Akamai, which has committed to power the internet more sustainably, took part in the US’ first corporate aggregated VPPA — a game-changing approach for smaller renewable energy buyers.
Financially savvy and environmentally responsible companies of all sizes are seeking to switch over to renewable energy. This can be a challenge, especially for smaller companies. Many companies purchase Renewable Energy Certificates (RECs) equal to the amount of power they consume. These certificates prove that renewable energy was added to the grid, and give companies the right to claim that they have purchased a certain amount of renewable energy. Virtual Power Purchase Agreements (VPPAs), which have recently gained popularity, make the purchase of renewable energy much more accessible. They are financial transactions in which companies use their credit to extend a fixed price cash flow to renewable energy projects in exchange for RECs, which helps these projects get built.
As recently as 2-3 years ago, companies with small energy loads could not benefit from the business and risk-mitigation terms that were only available to very large energy users. However, corporate aggregated VPPAs — such as the one entered into by Bloomberg, Cox Enterprises, Gap Inc., Salesforce and Workday earlier this year — are changing that.
Even before that, in 2018, Apple, Akamai, Etsy and Swiss Re announced the first corporate aggregated VPPA in the US. The project led to the construction of two renewable energy plants — a 125-MW wind farm in Illinois and a 165-MW solar farm in Virginia. This year, both projects will come online.
With Akamai looking for innovative ways to pursue its renewable strategy and recognizing shared goals with Apple, Etsy and Swiss Re, the companies formed a renewable energy buyer group to procure 290 MW of power. Akamai, a major cloud service provider, has committed to power the internet more sustainably. This partnership helped the company get much closer to its 2020 goals.
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We caught up with Mike Mattera, Director of Corporate Sustainability at Akamai; as well as the energy consultants on the project, Jim Boyle and David Osborn — the CEO and COO of Sustainability Roundtable, respectively. Here’s what they said:
What are Akamai’s energy emissions-reduction targets, and what have been some of the challenges in reaching them?
Mike Mattera: In 2015, Akamai set a goal for Akamai-leased data center operations to be 50 percent renewable by 2020. We sought to achieve this through a mix of on-grid renewable projects and data center co-location partners that could pass renewable energy off to us. We wanted a strategy that would ensure we were positively affecting the communities in which we operate, work and live. This is a more aggressive approach than just purchasing RECs and applying them to offset greenhouse gas emissions from our data center operations.
Since Akamai’s network is so widely distributed — 137 countries, 1,000+ cities and over 3,900+ locations globally — it is very difficult to execute this strategy. Our data center operations are not consolidated, like you see with the Microsofts, Amazons and Googles of the world.
How did aggregation help you overcome those challenges?
MM: With the wide distribution of our operations, and no direct path to carbon neutrality, partners were key to get to the finish line. Partnerships granted us a seat at the table with the large renewable energy development companies, allowing us to purchase energy in the largest cities across the globe. Together with Etsy and Swiss Re and an anchor tenant like Apple, we could take a larger part in the project and participate in the procurement strategy.
In this way, Akamai has the opportunity to offtake a portion of a given renewable project to power our data center operations and not have to worry abot buying more than we need. When you are in pursuit of renewable energy, having strong partnerships in place will reduce the cost and headaches, while being able to share the positive downstream effects together.
How exactly did Akamai partner with Apple, Etsy and Swiss Re on this project?
MM: Akamai, Apple, Etsy and Swiss Re collaborated to form a renewable energy buyers’ group to procure 290 MW of renewable energy capacity to get closer to achieving goals of carbon neutrality for our data centers and computing operations in Illinois, New Jersey and Virginia. The collective purchasing power from partnering with Apple was much larger than Akamai, Etsy and Swiss Re would have realized individually — this enabled us to solicit interest and cost-competitive bids from quality energy developers. We were also able to reduce the complexity and transaction costs by sharing a consultant to manage the process, starting from a common virtual power purchase agreement contract and working together to negotiate terms — which would have been difficult for Akamai, Etsy and Swiss Re to negotiate alone. It’s a replicable model that can help accelerate renewable energy procurement for smaller corporate buyers like Akamai.
What was Akamai’s role in the project?
Jim Boyle: Akamai innovated to bring the transaction sophistication and economies of scale previously reserved only for the world’s largest energy user to every high-credit enterprise. First, Akamai was a leader on VPPAs — this provides RECs with an unquestionable claim to representing new renewable energy, while innovatively selling the energy in the local market to third parties. Then, Akamai innovated further with the first buyer-organized corporate aggregated VPPA in the US (only the public sector and universities had done one before).
The Managing Director of RMI’s Business Renewable Center, Herve Touati, noted in 2017: “Aggregation is clearly the industry’s next and highest priority. It is the nut to be cracked” — and that is what Akamai, Apple, Etsy and Swiss Re jointly accomplished with the US’ first corporate aggregated VPPA. Akamai was the catalyst for the transaction and was assisted by 3Degrees, which also worked with Apple on the multi-site and multi-technology transaction.
Through this effort, Akamai has led in a manner that has very few peers. Only Bloomberg, Intuit and Salesforce can claim a similar level of leading innovation with VPPAs and aggregated VPPAs (after Akamai) to create what amounts to a new type of economically compelling renewable energy for every enterprise. Now Akamai is also leading in Iron Mountain’s Green Power Pass (i.e. supplier-provided RECs) and because of its successes, Akamai may decide to pursue 100 percent renewable energy, by causing new renewable energy infrastructure to be built.
Why is it meaningful to see IT companies do this kind of thing?
JB: The IT industry context matters. As Greenpeace’s “Clicking Clean” initiative and BSR’s Future of Internet Power make clear, the industry is awake to the fact that it’s driving electricity consumption at an epic scale globally, and causing long-term electricity to infrastructure to be built worldwide that will determine if the internet is sustainable. The major IT players know this will have a meaningful impact on whether global civil society is sustainable. And since it is comprised of technologists, the IT industry understands technology inflecting trends and exponential adoption, and is working to “force the spring” in regard to the flowering of renewable energy tech.
Would solutions like this work for other companies; and if so, where should they start?
David Osborne: This solution can absolutely work for other companies. They should speak with a corporate renewable energy expert to understand the range of potential renewable energy solutions available to them to reach emission-reduction targets in the US and globally. With a deepened understanding, they can then formulate achievable goals with a clear implementation roadmap.
This transaction highlights how companies today can participate in VPPAs to accomplish US emission-reduction goals (including net zero carbon) and renewable energy goals. Central to any renewable energy option is the claim a company can make to actually having caused new renewable energy to be built — many options that companies use today do not lead to new renewable energy creation. However, in the above transaction, Akamai is central to causing new renewable energy through its VPPA contracts.