Introduction

Microsoft Corp. matched its annual electricity consumption with renewable electricity in 2025, essentially catching up with Amazon.com Inc. at the top of the global corporate clean energy leaderboard. However, with only half of its clean energy portfolio online and its data center infrastructure continuing to expand, Microsoft's greenhouse gas emissions rose markedly during the period. The company's pause in using unbundled renewable energy certificates as carbon offsets contributed to the increase, pushing Scope 2 emissions higher. The move, however, reflects a realignment toward adding new renewable power to the grid, indicating that Microsoft remains committed to effective decarbonization.

The Take

Emissions are rising, yes, but there is more than meets the eye. The significant increase in Scope 2 emissions, for example, is largely the result of a shift in carbon accounting and procurement strategy. While that change may look unfavorable on paper — and paper decarbonization has long drawn criticism as "greenwashing" anyway — it could ultimately do more to support real-world power-sector decarbonization if Microsoft follows through on its investment commitments.

Beyond the environmental benefits, carbon-free energy also makes operational sense for Microsoft, other hyperscalers and the data center sector more broadly. The sector needs as much power as it can secure, and renewables have an edge in speed to power. Finally, power purchase agreements, which often run 15-20 years, can also lock in electricity costs and provide a degree of long-term price stability.

A banner clean energy year, but emissions rise amid operational and strategic shifts

With about 40 gigawatts of contracted clean energy across 26 countries in Asia-Pacific, Europe and North America, Microsoft is now essentially tied with Amazon as the world's largest corporate off-taker of carbon-free electricity, making the software giant one of the leading contributors to global clean energy project financing.

Having built this portfolio, Microsoft says it matched 100% of its annual global electricity consumption with renewable energy in 2025, effectively procuring enough renewable energy claims through power purchase agreements (PPAs), renewable energy certificates (RECs) and other clean energy sources — such as the share of renewables in the generation fleets of the power suppliers it relies on — over the year to equal its global electricity use.

In 2025, however, Microsoft's global electricity use rose more than 24% year over year to 37,026 gigawatt-hours — more than double its 2022 consumption, when the world was at the onset of the generative AI revolution. Of that total, Microsoft-owned data centers, or server-housing facilities for which the company has management and operational control, accounted for about 43%. A growing part of Microsoft's infrastructure strategy also involves leasing capacity from third-party wholesale providers.

Figure 1: Microsoft-owned data center electricity use by location, 2025

Against this backdrop of rapidly rising electricity demand, and with about half of Microsoft's contracted carbon-free energy capacity still in the planning stages — necessitating prolonged reliance on thermal generation — the company's power decarbonization efforts are under pressure.

In 2025, these dynamics were magnified by Microsoft's decision to pause its program of non-additional, unbundled REC purchases from existing renewable projects — a move that reduced carbon offset accounting in its Scope 2 emissions. Purchasing RECs from existing renewable power plants to offset carbon emissions has long been criticized as a form of "greenwashing," with the public questioning the credibility of the sustainability road maps used by corporations that rely on this mechanism.

This confluence of decarbonization headwinds led to a more than 26% increase in overall emissions in 2025, with market-based Scope 2 emissions, which relate to purchased electricity, rising tenfold to 13% of the total, up from 2%-3% between 2020 and 2024.

In the foreword to the company's 2026 Environmental Sustainability Report, released in July 2026, Microsoft Vice Chair and President Brad Smith and Chief Sustainability Officer Melanie Nakagawa recognized the near-term impact of the unbundled REC accounting change on reported emissions. However, by moving away from these certificates to prioritize investment in net-new power, Microsoft will contribute to the development of new carbon-free energy capacity — effectively doubling down on its decarbonization commitments at a time when the federal government is withdrawing support.

Figure 2: Microsoft emissions

A decarbonization strategy at scale

Microsoft's mammoth renewable energy agreement with Brookfield Renewable Corp. encapsulates both the company's aggressive pursuit of clean energy and the magnitude of its rapidly growing electricity needs amid the AI-driven data center boom. The global framework agreement for more than 10.5 GW of new carbon-free generation capacity, to be delivered between 2026 and 2030, is the largest corporate clean energy deal on record.

The deal revolves around deploying 10.5 GW of renewable capacity in the US and Europe, but it also includes the potential to expand its scope to include additional capacity across these markets, as well as Asia-Pacific, India and Latin America — where Microsoft has operations.

