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RECs cannot be used to back claims of 100% renewable energy

Table of Contents

In addition to starting my new company – Console, a weekly newsletter of the best tools for developers – I am also a Research Affiliate at Uptime Institute. Uptime Institute is an independent advisory organisation focused on efficiency and reliability of critical infrastructure, particularly IT and data centers.

Last year, I wrote about data center claims of using 100% renewable energy when we haven’t fully decarbonised the electricity grid yet. My first report for Uptime Institute is a more detailed look at that topic.

The report is available for free on the Uptime Institute website. The summary and key findings are below:

Executive summary #

Data center energy consumption and claims of 100% renewable energy use are receiving ever more attention from the media, legislators, and customers. The tech industry has made considerable effort to improve energy efficiency and is the largest purchaser of renewable energy. Even so, most data center sustainability strategies still focus on renewable energy certificates (RECs). RECs are now considered low quality products because they cannot credibly be used to back claims of 100% renewable energy use. To avoid accusations of greenwashing, data center operators must consider investing in a portfolio of renewable energy products. RECs may play a part, but power purchase agreements (PPAs) are becoming more popular, even though there can be financial risks involved. Further, matching energy consumption with equivalent renewable energy purchasing on an annual basis is not enough to reach the goal of decarbonizing the electricity grid. In the long term, all data center demand ― 100% ― must be supplied by 100% renewable energy, 100% of the time. This will prove challenging.

Key findings #

  • Carbon emissions reporting is becoming more widespread. Reporting is voluntary in most jurisdictions, but mandatory international sustainability reporting standards are under discussion. Large corporations, such as Apple and Microsoft, now require carbon and sustainability reporting for all their suppliers. Organizations that are not tracking emissions may have to invest significant resources to catch up should reporting become required.
  • Operators with the most sophisticated sustainability strategies have been expanding their renewable energy portfolios with large PPA contracts. Widely used RECs are likely to be dismissed as greenwashing if they are the main or only component of a renewable or low-carbon energy strategy. The low cost of RECs relative to the overall cost of electricity increases this risk.
  • Operators should favor the purchase of direct PPAs (which guarantee physical delivery of electricity on the local grid) where possible, or virtual/financial PPAs (which do not provide physical delivery of electricity) if not. Purchasers should ensure they fully understand the contract terms, particularly with regard to pricing, to mitigate financial risk.
  • As an alternative to PPAs, operators should consider retail or “green tariff” renewable energy contracts offered by energy services companies and utilities, sometimes in conjunction with a renewable energy developer. These contracts have a higher (financial) safety profile, because they have shorter terms and the renewable energy developer or energy retailer carries most of the financial risk.
  • The 100% renewable energy use claim made by many data center and infrastructure operators can be misleading because it usually refers to the annual matching of renewable energy bought to equal the energy used. However, the power grid that they use carries electricity generated by many different fuels, the proportion of which shifts over time and with region. Over the coming years, operators should start planning to match electricity generated by renewable resources on an hourly basis, with detailed reporting of the electricity’s source. Where this is not supported by energy suppliers, operators should pressure suppliers to provide the necessary data.
  • Although large-scale energy storage technology is still immature, new data center projects are starting to combine new renewable energy generation with large-scale battery storage. This allows the charging of batteries when renewable energy is available, then a switch to batteries when it is not. Large-scale, battery-based energy storage is being tested in some new data centers today; more widespread use may be an important component of future low-carbon/sustainable data center designs.
  • Customer demand for renewably powered data centers is increasing. Requests for proposals for new contracts may now include detailed questions about data center sustainability. Customers are also becoming more sophisticated (and demanding) about their understanding of offsets, RECs and PPAs.

Access the full report on the Uptime Institute website.