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How Your Data Center Can Beat Rising Energy Prices

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It’s no surprise that the idea of green data centers has exploded into the IT world’s consciousness over the last two or three years.

Densely packed servers and their cooling systems gobble up vast amounts of electricity, racking up big energy bills, harming organizations’ green credentials and often nudging up against the limits of the amount of electricity that can be piped into the building. A green data center uses lower-powered processors, more-efficient power supplies, better server layouts and modern cooling systems to reduce electricity consumption significantly.

But here’s the rub: Greening your data center won’t necessarily reduce your electricity bill.

That’s because it’s dependent on the cost of electricity, and cutting energy consumption by 20 or even 30 percent isn’t going to reduce the bill if the price per kilowatt-hour doubles. The price of oil more than quadrupled from about $30 a barrel in 2004 to more than $120 this year, and although it has since fallen back to around $100, the message is clear: Energy prices, as well as energy consumption, must be central to any data center operator’s thinking. “If you are running a large data center which uses a lot of energy, there if nothing else there is a compliance duty to look at the risk to the business if energy costs go up or supply cannot be relied on,” said Rakesh Kumar, an analyst at Gartner.

Clearly a normal business can’t influence world energy prices, but there is plenty that can be done to mitigate the risks and problems that rising electricity prices present to a data center.

One key strategy is to plan ahead. “If you talk to energy experts, the one common theme that emerges is that energy costs are likely to rise over the next five years,” said Kumar. “You need to ask yourself how you are going to factor in these costs over the next three, four and five years, and how much of the energy you are going to need should be bought in advance — how much the energy price should be hedged.”

Failing to do that could have a major effect on the IT department’s ability to deliver other projects — simply because a higher proportion of its budget than was envisaged would have to go toward paying the power bill. Even if electricity is not currently part of the CIO’s budget, it likely soon will be.

Another strategy, which is open to any company fortunate enough to be able to consider a completely new data center, is to locate it somewhere where electricity is inexpensive and plentiful. Electricity prices vary enormously state by state in the United States, and it’s no coincidence Google is building an enormous data center in The Dalles, Ore. and Microsoft is building one in Quincy, Wash. Both will be powered by hydroelectricity generated from the Columbia River, on whose banks these facilities are being built.

But companies shouldn’t necessarily restrict themselves to sites in the continental United States. For example, Iceland has vast amounts of cheap geothermal electricity thanks to its volcanic nature — which is why electricity intensive industries such as aluminum smelting are so prominent there. Areas in Eastern Europe or Asia (especially India) also present opportunities for low energy cost data centers using wind, solar and other reliable forms of energy. Five or ten years ago it would have been unthinkable to build a data center in some of these places because they lacked the right skill sets and sufficient data links to connect to the rest of the world, but today these issues are far less relevant.

Of course, there are drawbacks to having a data center many thousands of miles from the United States. For some applications, a data center in Iceland, Asia or Europe may not be appropriate because of latency issues. It’s important to remember, too, that the geothermal energy from Iceland is made possible because the country is one of the most volcanically active in the world. By contrast, Oregon and Washington are very boring and safe, geologically speaking.

For the majority of companies, the option of building a new data center is simply not on the cards, so they are limited to making the most of what they have got. “These companies need to concentrate on getting the lowest price and security for their electricity, and this almost certainly means not relying completely on buying from the grid in the normal way,” said Kumar.

Organizations should look at alternative supplies, or at least increasing the amount of low-cost energy they can get from wind or solar generating systems at or close to the data center.

The final thing to point out is that greening your data center is still worthwhile: Cutting your electricity requirements certainly reduces the impact of rapidly changing world energy prices.

But don’t forget that even if your data center is energy efficient, you may still be at the mercy of volatile market conditions. Ensuring you have electricity supplies that are as low-cost and as predictable as possible, by hedging, choosing alternative generation technologies or by relocating to areas with abundant electricity, makes good business sense. And because of regulatory and corporate governance requirements, you could even argue that taking these steps is not just a good idea — it’s the law.

This article was first published on

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