Microsoft will buy clean energy credits from Ontario Power Generation’s hydroelectric dams and nuclear reactors, the two companies will announce Monday.
Though details of how many credits Microsoft will purchase, or how much it will pay, were not disclosed, the 10-year agreement represents the first marquee customer for OPG’s clean energy credit trading business. It could also represent a milestone in efforts to establish a market for clean energy credits in Ontario.
Microsoft said it’s buying the credits to help meet its global commitment to purchase all of its electricity “matched by zero carbon energy purchases” by 2030. The credits from OPG will help achieve that objective in Ontario, where Microsoft has data centres and some offices.
“If the grid were completely clean energy today, we wouldn’t need these clean energy credits,” said Chris Barry, president of Microsoft Canada. “It is an innovative structure that provides us the ability to ensure that the power purchased is carbon-free.”
Clean energy credits (sometimes referred to as renewable energy certificates) are tradable certificates representing one megawatt-hour of renewable power. They’re potentially valuable to companies that have made public commitments similar to Microsoft’s. Buying straight from the grid, they can’t be sure whether their power was generated by wind turbines, hydro dams, or thermal plants burning coal or natural gas.
OPG’s generation fleet is dominated by its Pickering and Darlington nuclear power plants, and more than 60 hydroelectric dams. Through its Atura subsidiary, it also owns Ontario’s largest fleet of combined-cycle turbine natural gas plants.
The company began selling clean energy credits derived exclusively from its hydroelectric facilities earlier this century, but until recently it struggled to find buyers. In a letter to the Ontario Energy Board (OEB) this summer, the company revealed that between 2014 and 2020, it earned between $0 and $400,000 annually – amounts it deemed “immaterial.”
But sales surged to $5.5-million in 2021, the same year OPG began selling credits sourced from its Sir Adam Beck hydroelectric facility. The company forecast revenues from credit sales would be $4.8-million this year, and decline steadily in each subsequent year to 2026.
Notably, Microsoft said it will buy credits generated by OPG’s nuclear plants – and also, potentially, from a small modular reactor OPG plans to build at its Darlington facility by 2028.
“Nuclear is a critical provider of low-carbon electricity globally,” said Microsoft’s Mr. Barry. “We do feel that it needs to be an important part of the picture.”
Dan Goldberger, president of the Ontario Sustainable Energy Association, said clean energy credits derived from nuclear power have become contentious.
“It’s clean in the sense that no emissions of carbon dioxide result from the generation of nuclear energy,” he said. “But a lot of people feel, despite that, it’s not clean. There’s a good argument to be made there because of the radioactive waste, the use of water, and so on.”
In May, Environmental Defence petitioned the Ontario Energy Board to commence proceedings to examine OPG’s clean energy credit sales outside Ontario. The non-governmental organization was particularly concerned about sales to jurisdictions where electricity is generated by burning coal – a practice Ontario ceased nearly a decade ago.
“If OPG is selling credits into coal-burning jurisdictions, it’s as if Ontario is back to burning coal, by giving other people an excuse to do so,” said Kent Elson, a lawyer who represents the organization before the OEB.
In June, the City of Ottawa told the OEB in writing that it also objected to OPG selling them to buyers outside the province.
“Ottawa is concerned that this practice is removing the environmental attributes from the electricity our community consumes,” wrote Mike Fletcher, a project manager with the municipality responsible for managing energy reduction and building engineering projects.
Last month, the OEB informed Environmental Defence that it would not examine the matter. Earlier this year, Ontario Energy Minister Todd Smith instructed the Independent Electricity System Operator (IESO) to get a provincial registry for clean energy credits up and running by January, 2023. “Until those consultations have concluded and the results are known, it would be premature for the OEB to consider the matters raised by [Environmental Defence],” OEB chief commissioner Lynne Anderson wrote.
IESO spokesperson Martine Holmsen said it has developed recommendations for how that registry should be implemented during the first quarter of next year.
“Discussions are ongoing about implementation and we are awaiting a directive to proceed,” she wrote.
In addition to their agreement on clean energy credits, Microsoft and OPG have also agreed to collaborate on several other initiatives. They plan to adapt for the Ontario market a software tool Microsoft developed for its data centres in Sweden, which enables those facilities to track hourly energy consumption and match it to renewable energy sources. They’ll also collaborate on using Microsoft products to advance OPG’s efforts to deploy small modular reactors in Ontario.