In the US, beyond solar and wind, a key piece of the Microsoft-Brookfield deal is a long-term PPA for the output of the 97-megawatt Hawks Nest hydroelectric plant in Fayette County, West Virginia. Brookfield is modernizing the nearly 100-year-old facility to boost its output and deliver a portion to the grid. Hawks Nest was initially designed and built to power a nearby manufacturing facility. Microsoft expects to begin receiving power from the hydroelectric plant in 2027.

This hydropower deal is one of several developments illustrating Microsoft's evolution away from renewable energy holdings dominated by solar and wind toward a broader carbon-free energy portfolio spanning multiple time horizons and levels of technology maturity. Like other hyperscalers, this now includes nuclear power. In the nuclear arena, however, Microsoft distinguishes itself from its peers through unconventional dealmaking and first-mover approaches.

A renewable-heavy operating system with nuclear ambitions

The lack of visibility into the deal with Brookfield Renewable, which accounts for about one-quarter of Microsoft's secured clean energy capacity, makes it difficult to break down the company's portfolio by technology type. Because the deal consists entirely of renewable energy capacity, however, renewables make up the overwhelming majority of Microsoft's clean energy portfolio overall, although the classification of hydropower — part of the Brookfield agreement — as renewable energy may vary across jurisdictions.

Outside the renewable energy capacity secured through the Brookfield Renewable deal and specifically tracked by S&P Global Energy, solar dominates, particularly in the US, where it exceeds wind by more than 2-1. Geographically, Microsoft's US solar capacity is heavily concentrated in Texas, accounting for about 25% of the total.

Nuclear

Microsoft's 20-year PPA with Constellation Energy Corp. for 835 MW of nuclear capacity from the Crane Clean Energy Center project, formerly Three Mile Island, in Pennsylvania, anchors the company's nuclear procurement strategy. The deal entails restarting unit 1 of the facility, which was the site of a partial meltdown in 1979, making Microsoft the first hyperscaler to fund the restart of a shut-down nuclear plant rather than contract the output of an operating facility.

Even more groundbreaking is the company's PPA for 50 MW of fusion energy, signed with startup Helion Energy as far back as 2023. In retrospect, the deal can be viewed as an early signal of how urgently companies would seek any potentially accessible energy source to power the AI boom. Often described as the holy grail of energy generation because of its promise of near-limitless abundance, cleanliness and safety, fusion has been notoriously difficult to develop, let alone commercialize.

From this perspective, the Microsoft deal appears to be a bet that could yield substantial first-mover and reputational dividends if the technology pans out. At 50 MW, it is not central to the company's carbon-free electricity strategy for powering AI, which limits the downside. That said, Helion has begun construction of its 50-MW Orion fusion plant in Chelan County, Washington, about 100 miles east of Redmond, where Microsoft is headquartered, with service targeted for 2028.

Figure 3: Microsoft electricity consumption

Growth raises the sustainability bar

Microsoft's expanding clean energy portfolio and its shift away from unbundled renewable energy credits toward investments in new renewable capacity point to a sustained commitment to decarbonization. At the same time, the company is pursuing an ambitious, energy-intensive AI expansion strategy that necessitates a sizable data center build-out.

On Microsoft's fiscal fourth-quarter 2026 earnings call, Chairman and CEO Satya Nadella said the company added 31 new data centers across five continents during the period, bringing its total to 88 as it expands its footprint "in response to accelerating demand." Microsoft is projecting about $175 billion in capital expenditure in 2026 and expects this figure to grow in 2027.

Smith and Nakagawa alluded to the sustainability implications of this expansion in the foreword to the company's 2026 Environmental Sustainability Report, writing: "The global shift toward AI is reshaping economies, accelerating innovation, and becoming foundational to how technology is built and used. It is also increasing demand for the energy, water, land and materials required to support that growth."

Beyond its effect on Scope 2 emissions, this shift is also evident in the company's Scope 3 emissions, which rose 12% year over year in 2025. Scope 3 refers to indirect greenhouse gas emissions generated across a company's value chain. For hyperscalers, materials such as cement, steel and glass used in data center construction can fall into this category.

Microsoft's latest Environmental Sustainability Report reaffirms the company's climate ambitions, but its own figures show how difficult it is becoming to align those goals with rapid growth. Although Microsoft's data centers are becoming more efficient — averaging a global power usage effectiveness of 1.17 in 2025 — those gains do not eliminate the broader environmental pressures created by the company's expanding compute footprint.

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