Massive Renewable Deal and Battery Boost
There were two standout news stories this week to cheer the clean energy
sector.
First, Microsoft’s commitment to power its data centers with renewable
electricity in a $10 billion deal. This will add 10.5 gigawatts of generating
capacity, the equivalent of powering 1.8 million homes, and is eight times
bigger than the next-largest corporate renewable electricity deal, between
mining company Rio Tinto and an Australian solar company.
Microsoft needs the extra power because it’s forging ahead with new data
centers to service AI and cloud computing customers, part of an upsurge
in energy demand in the United States, soon to be repeated in Europe.
“The nationwide [United States] forecast of electricity demand shot up
from 2.6 per cent to 4.7 per cent over the next five years,” reported Grid
Strategies in a recent report. It predicts that more than $150 billion will be
invested in data centers up until 2028, alongside more than 200 major
manufacturing facilities.
In 2023, corporate deals for a record 46 gigawatts of new solar and wind
capacity were announced, as companies like Amazon and Microsoft sought
to reduce their carbon footprints.
All of this activity and development is positive news, but the context is
important. There’s such a huge growth in demand for energy that some
believe more coal, oil and gas sources may also be needed, negating any
positive impact on climate change.
“Gas is the only cost-efficient energy generation capable of providing the
type of 24/7 reliable power required by the big technology companies to
power the AI boom,” said one energy investor. The intermittent nature of
wind and solar power is highlighted by fossil fuel lobbyists as a central
problem.
Renewable energy champions argue that, by contrast, AI can help solve
the reliability issue for wind and solar power, through its predictive
abilities.
In a second clean energy breakthrough, the G7 this week announced a
renewable energy storage target: a six-fold increase in capacity by 2030
using batteries, hydrogen and water.
The International Energy Agency foresees batteries making up 90 per cent
of new storage capacity, with hydroelectric power accounting for a smaller
share. Batteries have enjoyed a dramatic uptake in demand over recent
years, as their costs have fallen by 90 per cent since 2009. Batteries
added 42 gigawatts to global electricity supplies in 2023.
We will doubtless hear more self-serving predictions from the hydrocarbon
industry about how renewable energy cannot power the economies of the
future, so it’s important to pay attention to developments like these:
massive renewable energy projects and game-changing storage solutions.
We’re in the middle of an energy transition, with incremental progress
taking place all around us, whatever the fossil fuel lobby might say.
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Microsoft to power data centres with big Brookfield renewables deal
Purchase of 10.5GW of electricity highlights rising energy needs of AI and
cloud computing The energy expenditure of data centres by 2026 is
expected to be equal to Japan’s total electricity usage
Antoine Gara and Amanda Chu in New York, Rachel Millard in London,
Camilla Hodgson in San Francisco
Microsoft has agreed to back an estimated $10bn in renewable electricity
projects to be developed by Brookfield Asset Management, in a deal that
underscores the race to meet clean energy commitments while satisfying
the voracious energy demand of cloud computing and artificial
intelligence. The “global framework agreement” signed by the Seattlebased
tech giant is a commitment to bring 10.5 gigawatts of generating
capacity online, or enough to power the equivalent of about 1.8mn
homes. The power will be added to the grids from which data centres draw
electricity. Brookfield said the capacity was about eight times larger than
the previous single biggest corporate renewable electricity purchase
agreement, a deal between the mining company Rio Tinto and an
Australian solar farm. Microsoft expects its partnership with Brookfield to
help finance the creation of large new wind and solar farms to be built
between 2026 and 2030, beginning in the US and Europe. Adding 10.5GW
of new capacity would cost more than $10bn, based on recent industry
trends. It comes as the frenzied interest in generative artificial intelligence
has sparked concerns about their intense energy demand and associated
carbon emissions. The International Energy Agency says that by 2026
data centres could globally consume more than 1,000 terawatt-hours of
electricity, more than double 2022 levels, roughly equal to Japan’s total
electricity usage. The US, which is home to a third of the world’s data
centres, is experiencing rapidly growing electricity demand for the first
time in two decades, spurred in part by the power-thirsty centres. Fiveyear
forecasts for the growth in electricity demand in the US have nearly
doubled in the past year from 2.6 per cent to 4.7 per cent, according to a
report from Grid Strategies. The anticipated demand has raised alarm
from energy watchdogs over whether antiquated power grids can meet
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the surge in consumption without slowing the move to renewables or
posing a threat to reliability. The initial agreement is almost three times
larger than the 3GW of power used by data centres in Virginia — the
world’s largest hub for such facilities — that source energy from Dominion
Energy, the area’s largest electric utility company. It would also account
for a significant piece of overall renewable energy generating capacity in
the US and Europe. The US added 33.8GW of utility-scale renewable
energy projects last year, the highest amount on record, bringing the total
renewable capacity on the grid to 262GW, according to American Clean
Power, an industry group. While tech companies including Amazon and
Google have signed new renewable energy deals, multiple fossil fuel and
power executives have told the Financial Times that the electricity needed
to meet the demand for AI will require higher natural gas consumption
given the intermittent nature of renewable generation and the nascent
battery storage buildout. Wind and solar made up about 14 per cent of US
electricity generation last year, while natural gas, the largest source of the
country’s power, made up 43 per cent, according to the Energy
Information Administration. Brookfield is one of the world’s largest
developers of renewable power; its US-listed company Brookfield
Renewable has about 33GW of operating renewables assets, including
wind, solar and batteries, around the world, and a further 155GW in
development. It has expanded over the past few years with deals to buy
much smaller rivals including the renewable energy business of the UK’s
Banks Group — which it has since renamed OnPath Energy — last year,
and US-based renewable energy developer Urban Grid in 2022.
