Iron Mountain Data Centers are in the vanguard of the clean energy transition: they not only run their facilities on 100% renewable energy, they are working towards a more ambitious goal, powering them with carbon-free energy 24/7.

In this episode, host Lincoln Payton dives deep into decarbonization with Chris Pennington, Director of Energy and Sustainability at Iron Mountain Data Centers, to understand the more ambitious goal, and how Iron Mountain is using hourly energy and carbon data as the foundation to match supply with consumption and help the company meet its emission goals.

Key Takeaways

– Why the future of decarbonization is moving away from annual market-based accounting methodology to hourly location-based accounting
– More granular data is key to understanding facilities’ load and matching it in near-real time to available clean energy sources
– Why adopting a long-term clean energy and decarbonization strategy serves both the climate and Iron Mountain’s bottom line

Resources

What is 24/7 Carbon-Free Energy & Why It Matters

Episode Transcript

Narrator:  On this episode of the Decarbonization Race…

Chris Pennington: I think we all recognize that as much as 100% renewable on an annual basis is a great start to the journey, it’s not the end of the road. There’s still more work to do.

Narrator: Chris Pennington, Director of Energy and Sustainability at Iron Mountain Data Centers, joins host Lincoln Payton for a discussion on how they’re managing their data center footprint as it continues to grow and what sustainability really looks like in a truly green data center. Ready to lead the sustainability pack? This is the Decarbonization Race.

Lincoln Payton: Chris, great to have you here.

Chris Pennington: Thanks, Lincoln. Great to be here. Looking forward to the conversation today.

Lincoln Payton: Absolutely. So Chris, what’s your professional roots to ending up in the chair you’re sitting in now?

Chris Pennington: Well, I’ve been with Iron Mountain now for just over 30 years, quite a while. So I won’t bore you with 30 years of details, but what I will say is that it’s an interesting journey. Iron Mountain is a 70-year old firm that really has its roots in storing and managing the assets that are most important to our customers. And that started with physical papers in our underground facilities quite a while ago, then moved above ground. And as information grew, so did our footprint and our size and today it’s a global organization in over 50 countries with over 1500 facilities. So it’s a robust real estate portfolio and its specialized facilities in many cases for preserving these valuable customer assets. And more recently, as information has become more digitized, our data center footprint has really started to grow and expand very robustly.

So my personal journey steered towards data centers just about a year and a half ago or so with the goal to really focus on building out our sustainability program for the data center business unit. What does it mean to be a green data center? What does sustainability mean within our space? How do we define it? How do we make sure that we’re setting goals that are impactful and meaningful and support the business? Certainly, energy is a primary piece of a data center business. In essence, it’s what we sell. Sure, we package it up in very secure, highly connected facilities with robust backup power systems, but at the end of the day, to a large degree, we’re selling power. So with that in mind, decarbonizing the grid is clearly very top-of-mind for us in terms of how we think about the business going forward.

Lincoln Payton: And we’ll drill down into some of those topics you opened there, but how did the thinking evolve within Iron Mountain for someone like you, very experienced member of the team, to be focused entirely on this space? What cultural evolution have you seen? And it’s a great example I think for everybody of what high-profile public companies, and particularly in areas of today… Digital data management, energy. What was the thought processes within the company to drive you to be the point on focusing this way?

Chris Pennington: It really is amazing to see the goals that companies across all sectors are setting towards helping to combat climate change, and our journey at Iron Mountain Data Centers really picked up speed in about the 2017 timeframe. And we’ve been securing renewable power for our data centers really since day one of the business unit. It’s always been a cornerstone of how we think about what it means to operate a data center, knowing that energy procurement was going to be so critically important that we wanted to make sure that we had a sustainable path that was something that we could really be proud of, but also that would bring value back to the business for decades.

Playing the long game is just in our DNA at Iron Mountain. So I think that for us, we were naturally inclined to think long term. We were keenly aware of how power was going to be a part of how we marketed the business. And that really kind of cast the journey early in terms of the direction that we were going to head. And it requires a good deal of dedicated support and commitment and resources to execute a plan like that. As companies go back to setting these really impactful goals, it does require a commitment of resources and talent and knowledge to execute those plans. And when I see that there’s positions opening up for energy and procurement and they’re all talking about renewables… And this is becoming a new core competency, I think, for how businesses buy energy, is what is the carbon impact and how is it contributing towards the company goals for carbon emission reductions?

