Is Big Tech the new power player in renewable energy?
Tech giants, as some of the biggest corporate buyers of renewables, are driving costs down – but some remain sceptical about their wider commitment to green
Having pioneered corporate power-purchase agreements (CPPAs) for wind and solar throughout the 2010s, tech giants have come to dominate the energy of tomorrow, mirroring the power of utility companies.
Amazon, Google and Facebook feature in the top five US corporate buyers of renewable energy in 2020, according to data from the Renewable Energy Buyers Alliance – the other two being McDonald's and Verizon.
“Five years ago, all of the power purchasing and all of the demand was coming from large utilities. Today, corporates are driving demand and sending a message to the energy industry that the grid needs to change, and your customers want this,” says Amanda Peterson Corio, head of Europe, the Middle East and Africa, and Asia-Pacific data centre energy at Google.
The biggest buyer of clean energy, Amazon, announced it will purchase power from 14 new renewable energy projects in the US, Canada, Finland and Spain in June, bringing its 100 per cent renewables target forward to 2025. The other four can already claim to power their operations on 100 per cent clean energy.
Big Tech companies now hold significant sway over grid infrastructure and local economic development as offtakers of renewable energy in the US, Europe and Asia. As the energy transition steps up its commitment to battery storage, many see the efforts of some Big Tech companies to champion hourly matching schemes as frontrunners for the decade to come. But how much of this is virtue-signalling and what do their commitments really mean for the electricity grid?
Ed Crooks, vice-chair for the Americas at Wood Mackenzie, says there is a “very broad movement” among the leading Big Tech companies to support renewable energy, and to contract for wind and solar projects to power their operations.
“It is absolutely not ‘greenwashing’,” he says, rejecting the idea that their moves are empty gestures designed solely to burnish their environmental, social and corporate governance credentials. “It’s what investors want, it’s what their customers want, it’s what their staff want,” he says. “And they’re not doing it quietly. They want their support for renewable energy to be visible.”
Crooks also underscores that their data centres have a “very substantial carbon footprint”, which would be even greater if they ran solely on electricity from coal-fired power plants.
Microsoft’s Brian Janous, general manager of energy and renewables, says the need to decarbonise is clear, given that Big Tech is one of the only industries whose thirst for energy is growing, while others’ consumption in the developed world is flatlining.
As of 2020, the five Big Tech companies procured 7.2GW of renewable capacity, according to an International Energy Agency (IEA) report, accounting for nearly 30 per cent of all renewable CPPAs.
An Amazon spokesperson said CPPAs allow the company to work “with governments and utility suppliers around the world to help bring more new renewable energy projects online”.
This, Amazon claims, has had a positive benefit for other energy customers. “In Ireland, we were the first organisations to use CPPAs to bring renewable projects online and deliver clean energy to the Irish grid, at no cost to energy consumers,” the spokesperson added.
Economic impact and value chains
In May, Facebook released an Economic Impact Study focused on the US, in which it states its programme has resulted in $3bn domestic investment in renewables creating roughly 40,000 construction jobs and 1,000 operational jobs.
According to a recent commentary from the IEA, Big Tech companies could “make even greater use of their financial strength to underwrite renewable investments where they are needed most: in developing and emerging economies”.
Data demand will grow rapidly in emerging economies over the coming decades, the report continues, requiring new regional data centres to serve growing demand.
Big Tech’s purchasing of renewable energy has been largely concentrated in areas where their data centres are located: North America and Europe. With an increasing number of data centres in India, Singapore and Taiwan, big tech’s influence as a corporate clean-energy buyer looks set to become more global.
In April, Facebook signed a virtual power purchase agreement (VPPA) with Singaporean energy provider Sunseap, for solar energy from the country’s largest offshore floating solar farm in the Straits of Johor. In the same month, it signed a similarly structured agreement, whereby it does not own the renewable asset, but enters into long-term electricity purchases, on a 32MW wind project in the south-west Indian state of Karnataka.
Urvi Parekh, director of renewable energy at Facebook, says of Big Tech companies in general, “everyone is identifying the local and regional issues that are changing and impacting the specific grid to decarbonise”.