Recommended Artificial intelligence Booming AI demand threatens global
electricity supply Renewables developers are increasingly striking longterm
power deals with large corporations, helping both sides get some
certainty over long-term power prices. In addition to Microsoft, Brookfield
has announced power purchase agreements with Amazon. Corporate
deals covering a record 46GW of solar and wind capacity were announced
in 2023, with Amazon the top purchaser, according to figures published in
February by Bloomberg New Energy Finance. Microsoft has committed to
ensuring 100 per cent of its electricity consumption is “matched” 100 per
cent of the time by “zero carbon energy purchases” by 2030, using
mechanisms including power purchase agreements and renewable energy
certificates. “Microsoft wants to use our influence and purchasing power
to create lasting positive impact for all electricity consumers,” said Adrian
Anderson, the company’s general manager for renewables.
G7 to target sixfold expansion of electricity storage Batteries and other
solutions aim to store wind, solar and hydropower to make up for
intermittent supply Climate ministers want to increase the capacity to
store intermittent sources of power supply, such as wind
Attracta Mooney and Kenza Bryan in London and Alice Hancock in Brussels
APRIL 26 2024
G7 countries are set to agree a global target this weekend to increase
electricity storage capacity sixfold from 2022 to 2030, as countries
grapple with how to keep the lights on while shifting to intermittent wind
and solar power. Ahead of a two-day meeting starting on Sunday, climate
ministers have “agreed in principle” a global goal for electricity storage
capacity of 1,500 gigawatts in 2030, up from 230GW in 2022, according to
a draft document seen by the Financial Times. That includes the use of
batteries, hydrogen, water or other solutions to store electricity. There are
fraught discussions on several other areas, with coal among the most
contentious, along with energy efficiency and methane targets. Japan in
particular has pushed back against an ambitious shift away from coal. The
current text, which has not been agreed, says countries should phase out
the use of coal power from which emissions are not captured shortly after
2035. Under new rules unveiled by the US on Thursday, coal plants
planning to stay open beyond 2039 will have to cut or capture 90 per cent
of their carbon dioxide emissions by 2032. The talks mark the first time
G7 energy and climate ministers have met since almost 200 countries
agreed at the UN COP28 climate talks in December to “transition away”
from fossil fuels. At the meeting in Dubai they also agreed to double
energy efficiency and triple renewable energy capacity by 2030. The
burning of fossil fuels is by far the biggest contributor to global warming,
but the shift to renewables has raised major questions about energy
supplies at times when the wind is not blowing and the sun is not shining.
One official involved in the G7 talks said the energy storage target was a
“good” solution and showed that countries were taking the agreement
reached in Dubai seriously by focusing on implementation. Energy storage
aims to stockpile excess energy when conditions for renewables are
optimal, using options such as batteries, then discharge it as necessary.
Hydroelectric dams currently provide the greatest store of renewable
energy, but only about 15 per cent of energy is generated by hydropower.
The International Energy Agency expects batteries to account for 90 per
cent of new storage. The G7 will “promote stationary battery storage
development and deployment to increase storage efficiency and reduce
storage costs,” as well as “encourage a diversified, sustainable, secure
and transparent supply chain for battery storage”, according to the draft.
The International Energy Agency said this week that the “rapid expansion”
of batteries would be critical to meeting the energy goals set at COP28. It
found that growth in batteries outpaced almost all other clean energy
technologies in 2023, with 42 gigawatts added to electricity supplies
around the world thanks to falling costs, better technology and supportive
industrial policies. Battery costs have fallen by more than 90 per cent over
the past 15 years, one of the fastest declines ever seen in clean energy
technologies, the IEA said. In draft language not yet signed off by
ministers, the document also proposed backing a push by the world’s
richest countries to end subsidies for fossil fuel development abroad, the
biggest source of international public finance for the sector. Ahead of
discussions scheduled in June, the US and the EU have differed over the
extent of a proposed ban on OECD countries extending export credit
agency loans and guarantees for oil, gas and coal mining projects.