Lincoln Payton: I definitely agree with you and even sitting in my seat, we see the road rising up to meet every day the decarbonization efforts, because there’s this education and awareness that maybe Iron Mountain was at the front of the line. And congratulations for that. But your types of example are spreading throughout industry. Very positive indeed. You mentioned it, Chris, but for how long have you been looking at the renewable energy space as part of the power equation for Iron Mountain?

Chris Pennington: The data center business really merged in late 2015, 2016 with a number of acquisitions that were made. And so our journey began in that 2015 timeframe. And it’s amazing now to think back to those early days eight years ago I guess it was now and think about how we were evaluating opportunities at the time. We knew that renewable power was going to be important. We knew that we needed to have the credentials behind that in order to make an annual claim towards covering our annual consumption. And we knew that there had to be economics that made sense for the business.

And so much has evolved since then, since those early days, just seven or eight years ago. There’s been so much great work done by companies to really think about how their energy footprint can be a strategic lever towards improving their environmental performance and a big push towards 100% renewable power. And it continues today and it’s wonderful to see.

And yet we’re seeing this interest now in more granular tracking of renewable energy, because I think we all recognize that as much as 100% renewable on an annual basis is a great start to the journey, it’s not the end of the road. There’s still more work to do. We’re a data center that pulls power from the grid 24 hours a day, seven days a week, 365. We never go down. That’s our commitment to our customers. And so until we can actually ensure that there’s clean, carbon-free energy going onto the grid in the way that we pull it off, we’ve got some more work to do. And by the way, our motivation for doing this isn’t only for environmental performance. It’s recognition that carbon-free resources are the lowest-cost energy generation out there because they’re not dependent upon the commodity costs for fossil fuels. It’s ultimately the path towards long-term, lower-cost energy.

Lincoln Payton: Chris, you said something that I’d like to expand upon a little bit, which is you talked about how Iron Mountain presents itself to its clients and how what you’re doing in the renewable energy, carbon-free, 24/7 granular space is important in how you present yourself to your clients and in fact how the clients are receiving you. Could you expand on that a little bit?

Chris Pennington: Sure. Yeah. And I imagine that you may be seeing this as well, that there’s this growing interest and recognition that decarbonizing the grid is important coming from across all sorts of sectors of the economy. Clean power isn’t reserved just for data centers. Companies of all business types are recognizing this opportunity. And where we sit is in this interesting space where we are a really critical piece of our customers’ energy supply chain.

Iron Mountain operates several different types of data centers, but our primary types are what we call a co-location data center, where we provide the four walls of the facility and we power it with robust power systems and rich connectivity to the internet and then customers move in and lease out space within our secure facilities. We’re buying power for the site and then distributing it to customers internally, and this is a far more economically efficient model than for them to go build their own critical environments. So we serve as their supply chain. We’re a primary supply chain provider for their energy and as more and more companies across more and more sectors recognize that hourly-based carbon-free energy is important, we need to be at the forefront and ready to provide them with that 24/7 carbon-free energy.

Narrator: 24/7 carbon free energy, or CFE, refers to total decarbonization or absolute zero energy. In practice, it’s called 24/7 hourly load matching and takes place when an organization is running on clean energy every hour, every day, at every location. As organizations pursue 24/7 hourly matching, the production of energy moves from annual matching to hourly, aligning both the time and location, meaning region of the grid or both generation and consumption. Both now and in the future, 24/7 hourly load matching helps drive total decarbonization throughout the power grid. This is because there is a direct connection between energy that is being sourced and consumed. When the carbon impact of businesses and an organization is calculated annually based on monthly utility bills, there is much less visibility into energy procurement and its impact on the grid. With less data comes fewer insights on how to reduce carbon. More on 24/7 CFE can be found at the blog link in the show notes.

Chris Pennington: So we think about it from a supply chain standpoint.

Lincoln Payton: And do your clients care?

