Equinix, the world’s largest data center service provider, has contracted with SunEdison for enough solar energy to offset carbon emissions associated with energy its entire California footprint consumes, including data centers in Silicon Valley and Los Angeles and global headquarters in Redwood City.
The company has signed a five-year power purchase agreement with SunEdison to buy most of the energy output from a planned 150-megawatt solar farm in Imperial Valley, California, due to come online by the end of 2016. This is Equinix's first utility-scale data center power purchase agreement, which will bring its global energy consumption from 30 percent renewable to 43 percent renewable.
The 105MW of the Mount Signal Solar II plant’s total capacity claimed by Equinix will produce about 300,000 megawatt hours of energy per year, which will be enough to offset energy consumed by its California operations, David Rinard, Equinix’s senior director of global sustainability and procurement, said. The portion consumed by the company’s headquarters is almost negligible in comparison to the amount of energy consumed by its data centers in the state, he said.
While internet giants and some of the biggest enterprises have been investing a lot in renewable data center power in recent years, the predominant majority of data center service providers, who serve thousands of customers around the world, have not, citing high cost of renewables and lack of interest by customers. Customer interest has been rising, however, according to multiple data center providers, including Equinix, which is a recent trend.
San Francisco-based Digital Realty, one of Equinix’s biggest competitors, which also happens to be one of its biggest landlords, announced earlier this year it would give its customers one year of premium-free renewable energy anywhere in the world. Interxion, one of Equinix’s biggest rivals in Europe, claims that 100 percent of its data center operation is powered by renewable energy.
Securing enough renewable energy for data centers remains a big challenge in most of the US. Many utilities don’t provide renewable energy as a product, and the ones that do often ask for premiums that are too high for data center operators to absorb. In states with regulated energy markets, such as California, utilities are prohibited from making power purchase deals with corporations.
California also has some of the highest electricity rates in the world, which in combination with the difficulty of sourcing renewables in the state made for an especially challenging route for Equinix. But it was important for the company to get renewable data center power in California, rather than in states like Texas or Oklahoma, where it would have been much easier, Rinard said.
Equinix’s global headquarters is in California, and Silicon Valley is one of the world’s biggest and most important data center markets. The company has seven data centers in Silicon Valley, a footprint stretching from Palo Alto to San Jose.
For those reasons the company accepted a data center power purchase agreement that was perhaps less attractive than would have been possible in other markets and one that was for a shorter term than it would have preferred, Rinard explained. It was important to solve the puzzle in California “because California was so hard to solve for,” he said.
Equinix also had to accept a degree of risk in entering into the agreement with SunEdison. Because it does not have a subsidiary registered as a power utility – unlike Google – it cannot sell power on the wholesale market. For many of its big renewable contracts, Google buys the energy from a project, strips it of Renewable Energy Credits and sells it on the market, applying the RECs to its data centers.
In exchange for RECs, Equinix essentially agreed to pay SunEdison the difference between the cost of solar energy the plant generates and what the energy producer will be able to get for non-renewable energy on the market. Equinix doesn’t know exactly what that difference is going to be over the next five years -- it will vary -- “but we feel the risk is reasonable and justifiable,” Rinard said.
The contract also includes “bridge RECs,” or RECs Equinix can apply to its energy consumption between the time it signed the contract and the time the solar plant in Imperial Valley comes online.
Rinard declined to disclose financial terms of the deal, citing a non-disclosure agreement.
Corrected: The Mount Signal Solar II capacity Equinix has invested in will produce about 300,000 MWh per year, not 300,000 kWh as a previous version of this article erroneously stated.