Three Ways Microsoft is Working to Transform the Energy Supply Chain

| Josh Henretig

As Microsoft has embraced its identity as a devices and services company, we’ve also embraced energy’s role in powering the cloud. In the past 12 months, we have made significant progress on an energy strategy that will reduce the resources required to deliver cloud services, from our power purchase agreement with a 110 MW wind farm in Texas, to datacenter innovations like in-rack power generation and biogas-powered datacenters. These initiatives are bound together by our objective to transform the energy supply chain toward radically greater efficiency and reduced environmental impact.

We are pursuing this objective in three ways:

1. Distribute efficient power generation to the datacenter 

We believe in the future of distributed power generation. Distributed generation is the concept of moving power generation closer to the point of consumption, thereby reducing the need for costly transmission investments, and reducing the losses associated with moving electricity over long distances. Our belief is that the future of power generation will be more distributed, but not necessarily to the exclusion of centralized power and the broader electricity grid. Rather. Microsoft’s scale lets us take on energy projects that are currently prohibitive to many others. That’s why we are actively pursuing solutions to enable widespread deployment of distributed resources, from innovative financing and ownership models, to working with regulators to ensure that distributed resources are put on a level playing field with centralized resources. We recently joined with Facebook in submitting comments to the Iowa Utilities Board in a distributed generation proceeding, which sought to do just that.

2. Deliver new renewable energy projects to the grid

We are also focused on bringing new renewable energy to the grid through the development of large-scale power generation projects. For instance, we secured an agreement for 110 MW from a new wind project in Texas that is currently under construction. The direct purchase of renewable energy will remain an important aspect of our energy strategy. The debate over the future of the energy sector is often reduced to pitting distributed generation against centralized generation, when in fact neither is sufficient on its own to deliver the transformation that the energy sector needs. We firmly believe that the next 100 years will not be as dominated by central station power as the last 100 years. Nor will distributed generation negate the need for a centralized power grid. Rather, the future of energy will be integrated. IT will enable an integrated future of cloud-enabled devices (a device in this context is anything that consumes, produces or stores energy). These integrated devices will be enabled to flexibly take advantage of distributed and centralized generation. With the growth in these connected devices, the business models of delivering electricity will evolve from the provision of a commodity, to a true services that is far different from the electricity sector as we experience it today.. We strongly support introducing new renewable and distributed resources to the grid and fully intend to advocate for policies that will bring about this integrated future.

3. Develop the next generation of energy technology 

We are on the cusp of a major shift in the energy sector—not only in how we generate energy, but in how we consume it. Energy transformations are by their nature extremely slow. It will take a tremendous amount of innovation and creativity to transform a trillion-dollar industry. This transformation will require advancing the state of current energy technology. But new technology alone is not sufficient: We also need to consider how we redesign the physical systems that will effectively integrate this new technology. For instance, we are focused on new thinking about how we integrate power generation and energy storage into the design of a datacenter. Beyond the datacenter, we are applying similar thinking to commercial buildings and households. And while technology and design are necessary, they are not sufficient to meet the energy challenges of the coming decades. Invention happens in the lab, but real innovation happens in the marketplace. We are focused on new business models, new regulations and new market designs that will foster the adoption and integration of these new, more sustainable technologies.

In the coming months, you will hear more from Microsoft on each of these fronts, from new projects to new partnerships that are aimed at nothing short of transforming the energy sector towards a more efficient, sustainable future.

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