Chris Pennington: That is an excellent question. I know that the interest is absolutely growing. We’re having more and more conversations with more and more companies across more and more business lines that say, “Where does your renewable power come from?” So their interest is starting further down the ladder, but moving up pretty quickly. It used to be that a company, a data center, could say, “we have 100% renewable power.” And that was like, “Check the box. Move on. No more discussion needed.” But now, there’s follow-up questions. “Okay. Well, where does that power come from? Is it local to where your business is? And how do you secure it? And how many long-term contracts do you have? And are you helping to bring new renewable power onto the grid? And what’s the carbon footprint of the grid where you operate in that you’re offsetting?” So the level of questions around emissions and the impact from renewable power are definitely increasing.

Lincoln Payton: For those that are not doing what you are doing and not as vested in the detail, the granularity of this, what do you say to people in the space who care about renewable energy, have clients that care about what their footprint is, but at the moment, they’re looking at their energy utilization and they’re going out and buying some offsets at the end of the year and saying, “Look, I think I’ve got this down?” You’ve clearly gone a long way to be more granular, circumspect. Does it make a difference?

Chris Pennington: I think it will more so in the future. I think we’re probably on more of the leading edge of this prevailing thought that’s starting to build. The solution to go and purchase local renewable energy certificates, or GOs [Guarantees of Origin] in Europe, to offset your consumption is a very common accepted practice. And frankly, there’s nothing wrong with that at all. And in today’s world where most companies who are reporting emissions use a market-based accounting methodology, they could take that wind REC from Texas and apply it against their footprint in New Jersey and say, “I’m covered.” And in fact, we do that today.

So that market-based approach where these offsets can be produced separately from where they’re consumed… I believe that this has a finite life ahead of it. I think that overall as companies recognize and as individuals we recognize that really we’re not done until the grid where we operate in is fully decarbonized, there’s going to be this preference towards more of a location based accounting. “What is the carbon impact where your facility is located at?” And movement away from this market-based accounting approach, which is only loosely connected in terms of the positive impact versus your consumption in the local market.

Lincoln Payton: I often think that the evolution from just the offset market to the specific temporal and regional matching of energy is the phase that we’re going through right now with ESG, which is, offsets are very good and certainly from an educational and an overall basis, but not as good as temporal and regional matched data. What are you looking at? And when you get that information, what’s the difference in a carbon free perspective between that hourly match and an annual average type of REC equation?

Chris Pennington: I think that, as you said, it is like an evolutionary journey and there’s on-ramps to this journey that every company can adopt. I wouldn’t want anyone to think that 24/7 hourly matching is the only way to go and then therefore just say, “Well, it’s too complex for us. We don’t understand it. We don’t have the solutions or tools, so we can’t do it.” That should not be the case. I think all businesses have this ability to make an impact in terms of their emissions beyond just buying certificates. Even if just buying certificates is where you start, you can still actually even make that better and build on it from there and that’s what we’ve done.

The way I think about it today is that my ultimate measuring stick is going to be what is the carbon missions from our business within the local grids in which we operate? And are we making progress? Are we making it better? And today, just to be clear, market-based accounting for GHG emissions, which says I can use a Texas wind REC to offset my New Jersey footprint… That doesn’t really help me in my personal journey here to say, “Are we really decarbonizing local grids?” Location-based carbon accounting, which is the other syndicated approach for reporting, also doesn’t help me because it doesn’t allow me to actually claim the benefits of locally-produced clean power contracts.

And so to be clear, there’s a bit of a void here in terms of the optimal measuring stick for how we measure our ability to go into a market, sign up new contracts for new, locally-produced clean energy, and use that to offset our local load. And that’s where the ecosystem is starting to build in terms of solution providers that help with this. And this is where Cleartrace helps us understand that. We’re looking to see where the puck is sliding to and we’re thinking that ultimately zero carbon is where we have to get to. It should be local. Cleartrace is helping us see where we’re at today. And I think that as protocols shift in this direction, we’ll be well-positioned then and be able to be out ahead of the pack.

