Amazon: Winds of change
Amazon, the online retail giant, reaffirms its commitment to Sustainability, and advances on its goal of using 100% renewable energy on its Amazon Web Services business.
On the morning of October 19th Jeff Bezos started his day standing on top of a 300-foot tall windmill, and breaking a bottle of champagne against one of the mills’ arm to celebrate the christening of Amazon’s latest and largest wind farm, located in Texas[1]. The astonishing facility has an annual capacity of 1 million megawatt hours, and is one of the many projects that the company is developing to achieve the goal of using 100% renewable energy in its Amazon Web Services (AWS) business, which provides virtual storage in a cloud system.
The strategy behind Amazon’s sustainability efforts is fairly clear: the use of renewable energy generates a win-win-win situation[2]. First, Amazon has the opportunity to diversify its energy consumption and to attain lower energy costs[3]. Second, the customers benefit from the savings that will be passed along as a consequence of the energy cost reduction. Third, the communities can enjoy a healthier environment as a consequence of the usage of alternative energy as opposed to fossil based energy. But most importantly, the company is convinced that Climate Change can be slowed down, and is fully committed to play an important role addressing this issue.
The Tech Industry’s fight against Climate Change
Even when the current Administration decided early this year to reverse the Clean Power Plan and promote the fossil-fuel resources industry[4], the technology industry, led by Amazon, Apple, Google and Microsoft, joined efforts[5] to stimulate the use of renewable energy, and advocated for the straightforward process of changing energy sources. The government’s decision of providing support to the coal mining and energy industries is a setback; however, Amazon and its buddies won’t admit defeat and will continue on this battle.
AWS is tackling the issue from two angles. First, by providing cloud storage, it allows companies to use 84% less power compared to what they would consume if they would use on-premises facilities[6]. This happens because a regular on-premises data center is less efficient in the use of power compared to a cloud provider such as AWS. Additionally, the number of servers required by a cloud provider is inferior than the one required by a regular data center. The combination of above factors generates a reduction of approximately 88% of carbon emissions by the companies using cloud data centers.
Second, AWS has set the goal to use 50% of renewable energy by the end of 2017, and 100% on a long-term basis. In order to be able to comply with this goal, the company has built 18 wind and solar projects, and plans to include 35 more facilities to its portfolio. Amazon has also made changes to its buildings[7], for example the installation of LED lighting and high efficiency heating and cooling systems; and others much more ground-breaking transformations, like recycling energy in the form of heat, captured from data centers through underground water pipes, and using it to cool or heat the building.
Spreading the word
Besides the renewable energy initiatives, the company manages a comprehensive program that includes responsible sourcing, the reduction of the global footprint in operations, and the efficiency of packaging. On this last item, Amazon is partnering with GiveBackBox to promote the reuse of the Amazon boxes to donate goods to charitable organizations. The company is achieving great things on the sustainability field, but in my opinion, Amazon could go even further if the company did a bigger effort to share this information, which would serve to inspire and motivate people and organizations to follow their path.
Looking into the future
The fight for Renewable Energy has not yet been won, but Amazon has made some strong moves so far. Will the wind energy remain cost competitive and attractive if the current subsidies are removed? Will corporate America be able to overcome the challenges that the current Administration is posing, and thrive on using renewable energy as the main energy source?
(Word count: 796)
References:
[1] “Amazon Launches Biggest Wind Farm Yet — Company’s Renewable Energy Projects Will Together Generate Enough Clean Energy to Power More Than 330,000 Homes,” press release, October 19, 2017, on Down Jones Institutional News, http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1952993636?accountid=11311, accessed November 2017.
[2] Amazon, “Sustainability,” https://www.amazon.com/p/feature/pxd3et5w29xn9m6, accessed November 2017.
[3] Energy Monitor Worldwide, “Why Wind Energy Is Booming in the U.S,” ABI/INFORM via ProQuest, accessed November 2017.
[4] Jennifer A Dlouhy, “Trump Sweeps Away Climate Rules Vowing `New Energy Revolution’,” Bloomberg Politics, March 27, 2017, https://www.bloomberg.com/news/articles/2017-03-28/trump-to-cancel-obama-s-policies-aimed-at-paris-climate-pledge, accessed November 2017.
