ENGIE, the world’s largest independent power producer, has signed an innovative volume firming agreement (VFA) with Microsoft that will allow the technology giant to buy “firm” power from wind and solar projects in Texas under a specially structured power purchase agreement (PPA).
The companies on Sept. 24 said the long-term PPA will allow Microsoft to buy a total of 230 MW that ENGIE plans to put online in January 2021 on a fixed, 24/7 basis, to match hourly consumption from a Microsoft data center in Texas. The majority of output will come from the 200-MW Las Lomas wind project in Starr and Zapata Counties in south Texas, but Microsoft will also buy 85 MW from the 200-MW Anson Solar Center project in Jones County, central Texas.
ENGIE and Microsoft on Tuesday also announced a partnership to integrate Microsoft Azure intelligent cloud services with ENGIE’s Darwin energy software to optimize performance of ENGIE’s wind, solar, and wind + solar hybrid assets worldwide. The Texas project will demonstrate that digitalization integration, as Carlo Purassanta, president of Microsoft France, and ENGIE CEO Isabelle Kocher told reporters in a webcast briefing on Tuesday.
ENGIE’s Darwin software, which is already in use at more than 15 GW of its assets globally, works to enable real-time plant monitoring and control, but it also offers reporting, forecasting, performance monitoring, and predictive maintenance. “Darwin has already enabled ENGIE to increase plant availability and to enhance production performance of up to a few percent on some of its assets,” Kocher said.
Microsoft Azure is a “portfolio of several services—infrastructure as a service, platform as a service, artificial intelligence, and machine learning,” explained Purassanta. “Plus it is super-important because Azure has the capability to do edge and cloud, meaning that you can put intelligence very close to the same source, to the engine or a turbine or a data center. So you can have the intelligence in the cloud but also very close to where things are happening. It’s the best-of-breed solution that we have.”
The two companies will mutually benefit from the partnership. Working together will allow Microsoft to furnish ENGIE with data-driven insights to build upon Darwin and “contractualize PPAs for its clients,” but it will also proactively serve as a client to provide feedback to better help Microsoft’s renewable procurements, said Purassanta. Microsoft, he noted, is one of the largest players in the corporate renewable procurement market, growing its portfolio from a 110-MW wind project in Texas in 2013 to more than 1.2 GW that today spans across six states and three continents. “So we are partner and client of each other, and we can enrich for sure what we’re doing together,” he said.
Kocher said ENGIE will build about 9 GW of new renewable energy projects globally between 2019 and 2021, 2.5 GW in North America alone. “What is critical, again, is to [tackle] the challenge of intermittency. Efficiently, of course, but also intelligently,” she noted.
Both Purassanta and Kocher also lauded the specially structured PPA with the VFA agreement. “This is really innovative, and really a first-of-a-kind for two reasons. The first one is that PPAs normally cover one technology—wind or solar. Here it is a cocktail of wind and solar. [The second is] the profile of production can fit the consumption profile,” said Kocher. That means, this is essentially an “as-consumed renewable PPA.”
“This is the challenge. As we all know, renewables are intermittent, and if we don’t master the equivalence between what is produced and what is consumed, we cannot totally decarbonize the energy consumption of our clients,” she said. “Here we are assembling and taking the risk and responsibility in real-time—to absolutely adjust and compensate and complement, if needed the real production profile with the real consumption profile. So it’s an ‘as-a-service’, real carbon solution,” she said.
Purassanta, from Microsoft’s perspective as a renewable power consumer, also noted the VFA solution is designed to essentially slash risks associated with purchases of renewable power. While uptake of corporate PPAs have soared from virtually none to more than 13 GW in the U.S. alone over the past decade, such deals expose the buyer to weather-related risks associated with power production from the intermittent nature of wind and solar, forcing them to grapple with hourly issues, he said.
“Put simply, the power needs of buyers are static but the power from the project varies on a day-to-day, hour-to-hour basis,” as Brian Janous, general manager of Energy and Sustainability at Microsoft, explained in an October 2018 blog post. “This variability and the financial impact are difficult for even the savviest energy buyers and a substantial deterrent to smaller companies, as well as retailers, looking to engage in the renewables market.”
Microsoft, specifically, has led the charge to develop VFA agreements—which it notes do not replace PPAs—and it has emerged as the mechanism’s first adopter. Janous noted the VFA concept has its roots in late 2010, when investment management firm Nephila Capital approached several first corporate renewable energy buyers with an idea to help them manage risks inherent to PPAs. Nephila eventually cultivated the concept into a company called REsurety, and along with corporate partner Microsoft, it signed the first “proxy generation” PPA with Allianz for the output of the 178-MW Bloom wind project in Kansas in 2016, laying the groundwork for future VFAs.
“It’s very unique and new in the way its set up and … it’s exciting because it’s also new for us to have a partner like ENGIE to contract and learn from,” said Purassanta on Tuesday.
—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine)