by A. Fletcher Mangum
Virginia has emerged as a national leader in the transition to renewable energy. The Virginia Clean Economy Act, which was signed into law in 2020, established several very ambitious goals for the state. For example, it mandated that Virginia’s major electrical utilities must source 100% of their energy from renewable sources by 2050, and declared 16.1 gigawatts (GW) of solar and offshore wind energy, and 3.1 GW of energy storage, to be in the public interest. Moreover, other recently enacted legislation has enhanced the opportunities for additional solar and energy storage development by making those facilities more fiscally attractive to local governments.
Why the interest in renewable energy development? Mainly because of increased concerns about the environment. It is important to realize that electricity production is the nation’s largest source of greenhouse gas emissions. In Virginia in 2009, electricity production generated 36.2 million metric tons of greenhouse gas emissions, with 28.7 million metric tons of that total coming from coal-fired plants. But, where coal-fired plants produced 37 percent of electricity in Virginia in 2009, by 2019 that figure had dropped to just 4 percent and statewide greenhouse gas emissions from electricity production had dropped to 30.2 million metric tons.
Although most of that drop was attributable to the increased use of natural gas, renewable energy is playing an ever-increasing role. Where utility scale solar energy generated zero megawatthours (MWH) of electricity in Virginia as recently as 2015, by 2019 that figure had grown to 949,111 MWH. Plus, more facilities, such as AES’ 500 megawatt (MW) Spotsylvania Solar Energy Center, the largest solar installation east of the Rockies, are coming online each year. And it’s not just solar, with Dominion Energy’s proposed 2.6 GW Coastal Virginia Offshore Wind project, Virginia has the potential to become a central hub for development of the offshore wind energy industry along the U.S.’ Eastern Seaboard.
Data centers have a key stake in this transition to clean energy sources. According to a recent analysis by the U.S. Chamber of Commerce the average data center spends about $7.4 million a year on energy costs. That high demand for electricity has made data centers increasingly sensitive to how the electricity they use is produced and also how they can reduce energy usage through greater efficiency.
Amazon Web Services (AWS), Facebook, Google, and Microsoft, the four largest hyperscale data center operators, have all publicly committed to move toward sourcing 100 percent of their power needs from renewable energy to reduce their environmental impact. More importantly, they are acting on those commitments and that is having an impact on renewable energy development here in Virginia. Two cite just two examples, at the time of its announcement Microsoft’s 315 MW power purchase agreement (PPA) with AES’ Spotsylvania Solar Energy Center was the largest corporate solar power purchase agreement in the U.S., and at last count AWS was supporting 12 solar projects that were either operational or in development in Virginia, with a combined total output of approximately 850 MW.
More generally, in February of this year the Renewable Energy Buyers Alliance released a list of the top ten renewable energy buyers in the United States in 2020. Amazon was in 1st place with 3.2 GW of renewable energy purchases, followed by Google in 2nd place with 1.0 GW, and Facebook in 5th place with 0.7 GW. And it is not just hyperscalers, major colocation providers such as Aligned, Digital Reality, Iron Mountain, and Switch are also making great strides in moving toward 100 percent renewable energy sourcing.
Data centers have also been at the forefront of innovations in energy efficiency. Just last year, Google unveiled a carbon-intelligent computing platform that will reduce the company’s carbon footprint by better aligning computing workloads to those times during the day when renewable energy is most readably available on the grid. In an example of even more out of the box thinking, Microsoft is now experimenting with the use of unmanned underwater data centers. These and many other innovations are achieving demonstrable results. According to a recent article in Data Center Frontier, where global data center capacity grew by 30% from 2010 to 2018, data center electricity usage grew by only 6%.
But, it’s not all about bees and bunnies. The transition to renewable energy is also being facilitated by some important economic factors. Even considering differences in capital costs and production capacity, the levelized cost of production of renewable energy is increasingly competitive with natural gas, currently the lowest cost fuel for producing electricity. Also, because almost all the cost of renewable energy is in the upfront capital costs, renewable energy providers can offer stable long-term pricing in the form of long-term PPAs. That certainty regarding future energy pricing is a big plus for large end users such as data centers. While on the flip side, PPAs also benefit renewable energy providers by providing the long-term demand commitments that aid in securing financing for those large upfront capital costs.
In sum, for reasons of both environmental responsibility and hard-nosed economic self-interest the data center industry has become a driving force in the switch to renewable energy, as well as in pioneering remarkable new methods for improving energy efficiency.
About the author: Dr. A. Fletcher Mangum is CEO and Founder of Mangum Economics. You may contact him at fletcher@mangumeconomics.com.
