Cloud software giant Salesforce took the first step toward delivering on its open-ended pledge to buy only “clean energy” by becoming a big backer of a wind farm being constructed in West Virginia.
Like many other big tech companies—Apple and Google in particular—Salesforce (CRM) wants to increase its purchases of renewable energy. Unlike those companies, however, Salesforce tends to lease its data center facilities. That makes it more difficult to negotiate directly with a utility and impractical to build its own on-site generating resources.
The solution? A relatively unusual arrangement called a “virtual power purchase agreement” that Salesforce negotiated with Canadian developer Enbridge (ENB). The contract calls for Salesforce to buy about 125,000 megawatt hours of electricity from the project annually at a fixed price over the next 12 years. That’s more power than Salesforce needed to run its data centers during its 2015 fiscal year.
The deal is considered “virtual” because the electricity won’t actually be used directly by Salesforce’s nearby data center. Rather, it will be fed into the local grid, adding to its clean energy capacity. Salesforce’s involvement reduces the risk associated with the project.
The arrangement is strategic for two big reasons: not only is West Virginia a big coal state, but a substantial portion of Salesforce’s annual energy consumption is tied to its data center in the region, the company’s chief financial officer Mark Hawkins told Fortune. “This is important to me, this is important to our founder, this is important to our executive team,” he said.
Salesforce didn’t disclose the location of the project but Enbridge paid $200 million for 103-megawatt New Wind Creek project in Grant County, W. Va., in late November. The project is scheduled to start operations in December 2016.
Salesforce has promised to switch completely to clean energy at an unspecified date. In early November, the San Francisco-based software company agreed to work toward a higher-level goal: net-zero carbon emissions by 2050. Buying energy generated by solar or wind projects is just one way to get there.