Connect with our team to request a demo of our software

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Get in Touch

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

The Essentials Of Clean Power For Data Centers

by: Seyed
Nov 3

We are seeing increasing adoption of clean power for data centers.

According to research published in 2023 by S&P Global Intelligence, in the U.S., the data center industry “continues to pace the corporate renewables market,” with Amazon, Google, Meta, Microsoft and Apple Inc. having a “combined renewable portfolio totaling over 45 GW around the globe,” which is more than “half of the global corporate renewables market.” Moreover, the research found that four big data center providers “have bumped up their renewable investments to a combined 1,500 MW,” and Google, Microsoft and Iron Mountain are “taking extra steps in order to be powered by clean energy around the clock.”

Yet, procuring clean power for data centers is a complex process. Data center leaders exploring clean power options must navigate a barrage of factors during the procurement stage. By thinking strategically about how to buy clean power, providers and operators can find solutions that best fit their business needs, reduce their carbon footprint and electricity costs, and hedge against energy volatility.

Why Pursue Clean Power for Data Centers Now?

There are four main reasons why data center leaders should pursue clean power now rather than later.

Being Environmentally Responsible

The first reason is environmental responsibility. By pursuing clean power now, providers and operators can benefit the planet. The sooner data centers move away from traditional energy sources, the sooner they can reduce their carbon footprint and make an impact.

Getting Ahead Of Regulations

Ethical reasons aside, pursuing clean power now also enables providers and operators to future-proof their data centers. On the climate policy front, new regulations are on the horizon, and more could be on the way. For instance, in September 2023, California passed Senate Bill 253, which will “require companies with greater than $1 billion in annual revenues to file annual reports publicly disclosing their Scope 1, 2 and 3 greenhouse gas (GHG) emissions.” Additionally, a Thomson Reuters analysis notes the SEC has proposed rules that would require companies to make “climate-related disclosures,” and these rules are “likely to commence in either late-2023 or 2024.” Proactive action is more strategic than reactive action. If providers and operators take a reactive approach instead of a proactive one, they might be left with a short amount of time to adapt and evolve in light of future regulations.

Hedging Against Energy Volatility

However, data center leaders should not make the shift to clean energy solely out of concerns over potential future regulations. They also need to factor in the premiums they currently pay for energy costs. Energy costs can rise due to inflation, geopolitical conflicts, economic volatility and natural disasters. By switching to clean power, data center providers and operators can mitigate those risks, setting the foundation for better financial health.

Meeting Customer Preferences

Additionally, from my observations, customers increasingly value sustainability and want to work with data centers that leverage clean power. Procuring clean power for data centers enables leaders to meet customers’ needs and stand out from competitors who have yet to make the move.

Identify Goals For Clean Power Procurement

Ultimately, green electrons are the same. But not all clean power is the same. The technologies that produce them and the way those technologies are procured vary.

There are multiple ways to pursue clean power, but three strategies are emerging as front-runners.

  • 100% renewable energy: With this approach, data centers try to ensure that their annual electricity consumption matches an equal amount of clean energy generated by managed assets. If not done properly, this approach may have a smaller emissions reduction impact than anticipated.
  • Carbon matching: This is an annual matching approach that supports new clean energy projects in cost-effective grids (but doesn’t address the infrastructures of local grids where the energy is consumed).
  • 24/7 carbon-free energy (CFE): Under this approach, every hour of the day, a data center’s electricity consumption would have to match its generation of clean and renewable energy generation in the same grid or energy market. 24/7 CFE is the most expensive and complex of the three strategies.

Successful clean energy procurement starts with data center providers and operators identifying their goals. Stakeholders should examine their sustainability and financial goals; carbon mitigation and financial health are not always aligned. For instance, from a sustainability standpoint, hosting a data center in a particular area might make sense. However, the incremental clean energy costs associated with it could render that location a financially sub-optimal option in the long run.

Once providers and operators have identified their sustainability and financial goals, they can use artificial intelligence and data analysis tools to forecast these approaches’ carbon and financial benefits and evaluate prospective power purchase agreements (PPAs).

Data center providers and operators also need to plan for the long term. The shift to clean power should provide financial stability for the next five to 10 years at minimum (barring fluctuating market conditions and other volatilities). Ideally, they should decide their desired outcomes from clean power in the next 10 to 30 years and ensure any PPAs they sign align with those goals.

Reliability And Operations Are Paramount

Shifting to clean power is a complicated process that requires understanding electricity markets, power system operations, financial transactions and regulations, among other factors.

To navigate these complexities, data center leaders should seek external expertise or build teams internally that are specifically focused on these issues.

In either case, data center leaders must keep reliability and operations top of mind. They still need stable and reliable electricity; switching to clean power is a gradual process, not an immediate one. A complete shift to clean power may be unrealistic for many data centers. But by taking incremental, strategic steps during the clean energy procurement phase, data center leaders can meet their decarbonization goals, reduce their electricity costs, future-proof their operations, and, ultimately, do their part in protecting our planet.

This article was originally posted as part of the Forbes Business Council.

Corporate Clean Energy Procurement: From RECs To 24/7 CFE

by: Seyed
Oct 11

An Overview of the Most Common Levers and Goals

*This article was originally posted as part of the Forbes Business Council.

