Apple’s solar commitment in China could roil tech industry

By David Ferris | 10/23/2015 07:06 AM EDT

For a few years now, the world’s largest technology companies have faced a steady drumbeat of criticism that they need to do something to reduce carbon emissions of the supply chain that manufactures smartphones, tablets and computers by the billions, mostly in China with coal-fired power.

On Wednesday, Apple Inc. did something.

The world’s largest and richest computer company said it would build, or work with its partners to build, more than 2 gigawatts of solar power plants meant to provide electricity to the company’s suppliers. Observers said the move is likely to force Apple’s rivals to ratchet up the mild pressure they’ve put on their contractors so far to reduce their carbon emissions to combat climate change.


"We’re very excited about it. We think it’s a big deal," said Pierre Delforge, director of the high-tech energy program at the Natural Resources Defense Council. "This is addressing the biggest piece of the pie for the impact of their products."

While Apple cast its decision as a clarion call for climate change action, some experts said it is a canny move that could make long-term financial sense and position the tech giant to thrive in China’s emerging carbon-trading market.

Apple’s announcement was threefold. It said that it had completed an earlier goal it set of building 40 megawatts of solar projects that are sufficient to power Apple’s offices and retail stores in China. It said it would itself build 200 MW of solar projects to "offset" its suppliers’ energy use and would partner with its suppliers to build 2,000 MW more. The company gave no deadlines.

"Climate change is one of the great challenges of our time, and the time for action is now," said Tim Cook, Apple’s CEO, in a statement. He added that he hoped "many other suppliers, partners and other companies join us in this important effort."

While many large tech companies recently have made big commitments to renewable energy, Apple’s initiative is something new.

Companies such as Google, Microsoft, Apple and Amazon have purchased large wind or solar farms in the United States and directed hundreds of megawatts of electricity to supply their own data centers — moves that give them credibility among their young and social media-minded customers.

What Apple promised to do this week is to build solar farms to supply an entirely different sort of animal: factories, in another country, that aren’t owned or controlled by Apple.

The factories are obscure, stretching back from final assembly to those that synthesize silicon and aluminum. Nonetheless, they could carry an even larger carbon impact than power-hungry data centers. Apple has reported that a whopping 72 percent of its greenhouse gas emissions come from manufacturing, most of it based in China.

"There’s a precedent for [technology companies] doing their own footprint," said Gary Cook, an information-technology policy analyst at Greenpeace. "But for their own suppliers, that’s pretty unique."

iPhone maker on board

One of the most significant parts of the announcement is that Apple wrested a commitment from Foxconn Technology Group, the principal maker of the iPhone and largest contract manufacturer of electronics in China, to build 400 MW of solar plants by 2018.

"I hope that this renewable energy project will serve as a catalyst for continued efforts to promote a greener ecosystem in our industry and beyond," said Terry Gou, founder and CEO of Foxconn, in Apple’s news release.

The embrace of renewable energy at Foxconn is important because the firm also makes equipment for many other high-tech companies, including HP, Dell, Microsoft and Amazon.

Whether other tech titans have the desire or means to follow Apple is unknown. Apple is the most valuable company in world history and has more than $200 billion in cash reserves, and so it has a freedom to experiment that other companies don’t — especially in the smartphone market, where Apple makes 92 percent of the profit, according to Business Insider.

Apple provided little detail about how its novel solar-supplier arrangements will work. The announcement said the installations would be built in the southern, eastern and northern grid regions of China and "will begin to offset the energy used in Apple’s supply chain."

Preparing for carbon markets?

Both China and Apple are secretive, so details at this point are scarce. But some experts offered examples of why it might make sense for Apple to do this.

Despite the green sheen, building giant solar farms and contracting their output to other companies might make eminent business sense in China. There, solar prices have plummeted, government incentives are strong, and land can be cheap, said Mark Barineau, a lead solar analyst at Lux Research Inc., a market research firm.

And there’s another factor, as well. "It might be less of an effort to go green and more about getting reliable electricity," he added.

Another is the emerging carbon-trading market in China, which was unveiled just last month and is due to begin as soon as next year.

The Apple deal "points out that companies that are headquartered in the U.S. are going to need to pay a lot of attention to emissions outside of U.S. borders," said Paula DiPerna, a special adviser to CDP, an organization that inventories the carbon emissions of major companies.

"Apple is a farsighted company, and only an ostrich is unaware that carbon markets are coming," said DiPerna. "It’s a signal that other companies would be wise to start doing the same."