Lincoln Payton: I think it’s well said, the metaphor is skating to where the puck’s going to be. Because when you look at the debate… Greta Thunberg and talking about people greenwashing, because frankly they’re using offsets that don’t match, it’s a little bit where things are going to be. Today, offsets are good, better than nothing, education is improving across industry and across the man in the street, but where’s it going? You clearly at Iron Mountain are a very digital and data-aware entity. In terms of skating to where the puck’s going to be, how important is it to you as a digital expert entity that the carbon accounting that digitizes all of your energy and carbon footprint gives you optionality going forward? How is this part of your overall digitization program?

Chris Pennington: Yeah. Yes. A colleague of mine once said that the data will set you free. It all comes back to data. And that saying comes to mind pretty regularly for me. So when we first heard about what Google had really defined – and then they were the pioneers in the space from my perspective where they came out with this 24/7 carbon free energy commitment by 2030 – I sat back and heard that, I said, “Wow, that’s amazing. That’s something that only Google could do.” That’s Google doing what Google does really well, which is setting a high goal and just driving at it, making a real impact. And I was so blown away by it and probably thought that there was no way that we could adopt a similar type ambition.

And yet the more we thought about it, we recognized, “Well, we already have some clean energy contracts. And I wonder how well they’re doing already. Where are we at in this journey?” And so we built a worksheet and tried to capture the data, and after about three or four days working on it, I was able to get a slice of data for a snapshot in time. And it was kind of exciting, it made us all go, “Hmm. Okay, that’s where we’re at in the journey, but where are we at today? It’s been three days.” So the data is not easily available yet in many markets, more easily available in others. And so, the data is ultimately necessary for us to have confidence in this 24/7 carbon-free energy goal and to make progress. We need to know which hours are high-carbon hours versus well-matched with our contracts. We need to know the profile of these. How often do they happen? How long do they last? Is it seasonal? And that enables us then to start thinking about the next procurements of energy that we do going forward.

And I’ll say we have not incurred any premium cost to adopting this 24/7 perspective on our energy procurement. And we’ve started making transactions and it’s not carrying a premium. So I think that this is more a matter of being well-informed with good data about where you are in the journey and being able to then take that data, have the right discussions with the right partners, and just make different decisions going forward, so that the data is setting us free and enabling us to make progress here.

Lincoln Payton: You’ve touched on one of those topics I wanted to come back to, which is the economics of the whole story, because there are people out there who will say… Either today they’re actually not doing anything and they’re just taking energy from the grid. There are those that will be buying some green power, some offsets. And there are those that are doing what you’re doing, which is the digital accounting and having that single source of truth that gives you that data to be able to make decisions and a little bit of optionality. But people will say, “Well, okay, but what’s the price arbitrage between those different options?” And so maybe you could talk about that a little more.

Chris Pennington: Yeah. There’s a little bit to unpack here, because there’s a lot going on when we talk about the economics of renewable energy and the cost of 24/7. I mentioned earlier that I think it’s really well-documented now that the lowest-cost generation sources available are going to be from wind and solar and other carbon-free resources, like low-impact hydro[power] as an example. So these generation sources have the capacity to produce power far below the cost of natural gas or coal or other fossil based resources. And so that’s becoming our reality today. They’re also intermittent resources and so they’re not around the clock providing the power that we need. It’s true that when renewable power is supplying the grid, it’s helping to reduce the cost of power on the grid. Our challenge is that we just don’t have enough of it yet. And then we don’t always have the right kind of allocation of time. We have too much at some point in time and not enough on others. So it’s early stages, I suppose, in carbon-free energy generation, but it’s clearly the path forward.

When I think about why carbon-free energy procurement is important, it’s because I want to match as many hours of my consumption with that lower-cost generation resource that’s out there. In order for us to do that, we need to help support the development of new carbon-free generation assets that align with how we use power. And these will take us decades to support and invest in and bring onto the grid, and yet we’re doing it so that we have that better match with when we’re consuming power.

Now, our goal of hourly matched carbon free energy is to get there by the year 2040, which is admittedly a healthy, long goal. These are really big goals to set for ourselves. A lot of folks will say, “Oh, 24/7 power. That’s ridiculously expensive. No company can afford to do that on their own.” And I guess my comeback to that is that this journey to 24/7 carbon free energy is a different journey than the Renewable Energy 100 [or RE100] commitment that close to 400 companies today have already made.

