Data centers want clean electricity. Can Georgia Power deliver it?

Last week, Georgia Power won regulatory approval to fast-track construction of 1.4 gigawatts of fossil-fueled power plants and to contract for nearly a gigawatt more power from coal- and fossil-gas-fired power plants owned by other utilities. The reason? Fear that skyrocketing power demand from power-hungry data centers and factories soon to be built in Georgia could overwhelm its grid unless it expands new generation as quickly as possible.

The plan has drawn the ire of environmental groups and consumer advocates, who say that choosing fossil-fueled power over cleaner alternatives will worsen climate change and increase electricity rates for customers. But it has also sparked concern from some of the same big companies planning the data center and factory expansions that Georgia Power says will cause its looming power crunch.

That’s the message that Priya Barua, director of market and policy innovation for the Clean Energy Buyers Association (CEBA) — a trade group that includes major data center operators with aggressive clean energy goals, such as Amazon, Google, Meta, and Microsoft — delivered to Georgia Power in deliberations over the proposed plan earlier this year.

CEBA is concerned that ​“some of the new load Georgia Power is forecasting may not materialize if Georgia Power increases the carbon intensity of its resource mix,” Barua stated in February testimony to the Georgia Public Service Commission (PSC), ​“since many of the customers bringing new load have clean energy targets” and want to locate in regions with cleaner energy options.

If CEBA members choose to build data centers or factories elsewhere in search of cleaner electricity supplies, that could undercut the whole premise of the utility’s rush to build more fossil-fueled power plants — and drive up costs and emissions for existing Georgia Power customers, she warned.

In the end, CEBA supported the stipulated agreement that Georgia Power and Georgia PSC staff reached last week — largely because the utility included a last-minute promise to create a program for companies to contract for solar and wind power, batteries to store clean power, and other carbon-free resources. Many other utilities across the country offer this kind of program, but it’s ​“a first for customers of Georgia Power,” Barua told Canary Media in an interview last week.

Georgia Power made a number of other commitments to expand clean energy options in last week’s agreement. These include calling on third-party developers to propose thousands of megawatts of solar, wind, and battery projects over the coming years and creating programs that will support commercial and residential customers who want to install solar and batteries on their businesses and homes.

Now the big question is whether Georgia Power will follow through on these alternatives to fossil power as it takes on longer-term planning for what it expects will be even greater demand growth from big commercial and industrial customers through 2035.

As of now, the utility is ​“willing to work with us” on these cleaner options, Barua said. ​“We’re holding them to that for the 2025 IRP.”

Georgia Power’s 2025 IRP and the bigger battle to come across the Southeast

Barua was referring to Georgia Power’s next integrated resource plan, or IRP. That’s the master plan that utilities revise every two or three years to detail how much new generation capacity they anticipate needing over the coming 10 to 15 years and what mix of energy resources they will use to supply it.

The plan approved last week, which was proposed in October and rushed through regulatory review, covers only the next three years. The load growth forecasted for the next decade — and the infrastructure that will need to be built to meet it — is roughly three to five times as much as what that plan contends with.

Georgia Power will publish a draft of its 2025 IRP next January. That’s the ​“elephant in the room” in terms of how dirty or clean the utility’s future resource mix may end up becoming, said Simon Mahan, executive director of the Southern Renewable Energy Association. ​“Looking a decade out is what 2025 will be a fight about.”

That same fight will be playing out across the Southeast over utility plans that could commit the region to a major expansion of fossil-gas-fueled power over the next 10 years or so in response to rising demand from data centers, factories, and the electrification of vehicles and buildings.

Duke Energy, one of the country’s biggest utilities, is seeking to build nearly 9 gigawatts of fossil-gas plants to serve North Carolina and South Carolina customers through 2032, nearly triple what it planned back in 2022. The federal power entity Tennessee Valley Authority is expected to propose a plan sometime soon for up to 6.6 gigawatts of new gas-fired power plants to replace closing coal plants and meet rising electricity demand through the end of the decade.

Environmental and consumer groups say that the Southeast is already falling behind on decarbonizing its power generation at a pace needed to meet the country’s Paris Agreement commitments and to combat climate change. Any new gas plants in the region threaten to put those goals further out of reach, they warn, by displacing the opportunity for cleaner resources to fill the gaps.

As of 2023, Georgia Power generated 48 percent of its power from fossil gas, 23 percent from nuclear power, 15 percent from coal, 2 percent from hydropower, and 7 percent from other renewables. Its 2023 IRP update noted that it plans to add about 10 gigawatts of new renewable resources by 2035, nearly double the 6 gigawatts it planned back in 2022. But those estimates could change when Georgia Power releases its 2025 IRP proposal early next year.

Between the unveiling of the new IRP and a final decision expected next summer, clean power advocates plan to push Georgia Power and regulators to make good on the clean-power promises set out in last week’s agreement.