[5] Jacob Kastrenakes, “Apple, Google, Microsoft, and Amazon back EPA in challenge of clean energy rules,” The Verge, April 1, 2016, https://www.theverge.com/2016/4/1/11350482/epa-rules-backed-by-apple-google-microsoft-amazon-court-filing , accessed November 2017.
[6] Amazon, “AWS & Sustainability,” https://aws.amazon.com/es/about-aws/sustainability/, accessed November 2017.
[7] Amazon, “Energy &Environment,” https://www.amazon.com/p/feature/gkkwdp34z5ou7ug, accessed November 2017.
I believe that this story is a clear example of how social problems can be solved by private entities. Like it was mentioned in the text, the fact that the current administration pulled back incentives towards clean energy hasn’t affected private investments. However, I am a little insecure about the long-term sustainability of this project for Amazon. The reality is that AWS is Amazon’s core business (going against the idea that it is primarily an online retailer!). Exposing this to potential cost disruptions in terms of energy expenses can be very dangerous for the business. For the meantime, I believe this will be played more like a PR move.
Interesting overview of the sustainability impact of Amazon Web Services and some of the broader actions that Amazon has taken to reduce their environmental impact. Reading this overview and seeing Amazon’s description of their sustainability efforts did make we wonder though how much the company over-emphasizes sustainability in AWS. For example, it makes sense that a centralized server is more energy efficient than individual companies operating onsite servers, but I think that the profitability of that business was the main driver. On the topic of profitability, this business has large margins that might make these investments in wind farms and other renewable energy sources more feasible. Given the company’s diversified businesses and assets, it would be helpful to understand the impact of their entire operation. On that note, Amazon received an F from CDP, a non-profit that queries carbon emission statistics from companies and receives information from 70% of S&P 500 companies, for not responding to this organization’s inquiry (https://www.seattletimes.com/business/amazon/amazon-reluctant-to-share-carbon-emissions-data/). While I think it’s important for Amazon to pursue renewable energy sources for their AWS assets, I think Amazon could demonstrate themselves as a leader in sustainability for all of their businesses, not just those with the margin to comfortably cover investments.
It is interesting to see Amazon making a focused effort on renewable energy for AWS. Given the size of Amazon as a retailer and the impact that has on the environment due to the consistent movement of goods using non-renewable energy sources, that this would even be any ones concern at Amazon. I wonder if Amazon is truly interested in focusing on renewable energy and doing it across their core product for retail as well, or if they are more concerned with managing the power source for their many income driver in AWS. I could see a play where they have the benefit of calling it a focus on renewable energy, while their true focus is just providing insurance to their traditional supplies of power.
This is a terrific example of a company taking a leadership role in fighting climate change by taking decisive actions to take a stand. There are also additional benefits of this program to Amazon which make it surprising that more similar companies do not take advantage of the opportunity to directly source renewable energy – notably, the fact that for a business which is very electricity-dependent (even though cloud uses much less electricity than a traditional data center, I have to assume that a cloud service center still uses significant electricity for the computer equipment), directly sourcing electricity provides a long-term hedge against rising electricity prices. Electricity prices have historically risen over time, and locking in electricity prevents amazon’s margins from being exposed to this. However, one thing that I would be curious to push more on is the extent to which Amazon (whether directly through asset ownership or indirectly through a PPA price) benefits from the numerous government incentives for which wind is eligible (notable the Production Tax Credit), and the extent to which they would continue this strategy if they were not able to benefit from these and therefore likely would have to pay much higher prices for their renewable energy.
“With great power comes great responsibility.” As A12345 indicated above, Amazon is an example of the new age of corporate responsibility in which corporations utilize their influence and scale to impact social policy and social impact. Amazon recognizes the “power” it maintains to be a positive agent for change and has decided to take action in the fight against climate change. Amazon’s environmental efforts are taking place across the company. In addition, to the amazing initiatives mention in the article, Amazon is retrofitting existing buildings to improve energy efficiency and reduce costs.