Big Tech rewriting the renewable energy rulebook in way ‘more radical than people realised’, claims sector veteran

Big Tech’s drive to decarbonise is forcing renewables developers to rethink their approach to selling power and pushing the energy transition into its “fourth phase,” claims sector veteran Alan Greenshields.

But this net zero drive resulted in the realisation that the power purchase agreements (PPAs) in use wouldn’t cut it if tech giants wanted to run their operations on 100% renewables.

PPAs have typically sold power on an annual basis, with a data centre operator procuring 100GWh of electricity over the course of a year, for example.

This means that, when there isn't enough green power on offer, offtakers are forced to procure power from the grid – a veritable mix of energy sources, green and otherwise.

As such, consultancy McKinsey previously estimated that these PPAs only achieve around 40-70% emissions reduction, which doesn’t cut it for tech giants chasing net zero.

“You haven’t actually addressed the underlying issue of powering stuff in a situation where you don't want to use fossil fuels at all,” said Greenshields.

Now, “forward looking” companies like Google and Microsoft are demanding 24/7 clean PPAs, where zero carbon energy supply is matched with demand on an hourly basis. Renewables “in real time,” as Greenshields put it.

New PPAs forcing renewables sector to take ‘next step’

Greenshields, who has decades of experience in energy storage and clean tech, said this represents a “game changer” for the sector.

Microsoft entered what it claimed was the “world’s first hourly matching (24/7) of renewable energy” for its Swedish data centres with local power giant Vattenfall in 2020, and the model has gained popularity since then.

Greenshields said these new PPAs are an instrument to “force the [renewables] industry” to take the “next step” in its development.

“It's being made the case by the big players in the market saying this has got to happen.”

Such PPAs are he said a “wonderful way to sidestep the complexity” of how the grid, with its mix of energy sources, could devise a way to achieve the same thing.

Tech giants’ demand for 24/7 clean energy is forcing power producers to rethink how to ensure they can “actually supply somebody with renewable power all the time,” said Greenshields.

Simply put, providing non-stop green power will he said require a huge expansion of long duration energy storage (LDES) capacity.

Low cost bulk storage that allows for excess green energy to be saved for when it is needed represents the “fourth phase” of the renewables rollout, said Greenshields – after the drop in cost of wind and solar generation and shorter duration lithium-ion batteries before it.

Whatever the solution, Greenshields said it is crucial for the success of the LDES rollout to get some of these budding technologies to scale, in the same way that lithium-ion batteries did before them.

To “short circuit” that process, Greenshields said countries could take a “moderate amount of money” and spend that on funding half a dozen or a dozen new technologies to help them develop 50-100MW facilities.

Because the technologies are “actually up and running” already, he said. “But we don’t have 15 years to wait for us to step by step keep driving the scale up to getting the costs down.”