominion-owned units will repay their higher expense by operating enough hours per day.

    All of this would be less expensive for customers, and no burden on other customers, if Virginia allowed (as 40% of other states do) third-parties to participate in generating electricity for direct resale to customers or to the utility.

    However, this reduces profits for the utility, which is why they are trying so hard to control it all. We cannot reasonably expect our investor-owned utilities to behave any differently until we pay them in a different way.

    Until then, our electricity costs will continue to increase, even when lower cost sources of generation (such as solar) are built by the utilities and put in the rate base.

    The units installed in North Carolina will not be the responsibility of Virginia ratepayers. I don’t believe.

    • Tom,

      Good information. However, I’m still waiting for Dominion or someone who wants to replace Dominion (by stirring up consumer anger against Dominion such that the laws are rewritten to permit competition) to offer me a lower price per kwh. Until then, call me skeptical.

      Similarly, I still wait for elected officials to bar new construction in floodplains and institute a new tax on properties located in areas likely to be flooded.

    • “My guess is that the server farms have a relatively stable 24/7 usage, …”

      Hard call. The key question comes down to network costs vs the cost of temporarily underutilized data centers. When it’s 3 am on the East Coast of the US it’s 9 am in Western Europe. Clearly Facebook is generating more traffic at that time in Europe than the East Coast. The challenge is that companies like Facebook build everything themselves … servers, storage, networks. In traditional IT where a company buys its servers from HP, data networking equipment from Cisco, connectivity from AT&T, etc – the network costs (and latency) would generally lead to more willingness to have underutilized data centers (during some times of day) than incurring the costs of getting the traffic across the Atlantic and back at 3am in Virginia. However, Facebook, AWS, Google, etc have significantly bent the economics of traditional IT. So, it would be hard to know Facebook’s economics without a look at Facebook’s architecture and infrastructure costs. Something tells me they wouldn’t be willing to publish those details.

      • “network costs vs the cost of temporarily underutilized data centers.”

        Fascinating. I never thought of that. The data-center business even more complex and nuanced than I realized — and I figured it was pretty complex and nuanced to begin with. Our politicians don’t have a clue. I wonder if even the SCC staff has a clue.

      • Mom –

        Thanks for forwarding this very informative article. Here is its opening paragraphs:

        “A powerful New Mexico regulatory authority is requiring the state’s largest utility to bill Facebook $39 million for a new transmission line construction for its data center — a move the social media giant says it was not expecting.

        The Public Regulation Commission’s on Tuesday ordered the Public Service Company of New Mexico to charge Facebook for nearly half the cost of the $85 million transmission project for its New Mexico data center that opened this year, the Albuquerque Journal reports .

        Commission members, who voted 5-0 to approve the order, contend that the utility cannot bill ratepayers for the transmission project because the line will not benefit retail customers. It only helps Facebook and wholesale electric operators who need the transmission capacity to supply renewable energy to other markets, the commission said.

        But the Menlo Park, California-based Facebook said that the ruling could affect its long-term operations in the state, raising costs and putting in doubt plans to use 100 percent renewable energy to run the facility, Facebook said.

        The company sees the bill as “a significant deviation of our understanding of the terms and conditions” of its contract with the utility and added that the bill is “creating uncertainty around the long-term costs of our operation in New Mexico,” Bobby Hollis, head of energy and site selection for the Facebook subsidiary Greater Kudu LLC, wrote in a March 29 letter to the commission. …

        The article goes on in ever greater detail. Sorry Jim didn’t raise it to our attention. Glad you did. It surely supports what I have found in my research on what is going on behind the curtains hidden from the public eye. Like I said these renewable power industries are “Crony Capitalism on steroids.” What a phony racket, what Americans are doing here to their own land. The Chinese are having one hell of great and profitable time, watching Americans make fools of themselves, in the ring side seat next to the Russians.

  6. Solar is just another fuel source except it is not available 24/7 and so you use it when it is available and use fossil fuels when it is not. It would work the same on your own rooftop where you’d use it when it is producing and then use grid power when it is not.

    In terms of variability – the existing network already handles the variations from peak loads when people are up and minimal loads when people are sleeping.

    I’m a little curious as to why Facebook does not put solar on it’s own building and buy enough nearby land for it’s own solar…or just use a power-purchase arrangement with a 3rd party. Anyone know why? Is it because of the tax incentives or something else?

    Again, this goes to how much we know and how much we don’t know and really is homework to those who want to be better informed whether they be a potential advocate or opponent.

    In terms of grid reliability – In the county I live, Spotsylvania, we just approved this:

    ” The Spotsylvania Solar Energy Center (Project) is a 500-Megawatt (MWac) solar project located in western Spotsylvania County, Virginia. The Project Site consists of three non-contiguous boundaries that encompass approximately 6,350 acres. Of the 6,350 acres, approximately 3,500 acres will be developed into the solar project, and at least 2,000 acres will be preserved as undeveloped, conserved land. The Project Site currently consists of recently timbered land and is bordered by other forested lands and scattered single-family residences (that border the clear cut timber land).

    sPower recently announced that Microsoft will be purchasing 315 MWs of energy from the Project. ”

    So we’re going to find out a few things.

    So far, none of the plans involve anything special to the existing Dominion substation they are connecting to. When/If they do, I
    will report back.

    Second, a fairly rigorous set of restrictions require complete shielding of the 1.8 million solar panels using berms and evergreen tree vegetation in front of the berms.

    At about 150 homes per MW – 500 will power more than 80,000 homes which is more than twice the number of homes in Spotsylvania County. The land requires – 3000 acres is 1% of the total land area of Spotsylvania County.

    The entire state could be powered by solar on less than 1% of the land area of the state and put in places that have been timbered or abandoned brownfield sites, or on top of closed landfills, abandoned quarries, and not the least of which – abandoned coal mining pits that
    currently look like this:

    This is WHERE our electricity has come from and I do wonder if the opponents of Solar were so concerned about the land-use impacts of mining fossil fuels – as long as it was not near where they live.

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