Tech Companies Banking on Green Data Centers
By Russell B. Cohen, Esq
Data centers, those enormous hubs of computer processing power that support the explosive growth of the Internet, are turning to renewable energy to reduce their carbon footprints and lock-in costs for these energy intensive operations. As more of us shop, share, and search online, U.S. data centers have grown to use nearly 10 gigawatts of electricity, the equivalent of simultaneously running 30 million toasters, according to Green House Data.
And while these facilities have very few occupants, they are huge energy users, primarily keeping massive arrays of servers humming along and cool enough to function properly. According to Pacific Gas & Electric Company, data centers can consume up to 200 times more electricity as standard office spaces of the same size. In 2013, they consumed an estimated 91 billion kilowatt-hours of electricity. That’s the equivalent of 34 large (500-megawatt) coal-fired power plants, and enough electricity to power every household in New York City twice over, according to the U.S. Energy Department and the National Resources Defense Council. By 2020, U.S. data centers are projected to use a whopping 140 billion kilowatt-hours each year, costing American tech companies $13 billion in annual electricity bills.
While data centers are the backbone of the digital economy, running computing services for tech giants like Google, Amazon, Microsoft, and Apple not only makes them one of the fastest-growing consumers of electricity, but in some cases the key drivers in the construction of new power plants. With commitments to achieve carbon neutrality and maintain public good will, tech companies have entered into long-term power purchase agreements (PPAs) with renewable energy providers to make large-scale projects possible, since their investments provide the financing that would otherwise be unobtainable. These agreements also provide clean energy developers certainty on the payments for their power, which in turn allows them to build these projects and obtain additional financing to build new ones.
And these long-term project investments are beginning to pay-off for tech companies. According to the 2014 Levelized Cost of Energy Analysis, prepared by financial advisory firm, Lazard, the cost of wind power has decreased 58 percent since 2009, and 15 percent in the last year alone. Without government subsidies for renewable energy, wind power now costs an average of 3.7 cents per kilowatt-hour. By contrast, natural gas comes in at 6.1 cents and coal at 6.6 cents per kilowatt-hour. And solar is a close second, according to a recent Deutsche Bank market report, which predicts solar power will reach price parity with conventional electricity in 36 states by 2016, or well over half the country.
Google was one of the first non-utility companies to invest in renewables to achieve its long-term goal of powering all its operations with 100% renewable energy. In 2010, Google began purchasing wind energy to run its Midwestern data centers – which only use 50 percent of the energy other data centers consume – saving Google more than $1 billion. To date, Google has signed nine PPAs for 1,146 megawatts (MW) of long-term wind contracts, enough to power more than 330,000 U.S. households. Two of its largest data center projects include 20-year PPAs for the entire output of the 240 MW Happy Hereford wind farm outside of Amarillo, Texas, and 48 MW from the Canadian Hills Wind Project in Oklahoma.
(Google’s Douglas County Data Center in Georgia)
“Because energy is a large operating expense at Google, it is beneficial to power the data centers with low-cost wind power,” says Gary Demasi, Google’s Director of Operations, Data Center Energy and Location Strategy. According to Demasi, the PPAs provide Google with an opportunity to lock in lower costs as a hedge against rising traditional utility costs. Although Google concedes that the long-term PPAs are currently costing the company more in up-front expenses, the pay-off is expected in the near future. “I’m betting that energy prices are going to go up,” says Joe Kava, Google’s Vice President of Data Centers. “In time…this is going to be a wise business decision as well as a wise environmental decision.”
In late 2014, Microsoft announced a deal to purchase 175 MW of wind energy from the Pilot Hill Wind Project in Illinois, about 60 miles south of Chicago, as part of a 20-year PPA with EDF Renewable Energy to power its data centers. Once online, Pilot Hill will be Microsoft’s largest wind project — producing the equivalent electricity consumption of nearly 70,000 homes – and generating all the energy needed to power Microsoft’s sprawling 700,000 square-foot Chicago data center. “It is encouraging to see leading corporations investing in the sector based not only on their desire to positively impact the environment, but also because it simply makes good business sense,” says Ryan Pfaff, EDF Renewable Energy’s Executive Vice President of Development, who also sees the cost of renewable energy continuing to decline.
