The corporate segment of the renewables industry has been one of the fastest growing markets over the last five years and it is no coincidence that data centers also rapidly increased their footprint over the same timeline. Of the roughly 26,000 MW of corporate-tied renewable capacity online or planned in the U.S., over 16,600 MW are contracted to technology companies with substantial data center operations.
Of the top eight companies in terms of contracted renewable capacity, seven heavily utilize data centers. Data centers are load intensive facilities and make up a substantial portion of these companies' overall energy usage. Amazon.com Inc., Apple Inc., Facebook Inc., Google and Microsoft Corp. are all major data center customers. AT&T Inc. and T-Mobile US Inc. leverage data center space as well — both owned and leased; however, they have thousands of data center and point of presence locations spread across all 50 states, so their pattern of renewable power purchase agreements, or PPAs, and data center locations is difficult to discern.
While these companies own some of the data centers they utilize, they also lease space from data center providers. A handful of these providers have also made corporate renewable purchases. Digital Realty Trust Inc., Equinix Inc., QTS Realty Trust Inc. and Switch Inc. all have contracted with wind and solar projects totaling over 500 MW.
In order to keep pace with aggressive individual renewable targets, corporations have ramped up renewable PPA signings as their energy consumption continuously increases. Apple, Facebook, Google, Microsoft and T-Mobile are all members of the RE100, committing to go 100% renewable. Amazon, while not on the list, announced a similar target. AT&T has not set a specific renewable goal but has been active in signing renewable PPAs.
These top companies have data centers located all around the country. Many of the renewable projects these companies contract with are in close proximity to data centers and other facilities, but that is not the case for all of them, as favorable corporate renewable markets do not always overlap with attractive data center markets. The emergence of virtual PPAs allows companies to bridge this gap by contracting with a renewable project in one location to offset their energy consumption in another in a more financially viable way. The three most active corporate renewables markets, not coincidentally, boast some combination of ideal wind and solar resources and proximity to data center hubs.
Texas leads all other U.S. states in terms of cumulative signed corporate PPA capacity to date at just over 8,600 MW. This should come as no surprise given Texas far and away leads the country in overall renewable capacity. High wind resources and abundant, cheap land combined with the federal production tax credit, or PTC, have made Texas a lucrative market for wind developers. Solar has begun to increase its market share in recent years as the wind market has started to saturate. This is not to say that wind projects in Texas are no longer viable, but the tide is starting to turn with the upcoming pipeline of renewable projects favoring solar in the historically wind-dominated state.
Amazon, Apple, Facebook, Google and Microsoft all have contracted with renewable projects in Texas for a combined capacity of almost 1,900 MW. Telecommunications companies AT&T, T-Mobile and Sprint Corp. add another 1,100 MW across six PPAs. Digital Realty, Equinix and QTS have signed four PPAs totaling just over 300 MW. Wind and solar almost evenly split this capacity among the five companies. Facebook and Microsoft both have multiple data centers located in the state and Google is building a large campus south of Dallas. Texas is a large data center market with the Dallas-Fort Worth metro area being the most notable hub with roughly 4.3 million square feet of net operational space according to 451 Research, Datacenter Knowledge Base, which is part of S&P Global Market Intelligence. Austin and San Antonio also host data center facilities with Microsoft being particularly active in the latter. With a massive pipeline of wind and solar projects and a growing data center market, Texas will remain a focal point of the corporate renewable segment.
Virginia is a growing renewable energy market, especially after the recent signing of the Virginia Clean Economy Act which requires utilities to procure 30% of their generation from renewable sources by 2030, eventually increasing to 100% clean energy by 2050. Only 650 MW of solar capacity has been commissioned in the state to date but over 6,400 MW of wind and solar are in the pipeline through 2025. This is sure to continue growing with the implementation of the Clean Economy Act.
Those familiar with the data center industry need no introduction to the Virginia market. It is the largest data center market in the world with over 10.8 million operational square feet. A combination of proximity to a large population, relatively cheap land, favorable tax incentives and most importantly access to the MAE-East network connection point — one of the original internet exchange points in the U.S. — made this area the central data center hub in the US and the world. Amazon owns or leases dozens of data centers in Virginia with Microsoft, Facebook and numerous other companies utilizing the vast data center network in the state as well.
Virginia is a prime example of data centers driving corporate renewable development as the majority of renewable capacity in the state is tied to corporate PPAs. Almost 1,700 MW of renewable capacity in Virginia is signed to corporations. Facebook is the largest buyer with 562 MW of contracted capacity and Amazon is not far behind with 452 MW. Microsoft and Apple also add to the mix with 335 MW and 134 MW worth of renewable capacity signed in the state. T-Mobile signed three deals with solar farms totaling 178 MW as well. While wind power, particular offshore wind, is expected to gain traction in Virginia, all of the corporate contracted capacity in Virginia to date is in solar projects. Solar is expected to remain the favored technology in Virginia for the foreseeable future.
With market drivers similar to Texas, Oklahoma has emerged as a nationwide leader in wind energy. It ranks third in the US, behind only Texas and Iowa, in installed wind capacity. Unlike Texas, however, solar is not currently expected to see a large increase in the state. There are over 4,800 MW of wind capacity in the pipeline through 2025 compared to only 260 MW of solar. Low costs have allowed virtual PPAs to be an economically viable option in the state with 15 non-utility companies contracting 2,600 MW worth of capacity in the state. Not surprisingly, all of this capacity comes from wind projects.
Oklahoma is not particularly well-known for its data center market though Tulsa and Oklahoma City do combine for just over 100,000 square feet of operational space. Google has planted a flag in the state, investing over $2.5 billion in a large campus near Tulsa and has emerged as a leader in the state for corporate wind purchases. To date, the tech giant has contracted over 700 MW of wind capacity in the state. AT&T, T-Mobile and data center provider Equinix also have contracted for almost 650 MW of wind energy in Oklahoma. Despite uncertainty surrounding the federal PTC, the virtual PPA market for wind should remain an attractive option for corporate buyers in the future.
The coronavirus pandemic has significantly distorted the outlook for the renewable industry and the corporate renewables market is no exception. While non-utility off-takers may be seen as riskier in the current climate and no company is completely immune to the increasing economic turmoil, tech and telecommunications companies should remain financially viable and attractive options for renewable developers looking for long-term off-takers.
Stay-at-home orders have made data center-backed network access and security more crucial than ever and while these directives will not stay in place forever, the reliance for these services will remain critical. Data service providers and their customers have proven to be an essential part of the global infrastructure and as long as the pillars of these industries remain committed to being powered by renewables, the corporate renewables market will continue to maintain and increase its presence in the market.
This article is the product of a collaborative effort between S&P Global Market Intelligence's Energy Research team and 451 Research, Datacenter Knowledge Base.
Ciaralou Palicpic contributed to this article.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.