RE100 member Microsoft has signed a 15-year power purchase agreement (PPA) for renewable power from a 90MW wind project in rural Pennsylvania, US, and is helping to open up the local market to further direct investment by businesses in renewables.
RE100 is the global corporate leadership initiative on renewables led by The Climate Group in partnership with CDP, bringing together more than 150 companies committed to sourcing 100% renewable electricity.
The Big Level wind facility by TransAlta is the third PPA signed by Microsoft in the PJM Interconnection, and takes the company’s total renewable electricity portfolio to more than 1.2 gigawatts (GW) across six states and three continents.
As well as clean power, the project will bring multiple economic and social benefits to Hector Township. Construction is now underway – creating 100 jobs, and over the life of the project, local communities will receive more than $8 million in tax benefits and landowner lease payments.
"Working with companies like TransAlta to bring new projects online, especially wind projects in states outside the Wind Belt, is good for our business, the community and the clean energy economy," said Brian Janous, General Manager of Energy and Sustainability, Microsoft.
John Kousinioris, President, TransAlta Renewables added, "Microsoft is a leader in procurement of renewable energy and a catalyst for change in how corporate customers can control their energy procurement.”
Accelerating market change
Further to sourcing 100% renewable power for its own operations, Microsoft is demonstrating further leadership in the transition to renewables by helping to open up the market to smaller players.
The IT giant has created a new contract to sit on top of PPAs to remove risk for buyers and incentivize aggregated energy storage – providing solutions that are scalable and affordable.
PPAs are an increasingly popular way for businesses to source renewable electricity. The last RE100 Progress and Insights Report showed how 2016 saw a fourfold increase in the use of PPAs by RE100 members, and according to Microsoft, renewable energy created from PPAs went from zero to more than 13 gigawatts in the US in less than a decade.
“This rapid growth, both within our portfolio and beyond, is because these deals are good for business,” write Brian Janous, General Manager of Energy and Sustainability and Kenneth Davies, Director of Innovation for Energy Strategy & Research, Microsoft, in a blog.
“Renewable energy agreements help companies meet sustainability commitments customers increasingly expect and – if structured properly – do so in a way that provides a hedge against the risk of rising electricity costs on the open market. The fuel for renewable energy projects – the wind and the sun – are free, enabling a fixed price over the length of the agreement.”
They continue, “However, as the market has matured, it’s become clear that other risks and complexities exist within the PPA structure that may inhibit their effectiveness as risk management tools. The failure to simplify this complex process and mitigate the risk assumed by the buyer could endanger the corporate procurement market, causing it to slow or stall out completely.”
Driving innovation
To overcome this challenge and encourage thousands of smaller companies to invest in PPAs, Microsoft has developed a ‘volume firming agreement’ (VFA) to address near-term price fluctuations created by the hourly variability of wind and solar. Effectively, VFAs remove the risk from the buyer and relocate it to those who want it – namely insurance companies.
To date, Microsoft has signed three such contracts with Allianz, covering three wind projects in Texas, Illinois, and Kansas, totalling almost 500 MW.
“At Microsoft, we are committed to driving a more sustainable future beyond our own four walls,” write Janous and Davies. “That is why our corporate energy commitments are broader than just megawatts. We intend to support and enable the transformation of the energy sector using our buying power and innovations so everyone can benefit.”
Mike Peirce, Corporate Partnerships Director, The Climate Group, praised the company’s success. “Since joining RE100 in 2015, Microsoft has consistently demonstrated leadership by switching to direct sourcing of renewable energy and backing supportive policy frameworks. Having already achieved 100% renewable electricity, it’s fantastic to see the company now driving forward innovative solutions to help companies of all sizes to do the same.”
Microsoft’s news comes in the wake of a special report by the Intergovernmental Panel on Climate Change (IPCC), which warns of rapidly increasing impacts of global warming above 1.5° Celsius.
A recent RE100 paper sets out recommendations for ways in which companies can demonstrate leadership on renewable electricity and accelerate market shifts.
Read more RE100 news here.