Renewable electricity consumption and reporting

In February 2021, IBM established its third-generation renewable electricity procurement goal: to procure 75% of the electricity IBM consumes globally from renewable sources by 2025, and 90% by 2030. The amount includes renewable electricity in the grid mix IBM receives from utilities or energy retailers, and renewable electricity for which IBM specifically contracts over and above the renewables in the grid.

Even though we strive to do so one day, it is not possible today or in the foreseeable future for IBM to actually consume 100% of electricity from renewable sources given our physical presence in more than 100 countries along with the need for uninterrupted power, which is usually only made possible today by the use of fossil fuel and nuclear generation sources.

To learn about IBM's progress against its goal, please see IBM's 2021 ESG Report Addendum: Energy and Climate Change.

IBM's renewable electricity procurement strategy

IBM's strategy is to purchase renewable electricity that is generated in the grid regions where our consumption of electricity occurs. Our definition of "grid region" aligns with how the US Energy Information Administration1 defines power balancing authorities' territories. We apply the same concept for other jurisdictions. By aligning with this definition of grid region, we ensure that the renewable electricity we purchase can physically flow from point of generation to point of consumption when the time of its generation and our consumption coincides. This also creates incentives for our electricity suppliers to increase their renewable electricity offerings in the places where we actually have demand for such power.

This means IBM does not rely upon the purchase of unbundled Renewable Energy Certificates (RECs) to comprise any "percent renewable" if we cannot credibly consume the electricity those certificates represent. For example, we do not use purchases of renewable electricity generated in Texas to claim consumption of that electricity in New York because the two states are in different grid regions.

We are source agnostic, meaning IBM procures renewable electricity generated from wind, hydropower, biomass, solar and geothermal installations around the globe. We report all of our contracted renewable electricity purchases whether from new or existing generation sources, "additional" or otherwise, and without discriminating against large hydropower plants. All purchases signal to suppliers our desire for them to maintain and broaden their renewable electricity offerings. This approach also recognizes that all sources of renewable electricity contribute to decarbonizing our economy.

Transparent reporting of renewable electricity consumption

IBM methodology to calculate its consumption of renewable electricity

IBM differentiates between two categories of renewable electricity consumption:

  1. Contracted renewables: purchases of renewable electricity for which IBM enters into a direct contractual relationship with a utility, power supplier or landlord to specifically procure and consume renewable electricity.
  2. Grid-supplied renewables: quantity of renewables that is part of the mix of electricity our facilities automatically receive from the grid.

To quantify our contracted renewable purchases, we rely upon our contracts with our providers. Typically, we obtain bundled Renewable Energy Certificates (RECs) or Guarantees of Origin (GoOs) in corresponding quantities that confirm this information. In geographies where RECs or GoOs are not available we obtain other equivalent documentation as alternative evidence to RECs or GoOs.

We estimate the grid-supplied renewables using publicly available power generation data by source from the International Energy Agency2, from the U.S. Environmental Protection Agency3 (at grid sub-region level) and from the Canada Energy Regulator4 agency (at provincial level). This data is typically one to three years behind the actual reporting year. IBM endeavors to obtain most recent reliable data for any given reporting cycle. The following example illustrates how IBM calculates its total renewable electricity consumption from both categories:

Let's assume a hypothetical IBM site in 'grid region A' consumes 10,000 megawatt-hours (MWh) of electricity each year. That site signs a contract with its power supplier to purchase and consume 5,000 MWh of renewable electricity per year. Therefore, 50% of the site's electricity is being supplied by contracted renewable purchases. The rest of the site's consumption (the other 5,000 MWh) is being supplied by a mix of energy sources in 'grid region A'. According to the relevant authorities, the electricity produced in grid region A comes from the following sources, in percent of total power generation: coal (23%); natural gas (45%); nuclear power (10%); hydropower (3%); wind power (18%); and solar power (1%). That means, that in total, grid region A is composed of 22% renewables. This means that 22% of the site's remaining 5,000 MWh of electricity consumption – equal to 1,110 MWh – is coming from grid-supplied renewable electricity. The site's total consumption of renewable electricity that year was 5,000 MWh (contracted purchases), plus 1,110 MWh (grid-supplied), totaling 6,100 MWh or 61% of its total electricity consumption.

IBM does not arbitrarily assign the consumption of renewable electricity to certain types of operations to be able to show desirable metrics (e.g., assigning all of our renewables consumption to our data center operations). Our approach is factual and transparent as we assign renewables consumption proportionally to the operations consuming the electricity at a facility level.

Allocation of renewable electricity to physical consumption and matched consumption

We categorize our procurement of renewable electricity as either physical consumption or matched consumption with bundled RECs. Both categories represent scenarios in which an IBM facility and a renewable generation asset are connected to the same grid region:

  • Physical consumption means the time of generation and consumption coincide. In this scenario, IBM consumes renewable power real-time, as it is generated.
  • Matched consumption with bundled RECs means the time of generation and consumption do not coincide. This is the case, for example, when there is more renewable electricity being generated than what IBM needs to consume at a certain point in time. In this example, the excess renewable electricity is consumed by others within our same grid region, but IBM retains the associated RECs.

We allocate our renewable electricity consumption among these two categories using the following assumptions based upon our understanding of the sources and profiles of their output:

  • Biomass - 100% physical consumption
  • Geothermal - 100% physical consumption
  • Hydropower - 70% physical consumption and 30% matched consumption
  • Wind power - 40% physical consumption and 60% matched consumption
  • Solar power - 20% physical consumption and 80% matched consumption


Allocation of IBM's renewable electricity consumption during 2021 in MWh
Total renewable electricity consumed 2,068,267
By delivery type
Contracted purchases 1,588,818
Grid-supplied 479,449
On-site generation 0
By category
Physical consumption 1,220,470
Matched consumption with bundled RECs 847,797
Unbundled RECs 0

References:

1https://www.eia.gov/energyexplained/electricity/delivery-to-consumers.php
2https://www.iea.org/data-and-statistics/data-tables/?country=WORLD&year=2017&energy=Electricity
3 https://www.epa.gov/sites/production/files/2020-01/documents/egrid2018_summary_tables.pdf
4https://www.cer-rec.gc.ca/index-eng.html