Last week,
The only information available on Apple Energy is in the company’s filings with the Federal Energy Regulatory Commission, but what can be gleaned from that illustrates a foundational shift underway in the energy world.
Essentially, Apple is seeking the ability to sell the renewable energy it generates to other businesses and consumers at retail prices. Without FERC’s approval, Apple will only be able to sell its energy to energy providers and utilities at wholesale prices. Apple Energy would more or less act as an energy provider itself, enabling the company to leverage its investments in renewable energy like wind and solar to generate new revenue from an entirely new market.
Apple’s decision to go this route might be unique, but a close look at the path it took to get here reveals a broader shift in the way businesses think about energy. And whether you’re a bleeding-edge company with substantial financial resources like Apple, or a smaller-scale enterprise that’s just starting to dip your toes in the water, there are a few lessons to learn from Apple’s energy evolution.
Apple was one of the early names to sign onto RE100, a group of the world’s biggest companies committed to 100% renewable power. In its 2016 Environmental Responsibility Report, Apple said it’s already well on its way, claiming 93% of its worldwide energy usage comes from renewables. Like most big companies that have made aggressive public commitments to renewables in the past decade, Apple has pursued these goals through a combination of strategies, including the purchase of renewable energy certificates (RECs).
If a company is drawing any power from the grid, the original source of power is indistinguishable, a mix of coal, natural gas, nuclear, or renewable. By purchasing RECs, businesses essentially pay a premium to ensure that for every megawatt of energy they consume from the grid, the energy supplier is procuring at least the equivalent amount from renewable resources.
While RECs have become an increasingly popular way for companies to hit their renewable targets, some have claimed businesses that use them are misleading consumers. Critics argue that a company cannot claim to be 100% renewable while relying entirely on grid power.
But Apple critics—and critics of RECs at large—are missing a few key points: 1) RECs are more than an expensive way of buying positive PR—they play an important role in the economics of renewable energy development, which accelerates the integration of these resources into our nation’s resource mix; and 2) Apple’s claims are based on more than just purchasing RECs as financial instruments on the open market. Like other firms in the RE100, Apple has influenced the transformation of the electricity grid by agreeing to purchase renewable energy on a large scale. With 521 megawatts of solar projects worldwide announced to date, Apple says it is one of the largest solar power end users in the world.
Apple actually provided a very simple analogy to its attitude about sourcing renewable energy in its 2016 Environmental Responsibility Report:
The best way to think about it is like a bank: You can deposit $20 in one bank branch, then go to another branch and withdraw $20. Renewable energy works in a similar way. And Apple’s renewable energy approach goes a step further to make sure we “deposit” on the same grid as the energy we are “withdrawing.”
Apple’s renewable efforts are primarily focused on fueling its operations, but under the auspices of Apple Energy, the company will also have the resources to buy and sell renewable energy in the market, enabling it to generate revenue from its renewable energy investments.
The implications of this move are vast. In one plausible future scenario (pending FERC approval), Apple could green its entire supply chain by selling renewable energy at market rates to their suppliers. In another, Apple could sell clean energy to households, powering iPhones and perhaps electric vehicles with 100% renewable energy.
Apple is clearly in a unique space. Most large organizations struggle to even know how much energy they’re using annually, much less operate a standalone energy company in what is one of the most highly regulated industries in the US. But Apple’s actions are driven by a few key trends that will likely impact most large enterprises—if not today, then in the relatively near future.
First—the discussions around corporate commitments to combat climate change are heating up (pardon the pun), and if your business doesn’t have a proactive strategy, regulations and mandates will eventually force you to develop one. Few businesses can go as far as Apple, but all organizations can start to mitigate risk by reducing their reliance on fossil fuel-generated power and setting science-based carbon reduction goals. With Apple’s aggressive head start at creating a diversified energy portfolio, the company has positioned itself to face the fallout of unexpected natural disasters, while also reducing its exposure to energy price volatility, increasingly strict regulations on carbon reductions, and the downstream effects of geopolitical upheaval that can disrupt energy markets at any given moment.
Second—there’s a reason Apple cares so deeply about its renewable strategy, and it’s not just altruism. Apple’s customers and shareholders demand it. Apple is a darling brand among millennials, a generation that is rapidly emerging as the largest consumer and employee cohort. Relative to the generations that came before them, millennials are demanding higher levels of commitment to a sustainable future. A 2015 Morgan Stanley study, for example, shows that millennials are two-to-three-times more likely to want to buy from and work at companies that share their values and place a high value on addressing environmental and social issues. Similarly, Wall Street is rewarding companies with strong commitments to material sustainability inputs. A Harvard Business School study from last year shows that companies that focus on material ESG factors provide a 6% greater return than those that don’t.
In other words, Apple is doing what all companies should at least be thinking about—asking the question, “How can energy strategy be used as a lever to drive profitability?”
The author co-founded EnerNOC, an energy intelligence software provider, in 2001 and serves as its Chairman and CEO. Prior to EnerNOC, Healy worked in the Energy Technology Laboratory for Northern Power Systems, Inc., and held positions with Merrill Lynch, International Fuel Cells (now UTC Fuel Cells), and the venture capital firm Commonwealth Capital Ventures.
