Datacenter rooftop solar represents another way to help offset carbon footprints

June 11 2020
by Jonathan Schroth, CFA


It is true that datacenters consume a great deal of electricity to power equipment, ranging from servers and other IT equipment to the cooling and power supply infrastructure that keeps such equipment operating. This power consumption has ramifications not only on the viability of long-term ecological sustainability, but also on an operator's profitability – electricity bills consume a significant proportion of colocation providers' bottom lines. However, one way for such companies to offset both their carbon footprints and costs is to earn renewable power credits though the energy markets. This strategy has been implemented by several providers in the northern New Jersey multi-tenant datacenter market through the installation of behind-the-meter rooftop solar arrays, and increasing regulatory pressures in the region should incentivize others to follow in their footsteps.

The 451 Take

Today, multi-tenant datacenter operators have several ways to tilt their energy use toward renewable power sources and away from those using traditional fossil fuels. Depending on the size and complexity of an entity's corporate infrastructure, these may include green tariffs, renewable power purchase agreements, renewable energy certificates and on-site generation. Given the inherent large scale of many colocation facilities and corresponding underutilized roof space with potentially favorable solar exposure, behind-the-meter solar array installations are one way to augment accessibility to limited renewable power resources. While only a handful of datacenter operators in the northern New Jersey market currently employ such a strategy, an increasingly tight regulatory environment may incentivize others to follow.


With a significant majority of power generation in the US still skewing toward fossil fuels, state-specific regulations requiring a more sustainable balance in corporate energy portfolios are incentivizing further development and use of renewables. New Jersey is a leader in the northeast, with one of the most aggressive renewable portfolio standard (RPS) targets, and its momentum should continue as the impact of global warming increases and the cost of renewables falls. According to S&P Global Market Intelligence, the state's RPS target will increase by 22.5 million MWh through 2030 from the current 11 million MWh, representing an annual growth rate of 12%, and solar generation should constitute a significant proportion of future additions to achieve such targets. While this story is still in the early chapters, there are several ways a corporation can help offset its carbon footprint while remaining compliant with more aggressive eco-friendly mandates. These include green tariffs, renewable power purchase agreements (PPAs, either physical or virtual) and renewable energy certificates (RECs) that serve as a tradable economic offset to traditional 'dirty' power usage.

Datacenter operators have the opportunity to achieve these mandates through another venue that is relatively unique to the industry, particularly large-scale operators: behind-the-meter solar array installations. Power generated by this infrastructure may be sold back to the utility in exchange for credits. In a market such as New Jersey, where renewable credits have significant value, this can be a lucrative endeavor on the power front alone, even before tax efficiencies and marketing benefits are realized from LEED and other green building certifications. Additionally, the relaxation of a cap on how much solar power can be generated (to match annual consumption) suits datacenters well, given their heightened electricity use.

On-site arrays

Datacenters are prime candidates for renewable offsets via solar installations, given their high power consumption and large exposed exterior square footages, but do on-site arrays have a meaningful impact on total energy portfolio?

A number of New Jersey datacenter operators with large real estate footprints and, more specifically, massive underutilized rooftop square footages with favorable solar exposure have chosen to adopt on-site generation capabilities as a way to offset their carbon footprints and enhance income by distributing the resulting power to the grid. While this is not a sufficient approach to achieving full carbon neutrality – in reality, the resale of solar power would merely lower peak-demand electricity charges – it is indeed a way to utilize an otherwise unproductive asset and can help achieve ecological certifications (and tax efficiencies) such as those offered by the LEED program.

Over time, as solar and wind projects increase in regularity, the deregulated New Jersey market should prove to be an excellent energy ecosystem in which to contract directly with power companies undergoing such developments. This method represents the ideal approach to increasing the proportion of renewables in one's energy portfolio, but also requires that generation projects be located relatively close to end customers. Importantly, partners must also be carefully chosen to ensure that they continue to remain active developers with which datacenter operators can contract in the future, preserving so-called additionality, or the virtuous cycle of sustained positive externalities realized by renewable projects.

Northern New Jersey

Only a handful of New Jersey multi-tenant datacenter operators have included behind-the-meter solar installations in their energy portfolios to date. That number may increase as regulations tighten.

In-person facility visits and satellite image-based reconnaissance performed on Google Earth reveal only a handful of colocation providers in northern New Jersey that have specifically undertaken rooftop solar projects themselves or acquired facilities from previous owners that have. While on-site generation should be viewed as an ancillary strategy to enhance one's total energy portfolio today, as corporate demand for renewable energy increases in the coming years against a tightening regulatory backdrop, augmenting access to renewable power solutions beyond green tariffs, renewable PPAs and RECs via behind-the-meter generation could expand the ease with which datacenter operators and similar entities gain access to a scarce resource.