Microsoft defects from utility to purchase renewable energy

It’s not just individuals who want choice in where they get their energy. Large tech companies are finding ways to divest from utilities and procure their own power from renewable sources.

The latest in this trend is Microsoft. The Washington Utilities and Transportation Commission (WUTC) has approved a contract that will allow the technology giant to purchase clean energy directly on the open market, rather than from utility Puget Sound Energy (PSE). Microsoft will use the energy to power its 15 million-square-foot Redmond campus, the location of its corporate headquarters.

The deal continues a trend of technology companies taking on procurement or even sales of clean energy. Last year Apple was approved to become an independent power producer (IPP), following Google, which did the same back in 2010. Though the Microsoft agreement doesn’t allow for Microsoft to sell energy on the market, it’s still a major step for the company.

Under the agreement, Microsoft will meet the electricity needs for its Redmond campus with 25% renewable energy through 2020, a level quite a bit higher than Washington State’s Renewable Energy Standard (RES) which mandates 15% renewables by 2020 (excluding the state’s legacy hydroelectric projects). Starting in 2021, Microsoft will increase that commitment to 40% RES-eligible renewables.

In a blog post, Microsoft president Brad Smith said, “This isn’t just an aspirational goal. In this contract, we’ve committed to buying renewable energy at levels substantially higher than Washington state law, targets that are not only aggressive but meaningful. If we fail to meet these requirements we will face penalties.”

PSE does provide a green tariff that allows companies to buy renewable energy. That program includes customers like Target, Starbucks, and REI. But Microsoft’s unique needs, including its size, energy use, and concentration of facilities, made it a good candidate to pursue its own energy procurement rather than taking part in this tariff, said Wendy Gerlitz, policy director for the NW Energy Coalition. The new contract is specific to Microsoft and does not establish a program that can accommodate other businesses, nor would this model make sense for most other utility customers, she said.

Because Microsoft is PSE’s biggest customer, there was concern about how the new arrangement would affect electricity rates for remaining customers. So as part of the agreement, Microsoft will pay a $23.6 million transition fee, provide ongoing funding for conservation programs, and increase its support for low-income PSE customers by 50%.

Microsoft will continue using PSE’s distribution system, and will remain one of PSE’s largest customers, with facilities outside the Redmond campus still being served by the utility. The agreement covers approximately 80% of Microsoft’s total energy load in the Puget Sound area, with the remaining 20% still being serviced by PSE.  

“This agreement is good for our business, but more important it’s good for residents, the environment and the state of Washington,” said Smith in a statement. “Once the transition is complete, the vast majority of our Puget Sound campus will be powered solely by carbon-free fuels. This contract is a helpful innovation in meeting the demand for renewable energy in a way that protects other energy consumers.”

The agreement is the result of several years of collaboration between Microsoft and PSE, which has been presented by both parties as relatively friendly. This is in contrast to the recent much more contentious defections of casinos in Nevada from NV Energy.