Originally published on RMI Outlet.
By Laurie Guevara-Stone
One of the largest information and communication technology (ICT) companies in the U.S. will soon power its five Texas data centers with 100 percent renewable energy. Hewlett-Packard (HP) recently announced a 12-year contract to buy 112 megawatts of wind power from a SunEdison wind farm in Texas. The purchase means HP will reach its 2020 operational greenhouse gas emissions reduction goal five years ahead of schedule. It also is an excellent example of the progress promoted by the Business Renewables Center, an RMI-convened and member-led platform that accelerates corporate procurement of off-site renewable energy by bringing together corporate buyers, project developers, and service providers (including founding members HP and SunEdison).
JUMPING ON THE TEXAS WIND BANDWAGON
Just this week HP joined Facebook, Walmart, Dow Chemical, and Microsoft in purchasing wind power from Texas. HP has approximately 1.5 million square feet of data center operations in the state. Its purchase of 112 megawatts of wind power from SunEdison will provide 100 percent of the power necessary to run those centers, and is the equivalent of powering 42,600 homes each year. It also brings the amount of Texas wind bought through corporate power purchase agreements (PPAs) in the past three years up to 1 GW.
Both HP and SunEdison are founding members of RMI’s Business Renewables Center (BRC). HP’s purchase will allow SunEdison, the world’s largest renewable energy development company, to begin construction on the 300 MW South Plains II wind farm. Texas leads the country in wind power nameplate generating capacity, having a total installed capacity of over 14 GW—21 percent of the 66 GW installed in the U.S. Besides having good wind resources and relatively cheap land, the boom in Texas wind power is partly due to the Competitive Renewable Energy Zone (CREZ) transmission lines completed in 2014. The new 345 kV transmission lines include 186 projects across Texas that help get energy from the ideal wind farm sites to the areas that need energy most. They’ll increase Texas’s wind capacity an estimated 50 percent.
BRIDGING THE GAP BETWEEN CORPORATIONS AND DEVELOPERS
One challenge for corporate offsite renewable purchases is often the length of the PPA. “One general issue that we deal with is developers wanting long-term deals such as 25 years and corporations wanting shorter-term deals,” says RMI associate Kevin Brehm, who works with the BRC. “The median duration of a corporate offtake PPA is 20 years, which is a long commitment for a corporation.” Consider that among HP’s ICT peers, for example, Yahoo is 21 years old (founded 1994), Google is 17 years old (founded 1998), and Facebook is just 11 years old (founded 2004). Imagine locking in an energy deal as long or longer than your company has even existed. The BRC helps bring developers and corporations together and bridge that gap to move a deal forward. “The BRC is a way for developers and corporations to meet in a low-risk, pre-commercial environment, build relationships, and build trust,” says Brehm.
HP and SunEdison signed a 12-year PPA, which is enough longevity for revenue assurance for the developer but short enough for corporate comfort. This shows that developers are willing to work on terms that work for corporations and is one reason the market is trending towards shorter PPAs. “Most developers are understandably very eager to sign deals as soon as possible, so they can take advantage of the 30 percent investment tax credit (ITC), set to expire in 2017,” says Dan Seif, senior consultant at The Butler Firm, a consulting and legal services firm supporting many of the largest solar developers. “Though many are also playing the long game, they realize that securing PPAs for projects that start operating in 2018 and 2019 is important as well. ”
2015 A BOON FOR PPAS
The BRC has a goal of 60 GW of off-site corporate renewable energy procurement. However, closing a PPA can be a daunting endeavor. “Environmental considerations figure into all of our IT and real estate decisions that we’re making,” Gabi Zedlmayer, HP chief progress officer, told the New York Times. “It’s still rather a complex process over all—you know, we can’t just go and purchase the energy that we want. To get to this type of an agreement, this has taken us the better part of a year.” The BRC provides resources that help corporations navigate the transactions and that explain PPA contracts, the types of deal structures available, and how to perform an economic analysis of the deal.
So far in 2015, corporations have signed more PPAs than in any previous year, including one by two other founding members of the BRC—Kaiser Permanente and NextEra. In the first half of 2015 alone, corporations signed PPAs for almost 1.4 GW of renewables.
“Companies need to show shareholders and customers concrete action on climate change goals,” says RMI managing director Hervé Touati. “Large-scale renewable energy procurement does not have the size limitations of rooftop PV installations and is faster and more visible than energy-efficiency programs, even though in the long run energy efficiency can be a better solution. Large corporations are beginning to develop the expertise needed to structure, assess, negotiate, and get approval for large-scale renewable PPAs. Knowledge sharing is key to accelerate the trend and avoid reinventing the wheel.”
THE ICT SECTOR GOES RENEWABLE
HP is only one of the small but fast growing number of players in the ICT industry that are purchasing renewable energy, including Intel, Microsoft, Google, Apple, Facebook, Salesforce, Cisco, and others (many of them also BRC members, advisors, and other allies). In fact, the amount of money the ICT sector spends on renewable energy is growing faster than in any other sector, according to a recent National Renewable Energy Laboratory (NREL) report. Data centers are responsible for about 30 percent of all electricity used by the ICT sector, and 2 percent of total U.S. electricity consumption. Many ICT companies are turning to renewables to both reduce costs and address environmental goals.
The ICT sector is an important market for renewables. In fact, the NREL report states, “Given the scale of electricity use by ICT companies, renewable electricity procurement across all levels of the industry could be a significant market driver for renewable development in the United States.” HP’s PPA with SunEdison will avoid the emission of more than 340,000 tons of carbon dioxide annually.
The raison d’être of the BRC is to leverage the knowledge of the first movers, many of which are members, to create a large class of fast followers that will benefit from the accumulated experience of their more advanced peers.
Reprinted with permission.
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