Putting aside, for a moment, whether wind and solar will ever generate enough electricity to meet humanity’s demand, what mechanism is best suited to get such clean electricity online?
In the U.S., one quarter of the gigawatt generating capacity now available has been invested based on companies having demand for such output locked in.
These would-be producers of green electricity use PPAs or power purchasing agreements as a risk reduction play to justify investment up front to be repaid over time by customers. With a PPA, the buyer of green electricity promised to pay, over time, for consumption of that form of power. With a PPA in place, the producer of such power can, with confidence, invest in generating capacity and so financial capital is deployed to reduce future contributions to global warming, where the risk/return relationship justifies the expenditure. The risk is shifted to the customer, who then faces the problem of finding customers who will pay for such use of electricity.
PPAs also revise time horizons, collapsing future use into present financial value.
The point of capitalism, as deftly noted by Adam Smith, is that customers drive the system, not capitalists. Producers who can’t sell at a profit just go out of business. Society has spoken against them: what they offer is not valued.
And high-tech companies, which operate giant data centers using lots and lots of electricity to produce a service vital to our daily lives, are well positioned to enter into PPAs with potential producers of electricity from wind and solar technologies.
It’s a win/win/win formula, rather beyond the ability of government to make happen by fiat: “Thou shall!”