The RE100 can be a very quick journey. You can purchase the certificates that you need today to offset your annual load from the past year. For us to actually get the clean energy we need hour by hour every hour of the day is going to take big advancements in energy storage and big advancements in the expansion of clean energy generation and we need more geothermal and we need more hydro. We need more of all this stuff, including storage in particular. So if we were to try and get to 24/7 today, for us to get from like 95% match to 100% match would be prohibitively expensive.

That’s okay. The point is we need to know where we’re at, which today, depending on the market, might be between, as low as 60% or up to 95%. And then we need to see where the unmatched hours are and then we need to strategically make the incremental progress towards closing those gaps, and we will get there over time. And as we do it collectively and collaboratively with other companies and providers like yourselves, it becomes more efficient for us to solve these last few bits of unmatched hours. It would be very expensive for us to try and be 100% hourly matched on our own. It’s far more efficient when we act together and we collaborate around this goal and it will ultimately become much more cost-effective to do. We’re just in the early stages of it. So we’re not hung up on the fact that for us to solve it today would be prohibitively expensive to get from 95% to 100%. That’s fine, we don’t need to get there today. This is the marathon, not a sprint.

Lincoln Payton: I think couple of very good points I’ll highlight, which is, first of all, knowing where you are. I get the question sometimes from industries that are inherently historically more dirty and [they ask], “Is it worth having accurate carbon footprinting and granular data?” And the answer is always yes, because it gives you a benchmark to then, step by step, take improvements and show and reflect and explain those improvements. And it goes very much to your point about together everybody making little moves.

The other point I think that’s very cool is if already you’re getting to high percentages of hourly matched granular energy, if everybody is doing this, the needle has moved very considerably at that point. And that opens the question, which in today’s world, we are hearing a lot about Scope 1, Scope 2, Scope 3, these various benchmarks. And we are seeing regulators certainly in the real estate space, in the US and in Europe, starting to set hurdles because frankly the kind of data management that you and I are talking about enables regulation. How do you at Iron Mountain look at the whole Scope 1, Scope 2, Scope 3 approach to life? Is that something that you’re focused on or are you focused primarily on certain sectors of that today because there’s enough data to accurately do stuff about it?

Chris Pennington: You made a couple of points or comments there that are interesting. For companies saying, “Well, what does it really matter what my Scope 2 footprint looks like? Why is that important? And why do we even know what it is hourly?” I think that is more and more so becoming reflective of “Chapter 1” thinking if you will. I think “Chapter 2” thinking is recognizing that, as you said, there’s more regulatory requirements in more and more places around the world. In the UK there’s been recent legislation. Certainly the SEC here in the US has proposed some rules that publicly traded companies of a certain size need to disclose climate related information, so that’s going to include their emissions. So I don’t think that any company has the luxury nor should they think that not reporting carbon emissions is an option for them in the future.

The thing is that companies of all sizes can make improvements. So think about a facility that may only have one building and they’ve got a rooftop solar system on and they’re thinking, “Great, we’re doing good work.” And you are. But if you knew your hourly consumption of power versus the hourly generation of that solar system, you might be able to shift when you use power a little bit to better line up with when that solar system is producing. You could really drive down your scope to emissions by not actually spending any more money, just getting more use out of the asset you’ve already paid for. So all that being said, I think that the regulatory landscape is absolutely heading towards the direction where companies will be better off to know where they’re at from an emissions tracking standpoint.

I think that once everybody gets to the point of saying, “Okay, we know what our emissions are…” And by the way, the standard of practice is to look at this on an annual basis through eGRID generic data, if you will. I think that the ones that would well serve beyond that will be the ones like an Iron Mountain who actually know what their hourly consumption is, what their hourly emissions are, when and where they operate. So the macro trend is the growing regulation and expectation that companies will know what their environmental footprint is and are working to make it better across all scopes and to get out there early, especially when the resources are available, to understand what your footprint is and start making progress sooner so that you’re not playing catch-up down the road.

Lincoln Payton: Yeah, very interesting. Talked about optimizing because there’s what you can go out and do and then there’s what you’ve actually got today and optimizing it. [Energy storage], certainly a topic of today. Are you guys working with storage today? Are you guys planning to work more with storage?

