Internal Carbon Fees Fund Data Center Energy Innovation at Microsoft

When it committed to 100 percent carbon-neutral operations in 2012, Microsoft started the unusual practice of charging each of its internal departments fees for the amount of greenhouse-gas emissions they are responsible for. Today, three years later, the company claims that the strategy works.

In a recently published update on the program, Microsoft said carbon fees generated enough money to pay for 10 billion kilowatt-hours of clean power, stimulated energy-use reduction initiatives that now save $10 million a year, and continue to fund innovation programs focused on using technology to reduce carbon footprint inside and outside of the company. The program did also deliver on its primary objective, reducing the company’s CO2-equivalent emissions by 7.5 million metric tons.

Data centers are some of Microsoft’s biggest energy consumers, and as the company continues to transform into a provider of cloud services instead of relying primarily on individual software-license sales, its data center footprint and corresponding energy consumption will only continue to grow.

Perhaps that is the reason some of the money from its carbon-fee program has gone to fund some unusual data center innovation projects around energy use.

One of those projects is a data center module (or ITPAC as Microsoft calls it) that is getting all of its power from biogas generated as byproduct of a waste-treatment plant in Cheyenne, Wyoming.

Converting biogas into electricity, fuel cells power 200 servers in the ITPAC. The system recycles excess heat from the data center by pushing it back to the sewage-treatment facility, giving it an extra 150kW of power to use in converting waste into energy.

Microsoft calls this setup the “first ever zero-carbon data center.” It’s a pilot project, but once complete, the company will have enough data to expand the concept to other locations that can provide easy access to biogas resources.

The second big ongoing Microsoft data center innovation project the company has spoken about publicly is integration of small-size fuel cells directly into server racks. This project is taking place at the National Fuel Cell Research Center at the University of California, Irvine. The project also received a $5 million grant from the U.S. government.

The idea is to cut electrical losses by getting rid of all the power conditioning equipment that traditionally sits between utility transformers and servers in a data center. The added benefit is reliability, since it reduced the amount of points of potential failure in the chain.

The approach “brings the power plant inside the data center, effectively eliminating most of the energy loss that otherwise occurs between the generator and the data center, doubling the efficiency of traditional data centers,” Sean James, senior research program manager at Microsoft, said in a statement.

Size of the fee is calculated by multiplying a division’s carbon emissions by carbon price, which is a universal formula, according to Mindy Lubber, president of Ceres, a non-profit that promotes corporate sustainability. Lubber wrote the foreword to a 2013 paper outlining Microsoft’s carbon-fee program.

“For a company to choose to become carbon-neutral is not novel, but Microsoft is taking an additional step by detailing the way to get there with a carbon fee,” she wrote.

Nearly 20 percent of the funds generated by the fees pay for internal carbon reduction grants. Almost 60 percent pays for green power and sustainable energy innovation. The company spends another 20 percent on carbon-offset projects in communities in developing countries.