Digital Realty to Offer Tenants Free Renewable Energy Credits

This is shaping up to be a big week for renewable energy in data centers. Following Tuesday’s announcement of a big wind power purchase agreement by Amazon Web Services, Digital Realty said it will give every customer that signs a new lease in any of its facilities around the world Renewable Energy Credits to apply to the energy their data center space consumes for the first year of their lease.

Few companies that own and operate their data centers choose to pay the premiums on their energy rates to make their IT operations carbon neutral. Even fewer companies that lease their data center space from the likes of Digital Realty do it, making the San Francisco-based real estate investment trust’s announcement stand out.

The move indicates that there is an increased interest among potential data center customers in renewable energy. Data center providers have very little business incentive to pay extra for renewable energy, since being able to offer the lowest energy rates to their customers is one of the main ways they compete. Digital Realty’s willingness to foot the bill for the tenant’s first year indicates that the company has seen enough demand in the market to make it worth the extra operating cost.

Clean Energy Makes You Look Good

Good publicity is another obvious benefit for the provider. Last year, Greenpeace started including Digital Realty and its peers, such as DuPont Fabros, and Equinix, on its annual scorecard for environmentally friendly energy practices by data center operators. Until last year’s report, only the big Internet companies, cloud service providers, and hardware vendors were included. Digital Realty received Ds in every category: for energy transparency, renewable energy commitment and site selection policy, energy efficiency and mitigation, and renewable energy deployment and advocacy.

Neither of the five data center providers listed did exceptionally well, but Digital Realty’s score was the lowest on the widely publicized report. It is likely to do much better on this year’s report, now that it has the new REC program.

Giving Clients an ‘Easy Button’

Aaron Binkley, the company’s director of sustainability, said every customer that signed a new lease would receive RECs automatically. Digital Realty will procure them on the client’s behalf at no additional cost to the client. After their first year ends, they can choose to start paying for the credits or opt out. The company will source RECs near the customer’s data center location wherever feasible.

The company’s leadership hopes the program will demonstrate to customers that the renewable energy premiums are not as high, and that the procurement process is not as complicated “as the market has been led to believe,” Binkley said.

Perceived high costs and complexity have been major deterrents for data center customers, many of whom say, “We’d love it if there was an easy button,” he said. So Digital Realty will provide that easy button. Energy procurement at scale is a big part of its operations, and the company has developed a lot of expertise and connections in the space. Once the initial year expires, all the legwork necessary to get and apply the credits to the energy the customer consumes will already have been done for them, lowering the barrier to entry. “The longer-term objective here is to really spur the growth of this within our client base,” Binkley said.

More to Come

Asked whether he and his colleagues have considered doing away with the one-year limit and just providing renewable energy to tenants indefinitely, he said it had been a discussion point, but “we wanted to walk before we run.” Right now, the objective is to show that it’s not so expensive and difficult. “This is a first step in what we think will be a number of steps.”