The Utilities Sector’s Next Big Gaffe? Ignoring GAFA

By GreenCom CoCEO, Peter Müller-Brühl

As Google, Amazon, Facebook and Apple – dubbed GAFA – prepare against ‘Google-shame,’ so too should utilities prepare for these tech giants’ entry into the energy market, which might lead to end customer products like Google energy. 

The Coronavirus: Good News for the Environment? Not Exactly.

There has been much talk in the last weeks about Covid-19’s impact on the environment. Social distancing measures and country-wide lockdowns have served to limit the emission of fossil fuels resulting in cleaner air. Online news sources have jumped on the occasion to report uplifting stories about the Coronavirus’ positive environmental repercussions. The Himalayas are now fully visible! Bangkok’s air quality has increased by 20%! These stories should be taken with a grain of salt, however.

True, Covid-19 has had its fair share of positive environmental impacts. Not all is greener, however. A considerable amount of CO2 continues to be produced by those who spend much of their time at home – especially when this time is spent online. Whether it be by teleconferencing for work, joining online classrooms, streaming videos, ordering provisions, or just plain browsing the internet, their daily activities still create a sizeable carbon footprint. In fact, research has shown that every second spent online could lead internet servers to emit as much as 7 grams of CO2, the equivalent of driving 15 meters!

So, although Covid-19 has served to reduce emissions, internet usage may partly counteract this positive impact. According to the World Economic Forum, online presence has increased by 50% since the start of the pandemic. Considering that our globe already encompasses 2.5 billion internet users, it is likely internet usage will be placed under scrutiny in the coming weeks by environmental activists.

GAFA: Prepared for Scrutiny

Talks of internet-focused environmental scrutiny are not new. Before the spread of Covid-19, many were discussing how “flight-shame” would soon transform into “Google-shame” once the global population was made aware of the CO2 resulting from online activities. The following chart demonstrates the rise in awareness for terms like “flight emissions” between 2018 to 2020. 

Google energy: Google trends shows increasing interest for the term

Google trends demonstrated increasing interest over time for the search query ‘flight emissions’ between 2018 and 2020. Who’s to say this interest won’t soon shift to the big tech players of GAFA offering something like Google energy? (Source: trends.google.com)

Because of this, the superpowers which make up GAFA (Google, Apple, Facebook, and Amazon) have already begun taking the appropriate environmental precautions. By joining bilateral Power Purchase Agreements (PPAs) with renewable energy providers over the last decade, these companies are ensuring that the energy consumed by their servers is relatively clean. In effect, signing these agreements has permitted GAFA’s members to create an exciting new product: remorse-free internet usage. Consider the chart below, which clearly lays out Google’s ever-increasing clean energy portfolio.

Google energy: Cumulative capacity of Google's renewable energy portfolio

Cumulative capacity (in megawatts) of Google’s renewable energy portfolio  – soon used to offer energy tariffs like Google energy?(source: blog.google).

Evidence of GAFA’s proactive engagement with clean energy has gained special prominence in the last years. When entering “google emissions” into search engines, internet browsers are no longer faced with news stories decrying the emissions caused by “googling.” Rather, Google has made a concerted effort to present the company’s clean energy measures front and centre. There are myriad web pages dedicated to explaining Google’s sustainable entrepreneurship. Thanks to the company’s newly minted investments in Belgian PV plants, Google can proudly explain its carbon-neutral activities. Amazon too has admitted the error of its ways and introducing measures to reach net-zero emissions by 2040.

GAFA’s Preparedness: Good for the Environment; Bad for Utilities

With Covid-19 forcing the world’s population to huddle around computers, GAFA’s PPAs will surely turn into a goldmine for its members. It is very likely that, in order to stay on the users’ right side during this ongoing Corona crisis, GAFA will increase its investments with PPAs. It is also expected that, as a result of its coordination within the energy field, GAFA will soon become a de facto big energy player. Although this prediction still falls within the realm of speculation, it is rooted in facts. Take Google, for example. Since the early 2010s, Google Energy has had the ability to purchase and sell renewable energy in the United States. Though the company currently only uses the energy obtained via PPAs to compensate for its emissions, who is to say that increased online activity resulting in the Coronavirus won’t lead Google to diversify its portfolio? Utility provision courtesy of internet giants is knocking at our doors.

Having to compete with tech giants is certainly not ideal for the already teetering utility sector. Companies like Google, Apple, Facebook, and Amazon have the name recognition necessary to make a splash in whatever industry they choose to enter. What’s more, with a roster of specialized data-based services, these giants can offer products unmatched by traditional utilities. Consumers, especially the ever-growing environment-conscious demographic, are sure to be swayed into switching providers. In short, once GAFA enters the field offering products like Google energy, utilities will be destined to lose unless decisive action is taken – and soon!

How Utilities can Prepare for the Inevitable: Customer-Centric, Localized Energy

Just as GAFA is prepared to tackle internet-shaming, so too should utilities be ready to tackle the tech industry’s entrance into the energy fray. First and foremost, utilities need to stop thinking in terms of megawatts. Customers know they can count on their energy provider to power their homes. Instead, utilities should begin asking themselves: how can we differentiate ourselves in a hyper-saturated and hyper-competitive market that will soon come to include GAFA with end-customer products like Amazon electricity or Google energy?

The first step is already done: the percentage of internet users willing to pay more for sustainable and eco-friendly products has considerably risen over the last few years. 

Google energy: Internet users saying they would be willing to pay more for sustainable products

The percentage of internet users who state that they would be willing to ‘pay more for sustainable/eco-friendly products’ has considerably increased in the last years paving the way for products like Google energy. Utilities should take this trend at heart, namely through the provision of green, localized energy (source: globalwebinedx.com)

But to fully answer this question, utilities need to realize what has made GAFA so successful over the years: Extreme gratification resulting from customer-oriented portfolios. Similar customer-centric strategies need to be emulated by utilities. What’s more, they need to be emulated in sections of the industry GAFA will be unable to touch – sections making up GAFA’s Achilles heel so to speak.

And although GAFA can get green PPA’s, their main weakness will be localized energy production and provision – a product offering an extraordinary story: Green energy from your neighbour’s roof! With their PPAs spanning continents, the likes of Google will only be able to provide energy created on a global scale. Utilities can make use of this weakness to create energy packages focused on localized energy produced near or at home. This will no doubt be appealing for large swaths of the population seeing as:

  • Localized energy ensures greater energy security (no more issues with transnational grids or cross-border transportation)
  • Local energy supports domestic rather than international businesses (and, by extension, has the potential to create new jobs for locals)
  • Local energy ensures price stability based on regional needs and production capacity
  • Local energy is typically greener. This is because it heavily relies on renewable energy sources like wind, solar, and biomass to produce the majority of its electricity

The above makes clear that, should utilities play their cards right, they stand a chance to survive (and perhaps even strive) following GAFA’s inevitable entry into the energy sector.

Next Step for Utilities: ACT!

Most within the industry can anticipate that GAFA’s members will soon become energy providers. It is up to utilities to act before this development inevitably occurs. Their competitive advantage will depend on whether or not they have the infrastructure and resources necessary to ensure their customers have access to localized energy. Most experts agree that the best way to do this is by instating energy communities. Through the use of digital platforms, utilities will be able to oversee and manage the energy consumption of local groupings. Customer-centric, localized energy provision could be achieved through these. It is the optimal way to ensure the utilities’ key demographics get the services not even GAFA can offer!

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