This announcement comes on the heels of Microsoft’s groundbreaking 20-year PPA with RES Americas to buy 100 percent of the electricity generated from its Keechi Wind Farm Project in Jack County, Texas. “Microsoft is making the financing, construction, and operation of this 110 megawatt project possible,” says Susan Reilly, President and CEO of RES Americas. “To be clear: it would not have happened otherwise.”
Since 2013, Apple’s data centers have consumed more energy than any other part of the company’s operations, growing from 220,000 MW-hours in 2012 to more than 300,000 MW-hours annually. As part of the company’s commitment to fully powering its operations with renewable energy, Apple recently signed a 25-year, $848-million, PPA with First Solar to receive nearly half of the energy produced from the California Flats Solar Project in Monterey County, California. By 2016, the 2,900-acre site will generate 280 MW of renewable solar power, 130 MW of which Apple will use to power its data centers and related operations.
And Apple’s data center energy usage is only expected to grow. Earlier this year, Apple announced one of its most ambitious projects to date — its plans to build a $2 billion data “command center” in Mesa, Arizona. The 1.3 million-square-foot facility will be powered entirely by renewable solar energy, supplied partially by a new local solar farm, developed with local utility, Salt River Project. Once completed, the project will provide around 70 MW of solar power to Apple’s regional data center – enough to power the equivalent of 14,500 Arizona homes.
(Apple’s Maiden Data Center in North Carolina)
While Apple has yet to realize any upfront financial benefits, “over time, the renewable energy from California Flats will provide cost savings over alternative sources of energy,” says Joe Kishkill, First Solar’s Chief Commercial Officer. This sentiment is echoed by Lisa Jackson, Apple’s Vice President for Environmental Initiatives, and former head of the Environmental Protection Agency, who said that “the difference in what we’re going to pay for the power through this deal and what we would pay commercially is hundreds of millions of dollars.”
While Amazon was late to the green data center game, earlier this year, as part of its recent initiative to reach 100% renewables for its global Amazon Web Service (AWS) data center, AWS announced that it signed a 13-year PPA with Pattern Energy Group to support the construction and operation of a 150 MW wind farm in Benton County, Indiana, called the Amazon Web Services Wind Farm (Fowler Ridge). By early January 2016, the Fowler Ridge project will start generating approximately 500,000 MW-hours of wind power annually, or the equivalent of the electricity used by 46,000 U.S. homes a year, and will fully power both AWS’s current and future cloud-service data centers.
While the Fowler Ridge wind power is currently more expensive than the predominant coal energy used by area utilities, the long-term deal gives Amazon more predictable pricing in what is often a volatile market. “With agreements like this we’re increasing the amount of clean energy we consume while helping enable the construction of new renewable energy facilities,” says Jerry Hunter, Vice President of Infrastructure at AWS. And Amazon predicts that the PPA will eventually save the company at least $12 million per year over traditional energy sources.
For now, Amazon and other tech giants are banking on these future savings. “These companies are making real investments in renewable energy because they make good business sense,” says Kevin Borgia, Policy Manager for Wind on the Wires, a non-profit wind energy and transmission advocacy group. “Their actions are not driven by simple publicity or branding, but by business strategies that anticipate long-term market changes.”
Want to learn more about green data center operation, maintenance, and construction? Join EUCI August 10-11, 2015 in Denver for our Data Center Design & Construction conference. Book before July 31, 2015 and save $200 on registration prices.
*Russell. B. Cohen is a contributing author to Energize Weekly. He is currently an attorney with Lear & Lear, LLP in Salt Lake City, concentrating his practice in energy and natural resources law. Russell is admitted to practice in the State of New York, and is a member of the New York State Bar Association and the Rocky Mountain Mineral Law Foundation.