Microsoft builds first datacenters with wood to slash carbon emissions

Climate Innovation Fund investments also complement Microsoft policy advocacy to help accelerate decarbonization of global supply chains by adding more carbon-free energy to the grid, modernizing and expanding electricity transmission and ensuring a robust clean energy supply chain.

Decarbonizing the global supply chain for building materials is especially challenging given the high-carbon emissions generated by the production of steel and cement. Steel manufacturing accounts for about 7 percent of carbon emissions globally, while cement production represents about 8 percent, according to the World Economic Forum.

Higher costs compared to traditional building materials is another challenge. Transitioning steel to low-carbon production methods is hugely expensive for steelmakers and depends on the availability of carbon-free energy, another critical commodity in short supply.

While transitioning to low-carbon concrete production is not as capital intensive as steel manufacturing, the supply chain is fragmented and many smaller producers operate on very thin margins, another hurdle that impedes the adoption of new techniques. Production timelines for low and zero-carbon concrete can also be long due to more complex manufacturing processes.

To help reduce its future reliance on traditional steel, Microsoft last year became an investor in Sweden's Stegra (formerly H2 Green Steel), which is building the world's first large-scale green steel plant in northern Sweden, with up to a 95 percent reduction in carbon emissions compared to traditional steelmaking.

Instead of coal, Stegra uses hydrogen derived from renewable energy. Their method emits water vapor rather than the carbon output typical of traditional blast furnaces, the principles of which have scarcely evolved since the Middle Ages.

In addition to its investments, Microsoft is pursuing the use of low-emissions steel in its supply chain and is a member of the Sustainable Steel Buyers Platform of RMI, a nonprofit that works to transform global energy systems through market-driven solutions.

While all startups need to raise capital, "what's not so common is to see an investor like Microsoft come to the table and say I want to both provide you with capital and also sign a contract to buy the output," says Middaugh. "What we're trying to do is be the catalyst, for lack of a better word, that gets these early contracts done."

Microsoft is also an investor in Boston Metal, which uses renewable electricity and has developed a unique process that generates oxygen instead of carbon dioxide when making steel.

To help spur market development of the carbon-free energy on which green steel depends, last year Microsoft invested in Electric Hydrogen, a Natick, Massachusetts startup that uses electricity to split water into oxygen and hydrogen.

"Part of the solution is (figuring out) how do you make sure that our suppliers have the enabling technologies they need to develop the green solution," says Middaugh.

Microsoft's Climate Innovation Fund has also made several investments in low-carbon concrete technologies including CarbonCure, which injects carbon dioxide into concrete, and Prometheus Materials, which uses microalgae to produce zero-carbon cement. Microsoft is using CarbonCure at select U.S. datacenters and plans to use Prometheus low-carbon cement in its two new Virginia datacenters in small amounts as a pilot to test its strength and durability over time.

Other industries outside the technology sector, such as education and healthcare, are also making moves to adopt more green building materials, but few companies operate at the kind of scale Microsoft does. "Microsoft is in a unique position just because they're so large," says Thomas Hooker, an associate in the New York office of Thornton Tomasetti, the structural engineering firm in New York. Thornton Tomasetti worked alongside Gensler, which is responsible for the design of Microsoft's two new Virginia datacenters.

"They can almost be like a market mover and to some extent actually push some of these technologies to more widespread use just because it's a high priority for Microsoft," Hooker said.

Cross-laminated timber is an example of a market that has already found its commercial footing. Because engineered wood is naturally low in carbon, abundant and far less complex to manufacture than, say, green hydrogen, CLT has been in increasingly wide use in the U.S. and Europe, where it has become a staple of green building for at least a decade. In 2021 Microsoft built its new Silicon Valley headquarters out of CLT, the company's first large-scale use of CLT.

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