Corporate clean energy procurement is on the rise. Progress was initially spurred by a handful of early adopters, such as Google and Meta. Today, fresh mandates, volatile energy markets, new incentives and increasing concerns about climate change are combining to drive more companies to set clean energy goals and emissions reduction targets and rethink how they buy power.

Based on my experience helping organizations determine the best clean energy procurement philosophies and power purchase agreements for their businesses, here are two popular levers companies are using to decrease their corporate carbon footprint, as well as brief overviews of the most common corporate renewable energy goals.

Clean Energy Levers

  • Renewable Energy Credits (RECs)

Renewable energy credits, commonly known as RECs, have been the most popular method for companies to support clean energy generation without directly purchasing renewable electricity. When a renewable energy project generates electricity and feeds it into the grid, it also generates RECs. Each REC represents one megawatt hour (MWh) of renewable energy produced. Companies can purchase RECs from renewable energy producers and use them to offset their own greenhouse gas emissions.

This indirect support for renewable energy has historically encouraged the growth of clean energy projects, but RECs also have drawbacks. Studies have shown that they do not meaningfully reduce carbon emissions. Companies just beginning their clean energy journey may want to start with RECs, but regulatory and policy changes in the next few years could complicate emissions disclosures related to RECs.

  • Power Purchase Agreements (PPAs)

Corporate power purchase agreements are long-term contracts between a renewable energy provider and a corporate power buyer. PPAs allow companies to procure electricity from renewable sources over an extended period. Corporate PPAs often span 10 to 20 years, providing stability for both parties and enabling the financing of new renewable energy projects.

By committing to purchasing renewable electricity through PPAs, corporations can secure a predictable and cost-effective energy supply that can help reduce their carbon emissions. In my experience, however, companies typically need to have 10 megawatts (MW) of load (i.e., use about 100 GWh of electricity per year) to make contracting PPAs worthwhile.

Corporate Clean Energy Goals

Different companies, policymakers and nonprofits advocate for different goals. Below are three of the most popular.

1. 100% Renewable Energy (RE)

Achieving 100% renewable energy involves matching the energy a business consumes with renewable energy produced on an annual basis—e.g., a company will procure 1 MWh of clean energy for every 1 MWh of energy it uses over the course of a year. Many corporations have pledged to reach this milestone as part of their sustainability targets, and we’re seeing companies increasingly meeting some or all of their renewable energy through PPAs. The value of using PPAs to achieve 100% RE is that they directly lead to new clean energy on the grid and send a strong market signal for new renewable electricity. However, many companies use RECs, too (especially those early in their clean energy journey). Regardless of what levers you use, making a commitment toward 100% RE can be a great starting point in the corporate clean energy journey and help drive innovation and sustainability across the entire supply chain.

2. Emissionality

Emissionality assesses the impact of a clean energy project on reducing greenhouse gas emissions. It considers numerous factors, such as timing (e.g., what hour of the day the project produces energy), as well as the project’s location and the grid’s existing energy mix.

For instance, California’s electric grid has more renewable energy resources than Montana’s, which mostly runs on coal and gas; emissionality places higher value on a renewable project located on the Montana electric grid because it displaces dirtier generation sources. The Emissions First Partnership argues that by choosing projects with high emissionality, corporations can ensure their investments lead to the most cost-effective emissions reductions. A recent report sponsored by Meta suggests that carbon matching (i.e., emissionality) enables the maximum carbon abatement for the least cost.

3. 24/7 Carbon-Free Energy (CFE)

24/7 CFE goes beyond offsetting emissions with renewables on an annual basis; it involves ensuring a continuous, reliable and carbon-free energy supply around the clock. Achieving this requires a highly sophisticated combination of renewable energy sources, energy storage technologies and demand response strategies.

Pioneered by Google, this approach focuses on the end goal of complete decarbonization of the electric sector by incentivizing commercialization of “last mile” decarbonization technologies like long-duration energy storage. Advocates for 24×7 CFE argue that while these last mile technologies may be more costly in the short term, investment in their commercialization should lead to a least-cost long-term solution. Microsoft has a similar philosophy—”100/100/0″—under which it aims to match 100% of its electricity consumption, 100% of the time, matched by zero-carbon energy purchases.

Choosing The Best Option For Your Company

There are many different opinions about how best to achieve renewable energy goals and reduce carbon emissions to get to net zero. For starters, I recommend first familiarizing yourself with RECs and PPAs (here is a great explanation of RECs, and one for virtual PPAs).

Defining clean energy goals for your business can be more complicated. You can start with an energy audit of how much energy you use now (and how much you’ll need in the future), as well as when and where you use it. Utilities have different green tariffs, and electric grids and wholesale markets have unique pricing, congestion and renewable penetration—all factors that affect cost and carbon-reduction metrics.

Also, think about what type of clean energy assets will be best for your business. Wind? Solar? Energy storage? Each has a different generation profile, and you may want a combination to get the maximum carbon reduction per dollar.

Finally, consider joining an organization like the Clean Energy Buyers Association, the Sustainable Purchasing Leadership Council, or the World Business Council for Sustainable Development. They have excellent resources and can connect you with other businesses exploring clean energy goals.