“We’d like to use this as an opportunity to have something more concrete in the next full IRP,” Barua said, ​“so we aren’t in this position again with utilities where they aren’t really considering solutions [to rising power demand] beyond peaker plants.”

The critique of Georgia Power’s approach to solar and batteries 

When it comes to the fine print in last week’s agreement, Southeast environmental groups are less sanguine than CEBA is. They especially object to the way that the Georgia PSC’s decision allows the utility to fast-track more fossil-fueled generation than batteries and solar.

The agreement permits Georgia Power to build only 500 megawatts of batteries in the next three years and procure another 500 megawatts of energy storage from independent power developers. What’s more, the agreement stripped out the relatively small amount of solar — 200 megawatts — that Georgia Power had proposed.

In a statement last week, the nonprofit Southern Alliance for Clean Energy blasted both Georgia Power and the Georgia PSC, calling the agreement a giveaway to the utility, which can expect to earn a healthy rate of return on the fossil-fueled power plants it was authorized to build, and saying it does ​“little to protect ratepayers and even less to advance clean energy like solar and wind.”

“Frankly, most of the utility plans are backward-looking,” Bryan Jacob, the alliance’s solar program director and Georgia liaison, said in an interview last week. ​“They’re the same type of centralized generation resources that our parents and grandparents had and don’t look at alternative ways to meet this new load growth with a new set of technologies.”

In particular, Georgia Power has so far largely given short shrift to the potential for solar power and batteries to serve as an alternative to gas-fired power plants, he said — even though the economics favor the cleaner option.

Across the Southeastern U.S., utilities are experiencing growing peaks in electricity demand, especially during cold winter mornings and hot summer evenings, when customers’ heating and cooling needs outstrip supply. Gas-fired power plants that can be ramped up quickly to meet these peaks in grid demand are the go-to resource for utilities.

But solar power stored in batteries can also do the job — not only without emitting carbon and other pollution, but also at a cost that’s often cheaper than building and fueling gas-fired power plants over their lifetimes.

Mahan noted that Georgia Power, like many other Southeastern utilities, is particularly concerned about meeting winter peak loads driven by the preponderance of electric heating in the region. This chart from Georgia Power’s 2023 IRP update indicates just how quickly it now expects those winter peaks to grow over the coming decade, compared with much lower load forecasts from previous years.

But Mahan said the modeling software used by Georgia Power to select the lowest-cost mix of resources to meet these peak winter loads shows ​“a significant uptake in batteries — even more batteries than gas plants in the next five to 10 years.” That’s in a state without a renewable portfolio standard or other mandates that would force the utility to choose batteries instead of gas plants, he noted.

To be clear, Georgia Power has installed about 3.8 gigawatts of solar as of the end of 2022, putting Georgia in the top 10 states for solar growth. And earlier this year, the utility installed a 65-megawatt battery system, the first of more than half a gigawatt of energy storage it has been approved to build under regulator decisions from 2019 to 2022.

But Georgia Power owns and operates almost all these systems, which means the utility can pass the costs of construction and operations, plus a guaranteed rate of return on its capital costs, on to its customers.

Since 2019, the Georgia PSC has ordered Georgia Power to pursue other options to expand its clean energy and battery capacity and serve the needs of corporate customers eager to green their power supplies. These new programs are structured as competitive procurements, in which the utility bids projects out to third-party developers and pays them for the electricity they produce — a method that has proved to be a lower-cost way to bring more clean-energy projects online in other states.

But clean energy groups have criticized the way that Georgia Power has handled its competitive procurements to date, both in terms of their slow pace and the restrictions the utility has placed on the projects that have sought to win contracts. Some critics fear the utility is balking at expanding a class of clean energy resources that don’t provide it as much guaranteed revenue, even if they are cheaper for customers.

A case in point: the 2 gigawatts of utility-scale clean energy projects that Georgia Power sought to procure under its Corporate Renewable Supply Procurement (CRSP) program, first launched in 2019. The utility did award contracts for 970 megawatts of projects in 2021, although those projects have been delayed by supply chain issues.

But it rejected a second tranche of 1,030 megawatts of proposed projects because their anticipated costs exceeded an ​“avoided cost cap” the utility had set for them, Jacob said. Plans to procure that capacity have since been transferred into a new program, dubbed Clean and Renewable Energy Subscription (CARES), bringing its total target to roughly 3.35 gigawatts of clean power through 2025.

At present, however, Georgia Power forecasts that these multiple gigawatts of new clean resources will provide a winter peak capacity of no more than 200 megawatts, according to its 2023 IRP update. That low value appears to be based on the expectation that those resources won’t be paired with batteries to help meet those critical grid peaks.

But Mahan noted, ​“We’re fully anticipating that hybrid renewable energy resources” — primarily solar plus battery projects — ​“will be a fairly significant share of resources bidding in” to that opportunity. While solar panels may generate very little power during early winter mornings, batteries can store power generated the day before to meet those needs.

