Featured Article : Microsoft’s $10 Billion Renewable Energy Deal Fuels AI & Cloud
Microsoft has agreed to back $10bn in renewable electricity projects by Brookfield Asset Management to help it meet clean-energy commitments and provide its data-centres with the extra energy requirements of cloud and AI.
Global Framework Agreement
The deal, which is a five-year agreement called the “global framework agreement” (“the agreement”) is a commitment by Microsoft, working in partnership with Brookfield, to bring 10.5 gigawatts of generating capacity online. This is reported to be more than three times larger than the 3GW of power used by the world’s largest hub of data centres in Virginia and is the equivalent of enough to power 1.8 million homes!
Microsoft’s partner in the deal, Brookfield, says the signing of the global renewable energy framework agreement will “contribute to Microsoft’s goal of having 100 per cent of its electricity consumption, 100 per cent of the time, matched by zero carbon energy purchases by 2030”.
Renewable
The renewable energy projects to create this significant extra generating capacity will come from wind and solar farms, which are yet to be built, between 2026 and 2030, beginning in the US and Europe. There will also be the potential to increase the scope to deliver additional renewable energy capacity to the Asia-Pacific region, India, and Latin America.
Feeding Demand From Cloud and AI
The agreement is expected to provide Microsoft with access to a pipeline of new renewable energy capacity to support the global trend of digitalisation and, crucially, the growing demand for cloud and AI services.
More Data Centres Needed
The growth of the cloud and now, significantly, the growth of generative AI has meant there is huge demand for (and investment) in data-centres. These are both the larger self-owned data-centres in the host countries (mostly in the US) of their ‘hyperscaler’ providers, leased data-centres, and smaller data-centres being built to ensure infrastructure is nearer to customers. The main ‘hyperscalers’ (i.e. the companies that provide cloud computing, storage, and networking services at a massive scale) are Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). Alibaba Cloud is the leading cloud provider in China and Asia.
Hyperscale Data-Centres To Double Every Four Years
The effects of the growth in generative AI in terms of demand for more data-centres, processing power and storage capacity are illustrated in recent findings by the Synergy Research Group. Their research shows that the number of data-centre facilities run by hyperscale cloud providers has doubled in the past four years and will double again by 2028, with 120-130 hyperscale data-centres coming online each year.
Microsoft, for example, is building a new 750K SF, $9.2M hyperscale data-centre campus near Quincy, WA, to house three 250K SF server farms.
The Implications
The implications of this surge in demand for (and building of) data-centres are many. For example, as infrastructure for cloud computing and data storage expands, it puts increasing pressure on existing power grids.
Also, as the growth in data-centres intensifies along with power-hungry technologies, and AI expands and algorithms become more complex, the energy requirements for these technologies are set to increase even further.
This will mean (and has already meant) a search by the hyperscalers for cleaner, greener alternative energy sources, hence Microsoft’s announcement of its renewable electricity projects with Brookfield. Transitioning from traditional fossil fuels to renewable sources like solar, wind, and hydroelectric power is essential, not only for reducing carbon footprints but also for aligning with global sustainability goals.
Microsoft’s main competitors are also investing in renewable energy projects to mitigate their environmental impacts. For example, back in January, Google announced it is building a $1 billion data centre north of London that will be powered by renewable energy from offshore wind. Also, after signing a PPA with ENGIE in January to increase its share in the Moray wind farm to 473 megawatts, Amazon will be making itself the largest purchaser of renewable energy worldwide this year.
Balancing data-centre expansion with Environmental, Social, and Governance (ESG) commitments is also now becoming a priority for organisations and data-centre operators need to ensure that their capacity growth does not come at the expense of the environment or step out of line with ESG commitments and upcoming regulations. Compliance with these regulations not only helps in avoiding penalties but also promotes innovation in green technology and sustainable practices in the data-centre industry.
Alternatives Will Take Time and Planning
However, although Microsoft’s renewable energy project plans (and zero carbon energy purchases) sound promising, some commentators have noted that it will take many years to develop the scale and type of alternative energy sources that are able to provide long-term power to AI. In the meantime, grids will be stretched. Also, the new energy landscape needed to deliver AI’s power requirements will take strategic planning.
What Does This Mean For Your Business?
Microsoft’s $10 billion renewable energy deal with Brookfield Asset Management could be seen as a significant stride towards sustainable growth in digital infrastructure that aligns with the company’s goal to match its electricity consumption with zero-carbon energy purchases by 2030. This large-scale initiative not only aims to power Microsoft’s burgeoning data-centres but sees it join the other main hyperscale cloud providers in securing renewable energy sources to meet the escalating energy demands of cloud and AI technologies.
For example, hyperscalers like Microsoft, Amazon Web Services and Google Cloud are all now investing in renewable energy projects as a strategic response to the dual challenges of surging energy requirements and environmental responsibility. These investments are crucial not only for reducing the carbon footprint associated with massive data-centres but also for ensuring compliance with global ESG commitments and forthcoming environmental regulations. These initiatives also reflect a growing recognition among the hyperscalers of their role in shaping a sustainable future for technology infrastructure.
For businesses, the main implications of these investments are profound. For example, as more data-centres are built to support more advanced and energy-intensive technologies like generative AI, the reliance on traditional energy sources could lead to increased operational costs and potential regulatory penalties. The shift towards renewable energy offers a more sustainable and potentially cost-effective alternative, reducing long-term dependency on fossil fuels and mitigating the risk of energy price volatility.
Also, the adoption of green energy by leading technology providers like Microsoft could influence the entire energy landscape. As these companies set new standards for energy use, they drive advancements in renewable energy technologies and contribute to the creation of more robust and sustainable power grids. This not only benefits the hyperscalers themselves but also the businesses that rely on their services, from small startups to large enterprises.
Ultimately, Microsoft’s renewable energy commitment is a signal of a broader and necessary shift in the technology sector towards sustainability. This trend may be an opportunity for businesses of all sizes to reconsider their own energy strategies and align more closely with sustainable practices. As the infrastructure for digital services expands, the integration of renewable energy is becoming increasingly important, not just for operational efficiency and compliance, but for ensuring the long-term viability of our global digital ecosystem.