Chris Pennington: Yeah, it’s a really great topic. And now you’re into chapter three thinking I think, but we will all become very comfortable with it down the road. This is an emerging landscape that I think the data is absolutely critical towards supporting. We already have energy storage on site today in the form of our UPS systems. They’re designed to operate only inside the facility and just to power the critical systems. And so as we think about that architecture a little bit and say, “Well, how can a grid-interactive building provide more value?” We start to see cool opportunities by supporting the resiliency of local grids. We could actually get paid through some local demand response programs that would help offset this capital investment. So grid-interactive buildings, I think, is a really interesting area for us to explore that we’re looking at right now, because we try to connect this grid-interactive building where at times we’re being this prosumer, pushing power back into the grid, versus just the consumer and pulling power off. All of a sudden, it really does matter what type of power we’re charging that battery with and when we’re dispatching it.

We definitely think about clean energy on an hourly basis and that will need to apply to our storage assets. And it actually doubles. You need to know where the clean power came from, when you charge the battery, and you need to have some sort of verifiable audit trail that says when you dispatch that and what the impact was. And that ability to audit and verify is very important to us because it provides credibility to the claims. It’s one thing for a data center operator to say, “Yep, I’m green. I buy 100% renewable power.” Okay.

We’ve always gone a step beyond that. Our energy program is an ISO 50001-managed program where every year we have a thorough management review. We get third party verification to our claims. So when we go out and say to a client in the future, “We provided you with 92.6% hourly matched power for your servers in our critical space,” we will need to be able to provide them the data that backs that up so that our third party auditors can say, “Yep, you absolutely did that.” And so we won’t make claims and we won’t move ahead unless we know that we’ve got a level of credibility behind this environmental data that is at least as strong as the credibility we place in our financial data.

Lincoln Payton: That’s a great comparison. And I think when we hear about the SEC moving in these directions, but just in general… And let’s be very honest, there’s a couple of heinous corporate mistakes to make these days. Greenwashing is one of them and we hear more about it every day. Very interesting. Where do you see the client base going? We are seeing more users for example of data centers saying, “I want validation of what this significant Scope 3 element for me is, which is…” And maybe I don’t own my own data center. I co-locate in Chris’s Iron Mountain data center. Are your sales teams able to use that as a sales aid?

Chris Pennington: It’s a really great question, because people’s awareness of data centers has really expanded over the last several years, especially recently with the pandemic and everybody’s doing remote everything these days. But most companies that have any significant size, they’re going to have some critical data hardware servers that they lean on to run their business. And historically companies would keep this in house and they would operate their data centers within their own four walls. And when they did that, the energy footprint of that data center was very apparent to them because they were paying their utility bill. As the co-location data center model emerged as a much more efficient way for companies to host their critical computer servers, that footprint moved from onsite to someplace else. And today it might even be in the cloud someplace.

What we’re seeing is that companies are recognizing that that footprint moved. It was internal and now it’s someplace else, but their obligation to report it as part of their Scope 2 emissions didn’t change. They still have to report this. So our customers at our Iron Mountain data center recognize the energy they consume at our facility as their own Scope 2 electric emissions just as if it were on site, because they have operational control over the equipment that’s consuming this energy. And so that’s why I’ll go back to the whole supply chain perspective we have on this. It’s so important for us as the provider of the space and power that we’re giving them the energy that they need and the data that they need and the credible claims that they need in order to have that footprint at Iron Mountain be recognized as zero carbon and therefore help them achieve their carbon reduction goals.

Lincoln Payton: What do you see as the next development? What’s on your roadmap for the next 12, 18 months, Chris?

Chris Pennington: In a word, I would say just more. More clean energy projects, more data, more understanding of where those unmatched hours are, more volume growth. Our footprint is expanding. So I think we’ve built a nice foundation in terms of starting the journey, working with a partner like Cleartrace that can help us understand where we’re at today, and then now what we need to do is just start making those incremental steps forward.

Narrator: Thank you for joining us on the Decarbonization Race. For more resources to help you lead the pack in the most important race of our lifetime, visit cleartrace.io/podcast.