Originally published on RMI Outlet.
By Stephen Abbott
Over the past two years, Microsoft has contracted for 285 MW of renewable power from two off-site wind energy projects. These two wind farms—capable of generating enough electricity to power 125,000 U.S. homes—could not have been built without the long-term off-take agreement provided by Microsoft, demonstrating the large-scale impact that companies can have on renewable energy deployment. The Business Renewables Center (BRC), an RMI-convened initiative and member-led platform, is working to accelerate corporate procurement of off-site renewable energy such as Microsoft’s, by bringing together corporate buyers, project developers, and service providers.
Managing Growing Energy Needs
Microsoft’s data center energy group—the principal champions of these transactions—pursued renewable energy contracts to both reduce costs and limit the company’s operational exposure to future energy price fluctuations, especially increases. The data center energy team recognized that as Microsoft developed its cloud-computing infrastructure, the construction of large data centers committed the company to purchasing large quantities of electricity to power these assets over their operating lifetimes. In fact, while building a data center can cost hundreds of millions of dollars, it can cost up twice that to power the building over its lifetime.
Fortunately, renewable energy power purchase agreements (PPAs) allowed the company to balance this large, long-term demand with a similarly large, long-term, fixed-cost supply. The energy group further justified the project by showing that these deals would save the company money. According to Brian Janous, Microsoft’s director of energy strategy, “Projects like this represent a good long-term bet for companies with significant dependencies on energy.”
Laying the Groundwork
Microsoft’s sustainability department’s efforts to promote, codify, and communicate carbon neutrality within the company laid the groundwork for the data center energy team’s renewable energy contracts. In 2012, Microsoft’s sustainability team won a major victory when the company announced that it would become carbon neutral starting the following year. To achieve this ambitious target, the sustainability department implemented an internal carbon fee across all business units. As one employee put it, this effort “helped codify sustainability into the culture of the corporation.”
The sustainability group also set up a “carbon neutral council” as a way to communicate with and respond to questions from business unit leaders. According to TJ DiCaprio, senior director of environmental sustainability, “By putting a price on carbon, the key leadership of the company understood the external impact of greenhouse gas emissions on our business, and we were able to then drive that accountability across the company.” This clear corporate policy on sustainability, backed up by concrete actions and a clear line of communication, made employees across the organization open to the idea of buying renewable energy and willing to assist in the process. Furthermore, the data center energy team worked closely with the sustainability group throughout the procurement process to communicate and build support for its proposals internally.
Accelerating the Process
Although many companies find that off-site renewable energy transactions require one to two years to complete, Microsoft was able to complete its first transaction in six months, and its second in only six weeks. A few key strategies helped them achieve this level of efficiency:
- Dedicated, knowledgeable team: Microsoft recognized that no individual facility manager would have the necessary time, resources, or motivation to complete an off-site transaction. To address this, the company built a dedicated, centralized energy team consisting of individuals with energy-industry experience.
- External assistance: Corporate off-site renewable energy transactions face a number of challenges unique to their specific niche. As a result, even though Microsoft’s team had energy-industry experience, they found help from external partners to be invaluable.
- Executive support: These types of transactions require support from a broad spectrum of internal departments (e.g., legal, accounting). Microsoft’s energy team found the resources and answers it needed quickly once it had secured the explicit support of senior executives.
The Microsoft case study proves that these deals are not only technically feasible but can also be executed quite quickly if deal proponents effectively educate their colleagues and take the right preparatory steps. These lessons build on those documented in our previous blog on Kaiser Permanente’s 153 MW deal for wind and solar energy. The BRC staff will continue to collect and document these best practices in order to help our members navigate the process of buying renewable power more quickly and successfully. If you are interested in learning more about the BRC, please email us at email@example.com.
Reprinted with permission.
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