Apple, Get Your Carbon Footprint Off My Neck
I love Apple. I have several Apple computers, an iPad and an iPhone. I'm a long time stockholder and I've always made money investing in Apple. Steve Jobs was obviously a terrific visionary but he spent 9 months after being diagnosed with cancer treating it with a special diet, a very sad lapse of judgment.
The presence of the global warming propagandist on his board of directors, Al Gore, must be counted as another lapse of judgment. Ron Johnson, now the CEO of JC Penny, is the genius that built Apple's phenomenal retail chain. Away from the gang at Apple, what does Johnson do? He makes the lesbian celebrity, Ellen DeGeneres, JC Penny's spokeswoman. A noted lesbian as the spokesperson for a lower middle class department store?
What is going on here? Surely there is plenty of arrogance at Apple. This is very worrying to some of us stockholders. Arrogance leads to mistakes. A big failure would damage the Apple mystique and quickly bring the stock down to earth.
Apple plays up its green side. It's hard to know how much of this is sincere and how much is simply catering the segment of the population that is hooked on green superstitions. Certainly Apple wants to defuse crackpot environmental critics. By crackpot I mean Greenpeace. When the iPhone came out, Greenpeace tore one apart apparently trying to find some sort of evil, toxic chemicals. Toxic chemicals in electronic equipment is a story of junk science by official bodies. The European Union some years ago made regulations prohibiting various substances in electronics, notably lead in solder. Of course lead, alloyed with tin, had been used in solder for 100 years without any bad consequences. Lead doesn't jump out of the electronics and poison you. It is a lot further away from your body than the mercury in the fillings in your teeth, which is also harmless, although in the right circumstances mercury is a deadly poison.
The proof that the EU regulations were nonsensical comes from the fact that the United States Environmental Protection Agency saw no need for similar regulations. If the EPA doesn't want to regulate something, it must be completely harmless. But, because electronics is an international industry that exports and imports, every electronics manufacturer in every country had to dance to the tune played by the EU. It wasn't just a matter of using a different type of solder. Every reasonable lead-free solder melted at a substantially higher temperature, so every electronics component in the world had to be redesigned to suffer the higher temperature at incredible cost to the industry and the consumer.
Apple has built a new and massive data center near Maiden, North Carolina to support its iCloud service. Greenpeace complained that the center will be mostly powered by coal and nuclear electricity. Now Apple has announced that it will build a 20-megawatt solar electricity farm and a 5-megawatt biogas generating facility on the site. Since Apple is secretive about almost everything, it's hard to know why they would do this or what they claim the economics of the situation are. A 20-megawatt solar installation generates 20 megawatts only during the instant when the sun is directly aimed at the panels. Obviously nothing at all is generated at night and comparatively little when it is cloudy. As a generous estimate the average power might be 25% of the 20-megawatt nameplate capacity, or 5 megawatts.
Greenpeace estimates that the data center will consume 100 megawatts of power. Given that Greenpeace is hardly reliable and is motivated to exaggerate, I suspect that the real figure is probably about 50 megawatts. To put this in perspective, a large power plant generates 1000 megawatts of electricity. Fifty megawatts is consistent with other large data centers if you make an allowance for rapidly improving computer technology and Apple's power saving claims. The proposed solar farm, given a typical figure of $3 per watt for large photovoltaic installations, will probably cost about $60 million. The solar farm can supply 5 megawatts or about 10% of the data center's estimated 50-megawatt energy requirement. At noon on a sunny day the percentage could rise to 40%.
As Greenpeace says, electricity in western North Carolina comes mostly from nuclear and coal. Apple will probably pay about 5 cents per kilowatt-hour, a rate that applies to large industrial users of electricity. So if we work out the numbers, the solar array, costing $60 million, and providing an average of 5 megawatts, will save about $2.2 million per year in electricity purchased from Duke Energy. Operation and maintenance of this large solar farm will cost about $940,000 per year. That leaves a savings of about $1.26 million compared to the cost of an equal amount of electricity from Duke. That savings has to be balanced against the estimated $60 million cost. If we take the life of the installation as 25 years, the stream of $1.26 million saved payments over 25 years with an interest rate of 6%, a reasonable number for an industrial installation, the present value of the 25 payments is about $16 million. So Apple is paying $60 million for a benefit worth $16 million. Put another way, Apple is paying about 19 cents per kilowatt-hour for electricity that they can buy from the utility for 5 cents. 19 cents per kilowatt-hour is actually a low number for photovoltaic electricity plants.
The way I see it is that Apple is throwing away $44 million of stockholder money to pacify delusional fans of green energy. Apple makes a big thing of limiting its carbon footprint. The CO2 emissions saved by Apple's 5-megawatt solar plant is neutralized forever in less than a day by the fact that the Chinese are adding a new large coal generating plant every week. China is where Apple manufactures its products.
Why does Apple make meaningless green gestures? Are they terrified by Greenpeace? Do they lack the courage to confront Greenpeace; something that is not very difficult considering that Greenpeace is constantly making comically extremist claims. Since Apple is highly secretive we don't know their thinking. Maybe they are so poorly informed about the facts of green energy that they think that tossing $44 million down a green rat hole is somehow a worthwhile gesture. Apple's failure to pursue a rational environmental policy at the expense of its stockholders is bad. What is unforgivable and cowardly is for Apple to appease extremists, like Greenpeace.