Wind Power Provider for Microsoft DC: Cost Savings Will Come

The man who directs resource planning for Black Hills Corp., the owner of two wind farms in Wyoming and the winner of a huge contract to provide power for Microsoft’s Cheyenne data center, told Data Center Knowledge that there will be cost savings for Microsoft in adopting renewable power. . . down the road a bit, but still along the way.

“I think this new structure between ourselves and Microsoft, where we’re able to leverage their generating units behind the meter — ultimately, long-term, that’s going to be a lower cost than normal in today’s market,” said Black Hills’ Chris Kilpatrick.

Two wind farms — Black Hills’ Happy Jack and Silver Sage projects — are involved in this deal.  Black Hills serves some 1.2 million natural gas and electricity customers in eight states, as far north as Montana and as far south as Arkansas, from its home base in Rapid City, South Dakota.

Behind the Meter

When any new customer enters Black Hills’ service territory, Kilpatrick said, it’s his firm’s obligation to provide energy.  Regardless of which customer that may be, it may need to build new generation facilities to serve the load, or enter into a long-term power purchase agreements (PPA).

As part of the Microsoft deal, he explained, the data center provider has agreed to supply generation behind the meter — meaning, backing up what wind power may not consistently be able to provide, with supplemental power, in this case from natural gas generators.  Not having to build that backup power supply not only saves Microsoft, said Kilpatrick, but also saves other customers in the area, by not having to bolster transmission capabilities with supplemental construction that could impact service.

In a corporate blog post Monday, Microsoft President and Chief Legal Officer Brad Smith explained, “Unlike traditional backup generators that run on diesel fuel, these natural gas turbines offer a more efficient solution and, more importantly, ensure the utility avoids building a new power plant.  This is a small step toward a future where other customer-sited resources may help make the grid more efficient, reliable and capable of integrating intermittent energy sources like wind and solar.  And as we recently demonstrated in our pilot with Agder Energi in Norway, this future will be enabled by the application of cloud technologies that enable utilities to visualize and optimize resources, providing the foundation for a low carbon energy future.”

That’s suggesting that Microsoft may be adding some intelligence on its end of the bargain — again, behind the meter.  That Agder Energi project to which Smith referred is an agreement with the Norway-based renewable energy provider to use resources hosted on Azure to develop new, real-time models for situational awareness on the power grid.

System Upgrades

All this is not to say this energy deal is ready to go the moment Microsoft flips the switch.  Black Hills has already constructed one new power substation, though Kilpatrick told us another is in the works, possibly costing some $15 million.  Improvements to some transmission lines will also be necessary, at a cost of about $5 million.

There’s also this: jEvery time a new customer enters the grid with a power draw that could peak at 237 MW — which is the number being touted by Microsoft on Monday — the strategy for serving the entire West Coast must be adjusted.

“It’s another piece of the puzzle that they certainly have to take into account, absolutely,” said Black Hills’ Kilpatrick.

“We have an electric industry of schedulers that work on the western half of the United States grid, basically scheduling energy through specific transmission lines to make sure that you don’t oversubscribe transmission lines, and make sure that you have enough capacity and enough space in those lines to allow energy to flow through.”

Black Hills utilizes such a group for its customers in Wyoming, South Dakota, and Colorado, to make certain the infrastructure is capable of supplying those three states.

Perhaps Microsoft could use a bit of that situational awareness today.  Kilpatrick, who told us he’s worked with Microsoft in planning energy consumption at its Cheyenne data center for about four years, admitted that facility does not consume anything close to 200 MW of power today.

A back-of-the-matchbook estimate for how much power the western U.S. power grid provides, he told us, is about 40,000 MW — making the Cheyenne DC, at peak consumption, about one half of one percent of the total draw.  Still, that’s astonishingly sizable.

“Part of what we do, when we’re figuring out how to serve our customers — especially large ones — is to work extensively with our regional transmission group,” he added.  “We do regional transmission planning to make sure there’s enough transmission for the whole region.  We don’t just look physically only at Cheyenne, or only at Wyoming.  It’s a bigger piece of the pie.  We do studies with partners in the region as well, to make sure we’re not upsetting the apple cart.”

Today’s agreement marks the fourth renewable PPA for Microsoft in the U.S.  The first, signed in November 2013, was a 20-year PPA with the Keechi Wind Project, led by RES Americas, a Texas-based wind power supplier.  That was followed in July 2014 with an agreement with EDF Renewable Energy, to purchase power from the Pilot Hill Wind Project, a 175 MW facility some 60 miles north of Chicago.  The third and latest PPA, signed last March, involved boosting solar power to the Virginia region by some 20 MW.