Data Centers: The Case For Energy Risk Management and Energy Reliability

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1 Data Centers: The Case For Energy Risk Management and Energy Reliability Author: Alberto Rios, Director Risk Management Published: July 2013 Acclaim Energy Advisors, ( is a full- service energy management firm headquartered in Houston, Texas. Acclaim helps businesses take control of their energy costs by providing a full complement of solutions, including strategic energy planning, energy markets information, energy risk management, dynamic load optimization and strategic energy sourcing. Acclaim provides services in both the wholesale and retail markets for electricity and natural gas within deregulated and regulated energy markets across the United States. Acclaim Energy Advisors Copyright

2 Data Centers: The Case For Energy Risk Management and Energy Reliability As the world has moved in to the 21 st century, the amount of data being stored and communicated electronically continues to grow at an astronomical rate. According to a report published by the International Data Corporation, in 2011, the amount of information collected and replicated electronically will be just less than 2 trillion gigabytes. For some perspective, the typical hard drive on a laptop is 500 gigabytes, or roughly the computing power of roughly 4 billion laptops, or almost one for every person on the planet. This trend towards digitalization of data has been going on for over 50 years and has led to the principle known as Moore s Law, which argues that technological improvements double every two years. With the tremendous expansion of digital data, the Data Center industry has exploded, providing the storage and electronic capability to meet this growth in data creation and demand for storage. While it is fair to conclude that the growth of the Data Center industry benefits the world, Data Centers face unique challenges in terms of energy risk management and energy procurement. This whitepaper examines the challenges faced by data centers by examining the load profiles for data centers, suggesting that there is value locked in historical energy usage patterns, the importance of energy reliability for operations and the use of machine to machine (M2M) technology to potentially enhance reliability, and the ability of informed energy risk management strategies to unlock sustainable value for data centers. Data Center Functions Simply put, data centers are physical or virtual warehouses for the storage, management and communication of data. Likewise, data centers provide applications for data processing. The following image shows a typical data center, with row after row of racks of servers. In short, data centers are critical to today s business world in that they allow everyday tasks such as and storage, provide back-up capability for many business, and are the Acclaim Energy Advisors Copyright

3 technology hubs powering the data driven 21 st century economy. Many data center companies are also involved in cloud computing which allows users to store and access their data anywhere in the world through a host of devices including laptops, tablets, and smart-phones. Load Profile According to Greenpeace in their 2012 study entitled How Clean is your Cloud? data centers and telecommunications companies, which rely on the cloud to support the latest smart phones, consumed approximately 620 million megawatt hours, roughly one-sixth of the total electricity consumed in the U.S. and exceeding the power usage of countries such as France and Germany. 1 However, total usage only reveals so much about the energy profile of data centers. Typically the load profile of a data center is relatively flat. The usage is consistent throughout the year, indicating that the load is not particularly weather sensitive. There is some increase in consumption in the summer months as more power is required to maintain acceptable temperature levels, but this increase is minimal compared to a normal business where energy usage will spike during hotter summer months. Similar to the monthly load profile, the daily usage is relatively consistent, with a slight increase occurring during normal working hours, which can be attributed either to workers at the data center or a slight increase in the amount of traffic being handled by the racks of servers that are inside a data center. The importance of understanding the load profile for a data center both on a yearly and daily basis cannot be overstated. Inside this usage pattern is a tremendous opportunity for data center managers and energy procurement and energy risk management professionals to collaborate to drive down the cost for energy. Since energy costs are the second highest costs for most data center companies (hardware costs typically being the largest), understanding the value of the load profile and knowing how to unlock that value in a manner consistent with the risk-reward tolerance of the data center owner creates real value and cost savings for data centers, which can then be passed on to end-users. Energy Reliability the critical challenge for data centers Having invested millions of dollars in very sensitive high tech equipment and a business model that relies on being available, the need for reliable power supplies is critical. The cost of downtime for a data center is a function of the duration of the outage and the size of the data center. The highest cost of downtime is generally related to problems in the data center s cooling and power infrastructure. Reliability is one of the main selling points of data centers; the need for reliable power supply comes in to sharp focus. The major outage costs can be categorized under business disruption, lost revenue, and loss of productivity. In response to this challenge, most data centers turn to on-site generation for back-up power to keep the data center up and running in the event of an outage on the power grid. These 1 See How Clean is Your Cloud, Greenpeace, at 10. Acclaim Energy Advisors Copyright