“Asia was one of the more challenging geographies to find sufficient volumes of renewable energy,” she says, stressing the need to come up with innovative solutions in land-constrained countries, such as Singapore, to deploy solar energy.
Facebook has also announced it aim to be net-zero across its value chain, which Parekh characterises as a “new horizon” for Facebook.
“I think on the electricity side, the fragmentation of value and supply chains is the hardest part of it. We’re going to have to do a lot of work,” she adds.
Apple has announced a goal to go carbon-neutral by 2030 across its supply chain and products. In October, it announced that some 175 of its suppliers will transition to clean energy as it brings more than 9GW of green energy onto power grids.
Clean energy on the hour
Scrutiny over value chains is mirrored by other commitments to scrutiny over energy consumption. Last September, Google set the ambitious target of being 100 per cent powered by clean energy on an hourly basis by 2030.
While businesses can claim to be 100 per cent renewable on an annual basis, the way this is monitored and certified means they can fudge their carbon consumption by way of green certificates.
In May, utility AES signed an agreement to supply the electricity to power Google's Virginia-based data centres with 24/7 carbon-free energy under a 10-year contract. AES will source energy from a portfolio of wind, solar, hydro and battery storage.
“The story here is that Big Tech companies are leading trends in corporates’ consumption of renewables that then trickle down to the rest of industry,” says Toby Ferenczi, founder of non-profit initiative EnergyTag.
A coalition of more than 100 supporting organisations, including Microsoft, Google, Iberdrola and Orsted, EnergyTag looks to develop a mechanism to ‘tag’ electricity with the time and source of production so consumers can match their consumption with clean energy, hour by hour.
“I truly believe that this is the future trend and these Big Tech companies are frontrunners,” says Julia Padberg, principal at SET Ventures, a clean energy venture capital company.
SET Ventures is the lead investor in FlexiDAO, a software start-up focused on hourly energy certification and fellow supporter of EnergyTag, which counts Acciona, Total and Iberdrola among its customers.
“Where a lot of other corporates are just buying cheap certificates from somewhere else, these Big Tech companies are actually the only ones that are truly consuming green energy that they have generated or acquired in real-time,” Padberg says.
National and regional governments have taken note of this push towards 24/7 matching, opening up the sector to innovation.
Buried in its $2tn infrastructure plan, Joe Biden’s US administration has also said it wants to purchase 24/7 renewables for government buildings to “drive clean energy deployment across the market”.
There are clear economic incentives to buying clean energy now, many argue. “Make no mistake, [Big Tech’s] clean energy strategy has helped them to drive down their power costs,” says Gero Farruggio, head of Australia and global renewables at Rystad Energy. “It’s very much a commercial [venture]. If you were to develop any energy generation, solar would be the cheapest.”
There is nonetheless a different sentiment among Big Tech companies, as compared with other businesses kickstarting their energy transition, he says, comparing them with big oil companies that have started to develop renewable capacity.
“Fundamentally, big oil sees renewables as part of their journey, whereas Big Tech sees it as their destination,” he says, citing the former’s efforts to wean themselves off fossil fuels versus the latter’s moonshot targets.
Elsewhere, there have been signs that Big Tech’s climate engagement is not as thorough as it has made out.
According to analysis by think-tank InfluenceMap, the five Big Tech companies’ climate policy positions do not translate into strategic lobbying, with only 6 per cent of Big Tech’s lobbying on federal legislation between the third quarter of 2020 and the second quarter of 2021 related to climate.
The report “found that while Big Tech holds positive positions on climate policy, its support is not backed up by strategic advocacy. In addition, the companies’ direct influence is overshadowed by the highly strategic and anti-climate advocacy of their industry associations in the US and abroad.”
Nonetheless, the sector appears to be hell-bent on increasing demand to push costs down.
“Part of the reason why we’re doing what we’re doing is to enable that downward cost curve,” Peterson Corio explains. “If you show demand, you’ll have more supply and you’ll get cheaper energy.”
Peterson Corio says she hopes this is what will happen in the next phase of the energy transition, whether that is driving down the costs of hydrogen or decarbonising grids locally.
“We’re doing a lot, but it’s a big problem. And it’s going to take more than just Google or other tech companies to [solve this],” she says.
An earlier version of this article was published in fDi Intelligence’s August/September print edition.