Georgia Power also plans to launch a competitive ​“all-source” procurement open to a variety of projects later this year, which could target building from 6 to 8 gigawatts of capacity resources by the early 2030s, Mahan said. This bidding process is structured to allow battery projects and projects that combine batteries with solar and wind power to compete — something that clean energy groups fought hard to include in last week’s agreement, Jacob noted.

The threat of building more gas-fired power and keeping coal plants open

Still, Mahan worries that Georgia Power will seek to position more utility-owned fossil-fueled power plants as contenders in this all-source procurement. He’s particularly concerned that the utility will go beyond the single-cycle combustion turbines it won approval to build last week — which are designed to run only during moments when the grid is under maximum stress — and seek permission to build combined-cycle gas turbines, which are designed to run far more often throughout the course of a year.

“The benefit of a combustion turbine is that you can build it and never have to run it,” he said. But ​“combined-cycle units, if they get approved and built, will emit way more emissions than what a combustion turbine will.”

Bob Sherrier, staff attorney for the Southern Environmental Law Center, shares that worry. The nonprofit legal advocacy group fought unsuccessfully to convince Georgia regulators to exclude the 1.4 gigawatts of fossil-gas and oil-fired combustion turbines from Georgia Power’s near-term plans, claiming in a statement issued after the PSC’s approval that they ran the risk of ​“potentially locking in Georgia’s reliance on fossil fuels for decades.”

Sherrier noted that Southern Company, the parent company of Georgia Power and sister utilities Alabama Power and Mississippi Power, has proposed adding two combined-cycle gas turbine power plants to its transmission-grid interconnection queue in Georgia and another to its interconnection queue in Alabama, adding up to more than 1.6 gigawatts of generation capacity. ​“Expect those to show up in the 2025 IRP,” he said.

Keeping coal-fired power plants open past their current 2028 retirement dates may also be on the table, Sherrier warned. In its 2022 IRP, Georgia Power agreed to close all but one of its coal plants by 2028 and consider closing that last coal plant by 2035. But in its 2023 IRP update, the utility stated that due to ​“continuing increases to the projected load forecast and capacity needs following 2028, the Company will likely evaluate extending the operation of certain units.”

“We’re deeply concerned about extending the life of coal for things like potential data center growth,” Sherrier said.

The untapped potential from utility customers — solar, batteries, and flexible load

CEBA member companies are also concerned about a possible overreliance on coal and other fossil fuels, Barua said. That’s why they’ve been so eager to expand the options for clean power outside Georgia Power’s CARES program, which so far has been the only existing choice in the utility’s territory.

The ​“carbon free energy customer program” that CEBA agreed to pursue with Georgia Power last week represents one such option. It’s structured to mimic the power-purchase agreements, or PPAs, that corporate customers can sign with independent power projects in parts of the United States that are organized into wholesale energy markets. Georgia, along with most of the Southeast and large parts of the U.S. West, do not participate in wholesale markets, which means that corporate energy buyers must work directly with utilities to procure clean energy.

The structure that Georgia Power has promised to work out with CEBA would allow commercial and industrial customers to identify and contract for power from large-scale clean energy and battery projects. That would give project developers the certainty of future revenues that they need to obtain enough financing to start building. That’s different from Georgia Power’s CARES program, which relies on the utility to seek out and negotiate contracts with clean energy developers and then make that capacity available to customers.

Big power projects aren’t the only way for customers to source their clean power. They can also build solar, batteries, and other distributed energy resources (DERs) on their own properties.

The stipulated agreement approved by the Georgia PSC last week includes two such DER options — one that would allow Georgia Power to own the DERs and pay the customer that hosts them for the energy they produce, and another that would allow customers to own the DERs and receive monthly bill credits for the energy they produce.

Barua said that ​“CEBA would be supportive of that idea,” depending on how the programs are designed, but noted that ​“the details have not been fleshed out yet.” In testimony before the Georgia PSC, she noted that Georgia Power’s existing Customer-Connected Solar Program, which offers customers a similar option to install solar on their property and sell the power to the utility, suffers from limitations — including caps on how much solar each customer can install and a 25-megawatt limit to total program capacity across the utility’s service territory — that ​“prevent it from meaningfully contributing to Georgia Power’s urgent capacity needs.”

Barua said CEBA members are also eager to explore other possibilities, such as programs that would reward them to reduce electricity use or switch to backup power during grid emergencies, a practice known as demand response in the utility industry. Georgia Power’s agreement with regulators includes a commitment to expand its use of demand response by creating a ​“curtailable load” program, although just how it would work has yet to be determined.

More broadly speaking, ​“customers want to be part of the solutions to meeting this load growth,” Barua said. That’s only fair, given that utilities are claiming that they need to make major changes in their plans to support big data centers, factories, and other commercial and industrial loads.

“There are a lot more companies, a lot more sophisticated energy buyers, who are thinking a little more holistically about how they can support the system and what that give and take is,” she said.

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