4 generators are tested regularly to make sure that they are fully capable of sustaining the operations of the data center in the event of a power loss and are typically triggered by automated technology, which turns the generators on immediately to maintain energy reliability. Besides reliability, back-up generators provide data centers the opportunity to participate in Demand Response programs, which can generate revenues by providing standby capacity to the grid. In some cases back-up generators could be used for peak response to take advantage of high real time prices. Data centers are positioned to maximize energy savings by developing a holistic energy management solution that encompasses product structuring, risk management, energy procurement, and Demand Response. A relationship with an energy advisor can be crucial to unlock the value of the aggregate energy puzzle. While this approach has a purpose, data centers could potentially achieve higher levels of energy reliability and less equipment damage by turning to the resources they already have namely access to high tech and data. For instance, the use of machine-to-machine (M2M) technology to monitor voltage levels, power factors of racks of servers, and power quality coming in to the facility is not widespread. Using this technology to monitor and record power usage and quality can lead to lower burn-out rates for equipment, higher per unit efficiency (PUE), and lower overall energy costs. Creating Sustainable Solutions As illustrated by the above mentioned Greenpeace report, there are concerns about the impact of the substantial energy consumption of data centers on the environment. The report also notes that simply improving energy efficiency at data centers does not make them any more environmentally friendly because the incremental benefit from increased energy efficiency is offset with higher consumption as the need for additional servers arises at the data center. As a result of this Greenpeace report, many data center companies are looking at ways to create a sustainable energy management solution. Given the load profile of a data center as described above, there are opportunities for creating sustainable solutions that can help manage energy costs and provide environmental benefits as well. For instance, data centers tend to take up significant amounts of space, typically being in buildings with lots of roof space. This creates an opportunity for installation of either rooftop solar panels to provide some amount of renewable energy to meet the energy demand of a data center. In addition, the solar panels can be used to charge on-site batteries providing stand-by power in the event of a loss of energy from the power grid. As an alternative to solar panels, wind micro-turbines could be installed on the roof and/or around the data center campus. Similar to the solar panel option, these wind turbines could be used to reduce consumption from more traditional power sources that have a greater impact on the environment than wind turbines. Conclusions Data centers are one of the driving forces behind the digital age and some industry analysts have called them the manufacturing hubs of the 21 st century. From the perspective of energy risk management professionals, data centers represent an opportunity to deliver significant Acclaim Energy Advisors Copyright

5 value for end users. Given the relatively stable load profiles of such facilities, with major increases in consumption and demand coming only when additional data storage racks are added, and even then the increase can be readily determined and quantified, professional energy risk managers should be able to manage the electricity load profile cost in a way that provides significant benefits to data centers. While energy costs are certainly important, energy reliability is even more critical as electricity is the lifeblood of a data center. This problem has typically been addressed through the colocation of on-site generation designed to kick on in the event of a failure of the power grid. However, most data centers have not taken advantage of recent technology advances. Specifically, the ability to use M2M advances in metering and energy control technology. By offering a value proposition that marries energy procurement risk management with enhanced energy reliability, energy professionals can become indispensable partners for data centers. Finally, a well thought-out energy risk management strategy will account for the potential for onsite generation and how that interacts with the retail product structure put in place at the facility. FOR QUESTIONS CONTACT: ALBERTO RIOS, DIRECTOR ENERGY RISK MANAGEMENT arios@acclaimenergy.com (832) Copyright 2013 Acclaim Energy Advisors. All content and functionality on the Site, including text, graphics, logos, icons, and images and the selection and arrangement thereof, is the exclusive property of Acclaim Energy Advisors or its licensors and is protected by U.S. and international copyright laws. All rights not expressly granted are reserved. Disclaimer: This information has been provided to you for informational purposes only. Unless specifically stated otherwise, no information contained herein constitutes an offer or solicitation by or on behalf of ACCLAIM Energy Advisors (ACCLAIM) to enter into any risk management product arrangement. The risk of loss in trading commodities can be substantial. You should therefore carefully consider the associated risks of trading any securities. Information presented is time sensitive and subject to change at any time without notice. Information contained within is compiled from sources believed to be reliable and the information provided herein is based upon a number of estimates and assumptions that are subject to significant business, economic, regulatory and competitive uncertainties. ACCLAIM makes no representation, warranty or guarantee as to, and shall not be responsible for, the accuracy or completeness of this information. ACCLAIM is not acting as an agent and is not liable to any recipient or third party for the use of or reliance on the information contained herein. Acclaim Energy Advisors Copyright