Microsoft Corp. made energy news this month when it decided to leave its local utility to buy its own renewable power. Washington state regulators have since approved the move. What fueled the company's decision, and does it establish a model for other companies to follow? During today's OnPoint, Michelle Patron, director of sustainability policy at Microsoft, discusses the company's strategy for efficiency and renewable energy.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Michelle Patron, director of sustainability policy at Microsoft. Michelle, thank you for joining me.
Michelle Patron: Thank you for having me.
Monica Trauzzi: So Microsoft made energy news this month when it decided to leave its local utility and buy its own renewable power. Washington state regulators have now approved the move. What wasn't the utility doing, Puget Sound Energy? What weren't they able to provide that fueled the decision to leave?
Michelle Patron: So we're very excited about this deal that was approved a few weeks ago by the regulator, and it's going to allow us to go and go to the open market and buy 100 percent carbon-free for our campus. And when you think about our campus, our campus isn't a few buildings; it's over 100 buildings, and some might even say it's a small city. And so this allows us to go and be able to choose where we're going to get energy from, at what price we're going to get it, and what supply source. And that's really exciting for us because that allows us to do it in a way that's good for our business, that's good for our local community, that's good for the environment, and frankly that's also good for the utility. And just in terms of the deal — so we're going to pay a $24 million transition fee, which will allow us to move from PSE providing our generation to going to the open market.
And this also created — set some new bold energy commitments. So we are contractually obligated now to buy 100 percent carbon-free, and within that energy we're also going to be contractually obligated to buy renewables, which in Washington state is a very narrow definition of solar and wind and a few other sources, at levels that greatly exceed what even the utility — so it's going to accelerate our ability to reach our sustainability goals. So if you look at what the utility is required to do, this is about two to three times more: 40 percent by 2021. And the other important piece here is that we wanted to make sure that we were protecting the local ratepayer. So we're paying this transition fee, which will be refunded to the local ratepayer, but we're also continuing to pay into local programs. So we're continuing to pay into the conservation program that PSE administers, and we're actually increasing by 150 percent what we pay into the low-income program as well.
So we wanted to be able to accelerate our sustainability goals and our purchasing of renewable and carbon-free energy at a market-based price; this allows us to do that. But it allows us to do it in a way that's also good for the local community and that's good for the environment.
Monica Trauzzi: It's a significant move. Do you think it sort of provides a model for other companies that we could see replicated throughout the country?
Michelle Patron: So every consumer has to do what's good for them, and obviously a lot of them are looking to increase their control over their own energy sources. What we think is really important about it is it shows innovative ways to work with utilities and to work with regulators, even in regulated markets, to find different types of solutions. So this might apply to others, it might not apply to others, but the fact of the matter, that you're softening the ground to have these conversations and think outside the box and figure out ways that you're addressing everyone's needs but also accelerating renewable uptake and doing it in a cost-effective way, we think that that is the important takeaway.
Monica Trauzzi: And it would certainly vary from state to state based on the commission and the dynamics at play. Do you think that you potentially had an easier time because it's Washington state and because of the political dynamics there?
Michelle Patron: So, you know, every state differs because they're the ones that control the — they have very different electricity regulations. You know, we are a large consumer. We also have a significant amount of in-house expertise in purchasing energy, so what we might seek in Washington state or even in other states that have different regulatory structures might be different than other consumers. But what we think is really important here is really thinking outside the box, working with utilities, working with regulators. We did an interesting project recently in Wyoming which was also quite different where we brought online 240 megawatts of wind power to help power our data centers. And as part of the arrangement we are providing backup power to Cheyenne, to the local community so that the utility can call on our backup generators when they have peak demand in their city. So trying to figure out really innovative ways to use new technology, to use our purchasing power to be able to move the needle here.
Monica Trauzzi: So what's been different now that you are focused on building relationships with the renewable suppliers? How does that change the game, the conversation for you just on a day to day basis?
Michelle Patron: I think we've been in this space, but we're actually really much more focused because we're looking to figure out how do we find sources. They're not always readily available. They're not always readily available in cost-effective ways. And so it's just that we're having much more active conversations with all of the different players — if it's the utilities, if it's the environmental groups, if it's the local regulators to figure out how we can get more renewables on the grid. I think the fact of the matter that we're having these conversations, that we're being engaged in this space, that we're taking on the different regulatory initiatives that we are has really — this is what's changed.
Monica Trauzzi: So turning to policy and Washington politics a bit, Microsoft was one of the big tech companies that came out against President Trump's decision to pull the U.S. out of the Paris Agreement. How can technology companies like Microsoft collaborate to continue to drive the U.S. towards emissions reductions?
Michelle Patron: So climate change is an important issue for our company. Environmental sustainability is an important issue for our company. Resource — the issues around resource management and resource stresses are important for our company and they're important for our business, right? We are a growing resource consumer, and so we have an opportunity — if it's energy, water, land — to do more in this space and a responsibility to do more in this space. These are issues that are important to our customers, right? We have customers that are private-sector customers, but also public-sector customers, municipalities, water utilities, transportation fleets. And we also have private-sector companies that are active in the agricultural space, that are active in the utility space, in the financial space, and all of them are looking for solutions that help them reduce their energy use, increase their efficiency, reduce their carbon footprint. And we have technology now that — we've had tremendous advances in cloud-based technology, in deep learning, in AI that allow us to process massive amounts of information and make sense of it in ways that help us more efficient, if it's ... energy use, water use and balancing the grid. And so all of that comes back to our business, and that's why we have — we've spoken out in the way that we have and that we're going to continue to engage on these issues, and that's why we're going to continue to take the actions that we're taking, because they really are fundamental to our bottom line, they're fundamental to our customers' demand, and they're fundamental to our business.
Monica Trauzzi: But some level of government support is necessary and critical to fueling innovation on efficiency and renewable technology. Do you believe that eventually the Trump administration might get to a place where it is looking to put money in that direction?
Michelle Patron: Look, we're going to continue to engage the government if it's on the federal level, if it's Congress, if it's at the state level, it's international, on these issues. We think that policy is important as an accelerator, as a force multiplier of what companies are doing and what other organizations and stakeholders are doing, and we're going to look for areas of alignment in demonstrating how we've been able to do what we're doing, what we're doing in Washington state, what we're doing in Wyoming, how there are market-based solutions here that move the needle forward but that also create important co-benefits, if it's job growth, if it's economic growth, if it's sustainable and resilient infrastructure. So those are conversations that we're going to continue to have and we look forward to them.
Monica Trauzzi: All right, we'll end it there. It's a really interesting move. Thank you. Thank you for your thoughts and thanks for coming on the show.
Michelle Patron: Great. Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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