Microsoft is one of the world’s biggest solar buyers—here’s why

More American households are opting for solar, but most big companies can’t meet their electricity needs by simply throwing some panels on the roof.

Large corporations seeking to ditch carbon-based electricity have been a significant driving force behind the growth in US solar capacity. Companies adding solar to help power their business operations account for ~14% of all solar capacity in the US, according to a November report from the Solar Energy Industry Association (SEIA).

Massive tech and retail companies, from Walmart to Apple, have led this push as they take steps to meet their own net-zero goals. Meta was the largest corporate solar user as of June 2022, with nearly 3.6 gigawatts (GW) of installed capacity, according to the report.

For Microsoft, the fifth-biggest corporate solar user in the US, according to the report, this is only the beginning, according to Brian Janous, GM of energy and renewables at the company. Solar makes up a growing portion of Microsoft’s renewable energy purchases, and Janous said he expects it will likely be about half of the company’s energy mix by 2025.

Microsoft had ~550 MW of installed solar capacity in June of last year according to the SEIA; in 2021, the company reported that the power purchase agreements already in place would bring its total renewable energy to ~8 GW as new projects come online, according to its environmental sustainability report.

The company likely won’t release full numbers for 2022 until later this quarter, but “our pace has not slowed,” Janous told Emerging Tech Brew in December during a conversation about Microsoft’s solar strategy.

“We’re continuing to do a lot of transactions, expanding our footprint more globally to keep pace with the growth of our data-center footprint globally,” he said.

The sunny side

Because of the amount of electricity required to power things like data centers, tech companies tend to consume more energy than on-site rooftop solar panels can provide, Janous said.

That’s why some companies like Microsoft have turned to power purchase agreements (or PPAs), which are contracts between a developer who designs, installs, and operates a solar energy system for a customer that agrees to purchase the power generated from the site over a long period, typically between 10 and 25 years.

“Solar installations are usually—rooftop, at least—measured in kilowatts, or maybe a couple of megawatts. But we’re doing several gigawatts a year, and so our focus has almost entirely been on utility-scale installations,” he told us, adding, “We’re already one of the largest buyers of renewable energy in the world. Our growth is such that we will continue to be one of the largest buyers of renewable energy in the world for the foreseeable future. It will rival that of a lot of electric utilities in terms of their overall procurement, development of these things.”

Microsoft has signed agreements worth hundreds of millions of dollars to purchase solar power and other renewable energy “over a 10, 15, 20 year period,” he said, though he declined to share specific deal terms.

Zoom out

There were nearly 19 GW of installed US solar projects with commercial off-takers as of June 2022—and half of that capacity has been added since 2020, according to the report.

“Solar really has come into its own in the last few years,” Janous said. “If I go back three or four years, the majority of what we were doing was wind. Solar was still sort of coming down that learning curve, from a cost standpoint. And then, really, about two years ago, it started to just flip. And suddenly, we started doing a lot more solar transactions.”

Nearly 27 GW of off-site solar projects with “corporate off-takers” are set to come online by 2025, meaning the total solar capacity installed for commercial use is expected to double again over the next two years, according to the SEIA report.

By that time, Microsoft is aiming to use 100% net annual renewable energy—meaning that the company would be buying enough electricity from renewable sources to cover all the energy it uses in a year, Janous said.

“When we announce our volumes for [2022], what we have contracted will largely be sufficient to achieve our 2025 goal,” he said.

The high price of electricity today has also helped to accelerate solar adoption as companies evaluate the cost of different types of energy, he added.

“At the end of the day, you’re going to buy energy,” Janous said. “We’ve entered a period where the cost of entering into a long-term power purchase agreement is actually quite favorable relative to buying in the market. I would have not said that a couple of years ago.”