Al Gore & Duke Energy: Marriage Made in Regulation Hell

Rogers photoThe North Carolina fuel cell project in which former Vice President Al Gore has a conflict of interest as a director of Apple, Inc., illustrates how crony socialism and state mandates to utilize so-called “Green” energy converge to benefit wealthy corporatists at the expense of regular citizens.

Yesterday NLPC reported that Apple’s plans to build a costly fuel cell electricity generation facility adjacent to its new data center in Maiden, N.C., was a conflict for Gore, because plans show Apple has enlisted Bloom Energy to build the project.

In addition to his Apple role, Gore is also an investor in Bloom through his role as a senior partner with Kleiner, Perkins, Caufield & Byers. According to a report in The News & Observer of Raleigh last week, Bloom could reap as much as $30 million from the deal – about $6.7 million per megawatt – based upon calculations of the estimated costs from the U.S. Energy Information Administration. That’s very expensive.

But even with Gore providing a nudge, Apple would be unlikely to pursue the project if it was too costly. Instead, the likelihood is that the world’s most valuable company will find its own way to make a few bucks off the scheme.

Unsurprisingly, a likely partner and willing recipient of the electricity from the “Bloom Boxes” would be Duke Energy, which services the area in which Apple’s data center sits. Besides the fact that CEO James Rogers (in photo) is ideologically aligned with Gore on the global warming issue and thus is a cap-and-trade proponent, the Charlotte-based utility is also mandated by the State of North Carolina to obtain 12.5 percent of its electricity sales from renewable sources by the year 2021, with intermediate steps toward that goal required (3 percent by this year).

Rogers seemingly hasn’t met a renewable energy scheme he doesn’t love, thanks to government policies that provide lucrative tax benefits, grants and rebates. The one exception (now – not when it was conceived) may be the Edwardsport, Ind. coal gasification power plant (which would capture carbon dioxide and store it underground) that is beset by massive budget overruns and scandal. Rogers is desperately trying to get taxpayers or electricity customers in Hoosierland to pay for the excessive costs rather than his stockholders.

But otherwise Duke has been buying up renewable projects, especially wind and solar. When asked by energy expert Robert Bryce last year why that was the case, Rogers responded that the subsidies available for wind projects allow Duke to earn returns on equity of 17 to 22 percent.

“In other words,” Bryce wrote in National Review, “for all of the bragging by the wind-industry proponents about the rapid growth in wind-generation capacity, the main reason that capacity is growing is that companies such as GE and Duke are able to goose their profits by putting up turbines so they can collect subsidies from taxpayers.”

So along comes Apple, which in 2009 was granted $46 million in special tax breaks from the Tar Heel State to build its estimated $1 billion data facility. Another attractive aspect was the affordable electricity provided by Duke – with plenty of coal, natural gas and nuclear generation to draw from – which the huge server farm would require a lot of. It’s the same reason Google planted a similar facility just 30-or-so miles from Apple’s.

Large investor-owned utilities such as Duke are always part of the negotiations for projects this large, and power companies love big industrial customers – and you can’t get much bigger than an electricity-sucking Apple facility that would host things like iTunes, cloud computing and its new iPhone Siri resources. Therefore Duke – always ready with a warm welcome to renewable projects since state utilities regulators guarantee at least a 10-12 percent rate of return from retail customers – would likely be willing to pay for the electricity generated by Apple’s fuel cell plant (and also an adjacent solar farm it is building). Undoubtedly Duke still comes out way ahead, and besides covering its costs, gains a bit more towards fulfilling the North Carolina renewable mandate.

Meanwhile Apple – who along with tech companies like Google, Microsoft and Facebook are the targets for criticism by environmental groups because of the massive amounts of energy they use at their data facilities – finds a way to (presumably) appease Greenpeace with solar and fuel cells. Thus they maintain their eco-friendly image. With a clear conscience Apple executives can still be welcomed at Silicon Valley tech-tycoon dinner parties, especially ones with a liberal U.S. president.

As is the case so often, though, it’s all for show. As reported yesterday, the hydrogen needed for the fuel cells will not be drawn from a “green” resource, but from natural gas. Instead Apple, Bloom and Duke will pretend they are offsetting (indulging) the natural gas they use by paying for “biogas” from landfills or hog farms to put less carbon dioxide-emitting electricity on the grid. The North Carolina Utilities Commission has already approved the scam scheme. If you want to find out what the new global temperature will be after this project is complete, just look at the current data.

Meanwhile taxpayers and electricity customers (pretty much the same thing) in North Carolina will pay millions of dollars more to give huge tax breaks and a “greener” image to the wealthiest company in the world, as though it needs their help. Other beneficiaries include Duke Energy, Bloom Energy, and Al Gore’s investment partner John Doerr, and his venture capital firm Kleiner, Perkins, Caufield & Byers. Oh, and don’t forget all the employees in “Green jobs” who keep the fans blowing to cool Apple’s computers (see all the cars parked at the facility?).

It’s just another friendly meeting at the intersection of crony corporate socialism and government regulation. As Tom Borelli of the National Center for Public Policy Research said, “This is a really significant issue. Al Gore’s investment and his partners’ investment in Bloom Energy should not be enhanced by Apple’s investment strategy.”

Paul Chesser is an associate fellow for the National Legal and Policy Center.