How tech went big on green energy
Standing on top of a giant wind turbine in Texas, 300 feet above the ground, Amazon chief executive Jeff Bezos raised a bottle of champagne above his head, and smashed it against the machine. He was christening Amazon Wind Farm Texas, a 253MW facility near the town of Snyder — and couldn’t resist a slight grin at the camera, as the champagne dripped down the turbine.
The year was 2017, and Bezos’s wind farm christening, broadcast across Twitter, marked a turning point for the company, reflecting a surge of investment in renewable energy. At the time Amazon was not a heavyweight in the world of green power, but that has changed: last year it was the largest corporate clean energy dealmaker in the US, according to new data, as well as globally.
It isn’t just Amazon: tech companies including Google, Microsoft and Facebook have become the world’s biggest corporate purchasers of clean energy. “Their influence is huge,” says Eduardo Insunza, director of global strategic customers at Iberdrola, the utility. “These guys have a lot of market power,” he adds.
Tech companies are big consumers of electricity because of their data centres, which need large amounts of power to keep the servers cool. The combined power usage of Amazon, Google, Microsoft, Facebook and Apple is more than 45 terawatt-hours a year, about as much as New Zealand. That amount will grow, as the rise of artificial intelligence and machine learning demands more computing power.
Alongside this demand, tech companies have adopted some of the world’s most ambitious climate targets. At a time when Big Tech is facing increasing political scrutiny about its growing economic power, the biggest companies are starting to achieve something that chimes with the high ideals they once espoused. As they become green themselves, they are also speeding up the transformation of the entire electricity system.
How this happened is often traced back to 2010, when Google signed its first wholesale clean energy deal, also known as a power purchase agreement.
“Once one of them started, all the rest followed, they always look at each other, and they go ahead,” says Insunza. Long-term contracts to buy clean energy made sense for the big tech companies, because they build data centres that operate for decades. “They also had the financial capacity, so they could take the challenge,” he adds.
Clean energy deals and climate goals are now a source of rivalry between the tech companies, with significant implications for the planet.
Matter of urgency
Microsoft president Brad Smith admits there is a bit of competition between tech companies on their climate pledges. “I think of all the competitive dynamics in the tech sector, this is probably the best,” he says with a chuckle. “Any day we bring that out . . . is a good day for the climate.” He adds the company has been influenced by its founder Bill Gates, who has taken on climate change as part of his philanthropic work. “I talk with Bill regularly about this work, and he is great at challenging us on it,” Smith says.
At Microsoft, the company has vowed to be “carbon negative” by 2030, which means that it will pull more carbon dioxide from the atmosphere than it emits each year, partly by using technology such as direct air capture, which sucks carbon dioxide from the sky. The company also uses an internal carbon price of $15 a tonne and bills each team for its emissions, which incentivises staff to use less.
It’s a close contest with Google as to whose target is more difficult: the search engine group has pledged to run all of its data centres on carbon-free electricity (such as hydropower, wind and solar) 24 hours a day, by 2030.
Google chief executive Sundar Pichai says it is a “significant” undertaking to operate carbon-free data centres, particularly when “factoring in the growth of these things”. Google’s annual electricity consumption nearly tripled between 2013 and 2018.
But Pichai says that living through last year’s California wildfires — which darkened the skies across Silicon Valley with smoke and ash for days — convinced him of the urgency. When it comes to climate change, “we’ve had warning signs for a while now, and the warning signs are increasingly becoming frequent”, he told the FT in September. “Globally we need to get prepared . . . our actions are a small piece of that.”
The IT sector directly accounts for 1.8 per cent to 2.8 per cent of global greenhouse gas emissions (this includes data centres, telecom networks, and user devices), according to a report published this month by Lancaster University and Small World Consulting. That is roughly the same as emissions from the aviation sector. In countries such as the US, where electricity usage is fairly flat, data centres are among the fastest growing sources of new demand.
“The tech companies really do dominate the whole market from a size perspective,” says Miranda Ballentine, chief executive of the Renewable Energy Buyers Alliance, pointing out that they account for 38 per cent of all contracted new capacity over the past five years. Data from Reba show that corporate purchases of clean power in the US rose to a record 10.6GW last year, which is equivalent to the capacity of the UK’s entire offshore wind fleet.
Keeping employees happy is also part of the rationale. In a competitive hiring environment, tech companies cannot afford to be seen as climate laggards — and their workers have been very vocal on this. In September 2019, hundreds of workers from Google, Amazon and Microsoft staged a climate walkout, timed to coincide with the demonstrations led by Greta Thunberg in New York. One of the employees’ key demands was for tech companies to stop providing oil and gas companies with machine learning services; a demand which none of them have yet complied with.
At Amazon, the scale of the employee movement rang alarm bells with management. Bezos consulted climate scientists in the sustainability team at Amazon, according to Maren Costa, a founding member of Amazon Employees for Climate Justice. “I think he had some blind spots before that, and did make a bona fide change,” she adds.
One day before the protest, Bezos went on the offensive with a new climate pledge for Amazon — aiming for net-zero emissions by 2040, and to match 100 per cent of its power with renewable purchases by 2025. But employees noticed this was less ambitious than its peers. An Amazon spokesman said discussions about a net zero target had begun years earlier, in 2016. “Amazon has a longstanding commitment to sustainability,” he said.
