Microsoft’s unusual solar market strategy

This week brought a novel agreement for the solar industry: Microsoft said it had entered into a 12 gigawatt deal with Qcells to supply solar panels to projects the tech giant has contracted through 2032.

• The top line: Contracting directly with panel-makers is a very unusual move for an end user like Microsoft. Experts suggest that it both signals a maturing offtake market, and — if replicated by Microsoft’s peers — may offer a boost to domestic manufacturing.
• The industry context: The world of solar procurement is complicated and often messy, plagued by supply chain problems, geopolitical issues, and uncertain regulatory landscapes. Corporate offtakers typically don’t wade into procurement, preferring to leave it to energy developers and other specialist middlemen. ‍
• The current take: While other companies aren’t likely to rush to follow in Microsoft’s footsteps, the move reflects the fact that end users are increasingly involved in the supply chain, a renewable energy analyst told Latitude Media. That’s in part a function of the United States regulatory environment, and in part because of the need to diversify supply.

Microsoft is one of the top corporate installers of solar in the U.S., to the tune of around 550 megawatts as of mid-2022. The company has committed to being carbon negative by 2030, and to removing the equivalent of all emissions dating back to its founding by 2050.

The 12 GW deal with Qcells includes the 2.5 GW commitment the pair announced a year ago, and is the manufacturer’s largest procurement and construction agreement to date. It makes Qcells a one-stop-shop for energy solutions, the company said. And it’s likely unique — at least at this scale, in the clean energy industry, a supply chain analyst told Latitude Media on background. 

“Supply chains are complicated, they're subject to a lot of different domestic and international regulations and policies, technology is ever-evolving, especially with solar,” the analyst explained. “Typically the end customer is not the expert on the technology and on the landscape, especially a complicated landscape that's still changing, like renewables."

Because of the challenges, other corporate buyers aren’t likely to follow Microsoft into panel procurement territory anytime soon, the analyst added. 

“Could there be others that dive in? Maybe. But they really have to invest in that expertise and be confident that they can navigate those complications in order to make sure that they have a project that performs at the cost that they are looking for.”

Qcells will provide Microsoft with the agreed-upon solar panels over the next eight years. Those panels will be used in Microsoft’s projects developed by Qcells, as well as for projects Microsoft has contracted separately.

“The expanded agreement with Qcells is designed to drive large-scale domestic production of solar modules essential to advancing a resilient U.S. supply chain and clean energy economy,” Microsoft said in a statement to Latitude Media. “Through long-term agreements like this we are signaling industry demand for greener energy solutions and bringing more renewable energy to the grid, faster.”

Microsoft said the exact details of when and where the 12 GW will be installed are still being worked out, but that the capacity will be distributed across the U.S.

The manufacturing details, however, have already been nailed down: a new, $2.5 billion, fully-integrated factory in Georgia is set to begin operations later this year.

That’s another very important element of this deal, because while tax incentives can help domestic manufacturers bridge the economic gap, long-term contracts with commercial anchor customers like Microsoft can ensure there’s a stable runway via which production can ramp up.