Every Renewable Site Needs a TIER 0™ Data Center

Date Published


TIER 0 data centers help de-risk the long-term vitality of wind and solar farms.

Renewable energy projects have dominated new power plant development. In 2020, more than 80% of all new generating capacity was renewable, and of that amount 91% of it was either wind or solar. [1] As more organizations announce sustainability targets and buy up the renewable energy credits (REC) to meet their goals, it is logical to expect those funds will continue to build more wind and solar farms around the globe.

However, just building a new renewable asset is not enough to achieve a lower carbon future or reduce the cost of power in communities.  It is the long-term effectiveness of those renewable assets that is going to decarbonize our planet. For a wind farm or solar farm to remain a valuable asset to the grid, it must manage its risks associated with location, curtailment and forward contracts. We know it is not easy being green, but with the right offtake at the source, like a TIER 0 data center, the economic vitality of a renewable energy asset can be improved.


Risk: Building Renewables Far from Load Zones

There are regional limitations on where you can place a wind farm. Those windier locations are typically not close to large metropolitan areas. This creates a situation where there is excess supply at the wind farm, far from populous load centers. The risk here is the cost to build the infrastructure that will carry that excess power to a location that can use it. Building out the transmission lines is very expensive and in some instances is not possible given the terrain or budget.

Solution: Bring TIER 0 Load to the Renewable Source

Instead of moving the electricity, we move the workload to the source of power. By building a TIER 0 data center behind the meter, it eliminates the necessity for long transmission lines. It also alleviates congestion by soaking up the excess availability, making the most of that clean energy where and when its available.


Risk: Curtail and Miss out on Production Tax Credits (PTCs)

The Production Tax Credit (PTC) provides a tax credit per kilowatt hour (kWh) of electricity generation for certain renewable energy sources. [2] This incentive is especially beneficial for green energy projects that are just starting out. If you are a power generator that qualifies for PTCs then you are incented to generate as much renewable energy as possible. But there are a couple of things that can stand in your way – unfavorable weather and/or the demand for power being too low. There are instances where there is plenty of wind generation potential, but because there is already too much energy supply on the grid, the market can tell wind providers to shut down until the demand for energy increases. This mechanism for balancing supply and demand is what keeps power flow stability on the grid (i.e., maintaining consistent voltage, frequency, thermal limit restrictions). When a renewable energy asset is asked to curtail for the sake of grid stabilization, that is taking away potential PTCs from that wind farm because it is not producing wind power at that time, even if the weather is favorable.

Solution: Redirect Energy to TIER 0, Keep Earning PTCs

A TIER 0 data center built behind the meter can buy the energy that would otherwise be curtailed. That way the renewable energy generator can divert all its electricity to the TIER 0 load source instead of the market. This allows the market to stabilize supply and demand, and the wind farm can continue to generate green energy to claim all possible PTCs, supporting the economic vitality of the site.


Risk: Futures Contract with Distant Trading Point

When a wind farm is located far from a load zone and desires to hedge or “fix” a sale price for their energy, they must sell a futures contract at a trading point that is far away from their market settlement location. In this situation they face basis risk because the generator (wind farm) and power purchaser (entity in a load zone) are operating in different geographic locations. That renewable asset is selling a forward strip of power at an agreed upon price that could be very different from the price they receive from the market at their generator settlement node.

Solution: Futures Contract with a Nodal Price Equal to Hub Point

The renewable asset can eliminate basis risk by selling energy at their hub. By having a TIER 0 data center built at the renewable energy site, the power generators can enter a Power Purchase Agreement (PPA) with a company, like Compute North, where the nodal price point is equal to the hub point at which they have sold a futures contract.


Risk: Futures Contracts with Fixed Volumes

When a renewable asset, like a merchant wind farm, is interested in selling a forward block of power to fix their revenue at a certain price, they must sell a fixed volume with that trade. The problem with fixing a volume of wind power is that the supply is unpredictable. That generator is almost always going to be imbalanced on the volume they sell in that forward trade relative to their actual generation output.

For example, when a wind farm is generating less than the forward contract volume, that asset must buy back the energy from the market at the real time price, which is typically higher than the contracted price.

Conversely, when a wind farm is generating more than the forward contract volume, that asset must sell the excess energy into the market at the real time market price. The drawback of selling it at that point is the other wind assets are in that same situation, which means supply is high and the market price they would receive for that excess power is typically lower than the contracted price.

Solution: Forward Contract without Fixed Volumes

A renewable asset can mitigate the risk of forward contracts with volumetric imbalances by not requiring a fixed volume with the fixed price. For example, Compute North’s TIER 0 data centers could enter into an agreement to buy the power only when its available without any negative consequence to the wind farm when it cannot produce energy (with the exception of annual threshold requirements). Another option is to contract for power with an indexed structure. In this scenario, the wind farm does not have a guaranteed fixed price, but they get the fundamental benefit of increased pricing at their generator nodal price point because we have added load and demand at the asset location.


The path to a cleaner grid is through these renewable assets. The symbiotic relationship between a wind farm or solar farm and a TIER 0 data center is what helps clear that path of unnecessary risk. In a time where weather is volatile and markets are uncertain, it is nice to know you have a steady ally with Compute North.

If you are a power generator that is looking for a partnership that will minimize risk and boost your rate of return from your project, reach out to us. We have a lot to talk about!


[1] IRENA, World Adds Record New Renewable Energy Capacity in 2020, https://www.irena.org/newsroom/pressreleases/2021/Apr/World-Adds-Record-New-Renewable-Energy-Capacity-in-2020

[2] EPA, Renewable Electricity Production Tax Credit, https://www.epa.gov/lmop/renewable-electricity-production-tax-credit-information

Date Published



Kenzie Maynard

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