Amazon joined the climate race later than its peers, and it also has more distance to go: it is a far bigger consumer of electricity than Google or Microsoft. For Amazon, the emissions challenge is not only its data centres — which have surged under Amazon Web Services — but also its fulfilment centres and delivery trucks. Even though it is the biggest corporate buyer of clean power in the world, these deals covered just 42 per cent of its power consumption in 2019. To reach net zero by 2040, the company will increase clean energy purchases, invest in electric vehicles and purchase carbon “offsets” or credits, to compensate for any remaining emissions. It is also racing to expand its sustainability team, with more than two dozen job openings listed on its website.
However, Rolf Skar, a campaign director at Greenpeace, says: “I think there is some hypocrisy, especially in some of the PR moves Amazon has made recently. There are a lot of headlines, and a lack of transparency, and a lack of specifics.” He highlights the support for carbon offsets in Amazon's climate pledge, saying it could be a “false solution” to rely on buying credits, rather than cutting its own emissions first.
Greening the grid
Whatever the motivations, the buying power of the big tech companies has already had a huge impact on shaping the development of clean energy, particularly in the US. New installations of wind and solar reached record levels in the US in 2020, despite limited federal support for renewable energy during the Trump administration.
Oded Rhone, Edison Energy chief executive, says tech companies have “substantially” accelerated the market for renewables. “Now if there were not tech companies, would it have happened anyway? Probably. Probably would have taken longer,” he said.
As tech companies pursue their green goals, that is also starting to cause challenges for some utility grids. In areas where demand for clean power from tech is surging, some companies that own gas-fired and coal-fired power plants may have to close them down sooner than expected, incurring financial losses.
“There is tension between building new zero-carbon projects, when we still have fossil generation assets in the system,” says Reba’s Ballentine. “We are really reaching that point in the US [due to the scale of the clean energy buying] where we have to look at the whole system.” In the past three years, more than 70 utilities in the US have adopted goals to cut their net emissions by 80 to 100 per cent, driven in large part by demand from their customers to do so.
Some tech companies say helping utilities go fully renewable is one of their goals. “We want to green the grid for everybody,” says Amanda Peterson Corio, Google’s data centre energy negotiator. “This is really sending a signal to the industry — your end users want clean power, and we want the system to figure it out,” she adds.
With energy buying on this scale, it may only be a matter of time before the tech companies branch into the energy business themselves. At Facebook — which ranks third globally for corporate clean power purchases — the company took its first direct stake in a solar project in Andrews County, Texas, which started operating last year.
Tech companies will have to buy more and more clean power as their businesses grow, and invest in battery storage capacity. Even though data centres have become more efficient — meaning that the same amount of electricity used in recent years now results in more computation — the growth in demand for data has outstripped these gains, particularly for the big tech companies.
“The advent of video and higher consumption uses is driving data demand higher, and driving electricity demand up,” says Urvi Parekh, head of renewable energy at Facebook. Its electricity usage quadrupled between 2015 and 2019. “We are very committed to the energy efficiency of these data centres, but with new products and services, it means it is necessary to find new renewable energy to support that,” she adds.
There are two areas of climate work where tech companies are coming under pressure from activists and employees: one is the services they provide to oil and gas companies, which are using artificial intelligence to improve the extraction of fossil fuels. “This is kind of a double-edged sword for a lot of these tech companies, as they look at expanding and virtualising their ‘internet of things’, while also at the same time looking to be leaders in sustainability,” says Kyle Harrison, an analyst at BloombergNEF.
Another is their lobbying activities. Only 4 per cent of the reported US federal lobbying spending of Apple, Alphabet, Amazon, Facebook and Microsoft was climate-related during 2019-2020, according to a report from London-based analysts InfluenceMap. “We are not going to solve climate change simply by companies buying clean electricity,” says Nat Keohane, senior vice-president at the Environmental Defense Fund in Washington.
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As tech companies continue to grow — their value has surged during the pandemic — they will also have to confront the extent to which their core businesses are aligned with a lower-emissions world. Some activists have raised alarm over the culture of consumerism and convenience that is fundamental to Amazon’s rapid delivery services; others have pointed fingers at the way climate-deniers have gained a platform on Facebook to disseminate their views. When Bezos said last week that he would step down as chief executive of Amazon, he said he would spend more time on philanthropy, including his $10bn Earth Fund for climate causes.
One common thread that runs across tech companies’ approaches to climate change is they believe technologies such as renewable energy and direct air capture will solve the problem. This philosophy has been attacked by activists such as Thunberg, who say changing human behaviour is just as important as finding technical solutions. As Big Tech goes green, it won’t be without growing pains.
Big Tech climate targets
ALPHABET Google to operate on completely carbon-free energy, 24 hours a day, by 2030.
Google has offset all historical emissions since its founding in 1998.
AMAZON Operations to be powered by renewable energy by 2025. Net-zero emissions by 2040.
$2bn fund to invest in start-ups that help companies cut emissions.
FACEBOOK Achieved net-zero emissions for operations last year.
Net-zero emissions across supply chain by 2030.
MICROSOFT Carbon negative by 2030, actively removing more carbon dioxide from the atmosphere than it produces, including supply emissions.
$1bn fund to invest in new climate technologies.
APPLE Emissions to be cut 75 per cent by 2030 across entire supply chain, carbon removal technologies used to compensate for the remaining emissions.
Apple operations now completely powered by renewable energy.
Additional reporting by Richard Waters
This article is part of an FT series about the global boom in renewable energy