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Are IT Data Centers Emerging as a Killer App for Green Power? Part II

This is part II in a two-part series. Part I can be read here.

Clean Energy Options for Data Centers

IT and cloud computing companies have three primary avenues for sourcing cleaner energy for their data centers: procure clean energy from the local utility, purchase energy from offsite renewable energy resources, or deploy onsite renewable energy system(s).

Procuring Electricity from the Grid

IT companies looking to reduce carbon intensity benefit from siting their data center in the service area of utilities that utilizes renewable sources of power. Additionally, many local utilities now offer the option to purchase green power. And in some markets, companies can elect to buy power from an alternative energy supplier that offers green power.

Utility Green Power Mix –As previously mentioned, carbon intensity of electricity provided through the grid varies substantially. For example, siting a data center in Washington State with access to clean, low cost hydroelectric power rather than Utah, which relies primarily on coal, can significantly reduce resulting carbon emissions. By making the GHG intensity of grid power a factor in data center siting, companies can significantly reduce the emissions potential of a prospective facility.

After Greenpeace’s “unfriend coal” campaign, Facebook adopted a siting policy that gives preference to states with access to a clean renewable energy supply. Recently, Facebook chose to site their third major data center in Lulea, Sweden, because of the large amount of available hydroelectric capacity. Yahoo’s decision to construct a data center in Locksport, NY, was influenced by their ability to procure 15 MW of hydroelectric power from the New York Power Authority.

Utility Green Power Purchasing Programs – Some utilities offer customers the ability to purchase energy from renewable sources at premium. Utility programs are convenient, as they combine green power purchases and electricity services into one bill, and often source green power locally from within the their service area.  As an example, Green House Data in Wyoming is using wind energy provided by its local utility, Cheyenne Light, Fuel and Power, to meet 100 percent of their 10,000 sq. ft. data center’s energy needs.

The downside to utility programs is that customers are limited to the options offered by the utility, and not every utility provider offers a green power purchase program. Also, these programs charge an incremental price for clean energy, so there is not a direct savings opportunity.

Purchasing Energy from Renewable Sources

While utility-provided green power options are expanding, they are still limited to specific geographic areas and utility districts. And it is unlikely that any utility will by completely powered by renewable energy in the near future. Therefore, some IT companies are electing to purchase renewable energy through directly through competitive retail markets, power purchase agreements, and/or renewable energy certificates (RECs).

Competitive Retail Markets – In the handful of states with competitive or restructured retail electricity markets, data center operators can purchase electricity from alternative electricity suppliers that offer greener power. The number of states with retail markets and the amount of competitive green power suppliers is limited but growing, particularly in Texas, where 69 green power offerings were available as of September 2011.

Power Purchase Agreements –A number of IT companies are signing long-term power purchase agreements (PPAs) to procure energy from renewable energy systems. Such PPAs help renewable energy developers to obtain preferential financing, and allow customers to purchase energy at set rates, typically below utility electric prices.  Companies can sign PPAs for onsite or offsite renewable solutions. PPAs require that the customer organization has excellent credit, and is willing to sign a long-term contract.

Google is an excellent example of a company using PPAs to procure clean energy for new data centers. Google has signed two 20-year PPAs with wind farm developer NextEra Energy, to purchase more than 100 MW of power for each of their data centers in Iowa and Oklahoma. Energy from the wind farms are provided to the local electric grid and sold to the local utility, while Google retains the renewable energy certificates (RECs) and applies them to energy used at their data centers. By signing a long-term PPA, Google has provided NextEra Energy with a secure revenue source, which allows them to obtain financing, and in the process helps to stimulate demand for more renewable energy.

Renewable Energy Certificates (RECs)-Renewable energy certificates (RECs) represent the environmental attributes of the generation and delivery of 1 megawatt-hour of green power to the U.S. Grid. RECs have become a popular option for easily and inexpensively offsetting emissions from data center electricity use. Leading IT companies Intel, Microsoft, Cisco, and Dell are among the top purchasers of RECs. In fact, Intel is top green power purchaser in the US, purchasing more than 2.5 million MWh to meet 88 percent of its total electricity use. Datapipe, Inc., a cloud computing company, has purchased more than 56 thousand MWh of RECs to offset the emissions associated with the electricity consumed by its US offices and data centers.

However, RECs represent an incremental cost for companies, versus potential energy cost savings. RECs can be sourced locally or nationally, meaning that there may or may not be local environmental benefits from the purchase of RECs. Currently, the cost of RECs is very low by historic standards, and critics of RECs are questioning “additionality”, the impact of RECs in supporting new renewable energy developments.

Deploying Onsite Renewables

Onsite renewable energy solutions reduce demand for utility-provided power generated by fossil fuels, and offer the potential to reduce energy costs. Onsite renewables also help to add capacity and reduce impacts on the local utility grid, which may not have been initially designed to handle significant new demands from a data center.

Finding viable onsite renewable energy options depends on several key factors, including physical site characteristics, geographic location, availability and cost of utility power, available incentives and the organization’s sustainability goals. And multiple onsite renewable energy solutions may be deployed simultaneously, as is the case with Apple’s Maiden, North Carolina data center, which has planned solar and fuel cells deployments to meet 60 percent of their data center’s energy needs.

Solar PV –Dropping solar photovoltaic prices combined with federal and local incentives have made solar viable at data centers in a growing number of locations.  Solar can help reduce a data center’s energy costs, by producing power during the middle of the day when cooling demands and electricity rates are typically the highest.  Rooftop solar systems can also offer a shading benefit as well.

However, data centers are highly energy-intensive and require energy continuously throughout the day.  Solar panels are low-intensity generators, requiring on the order of seven to ten acres for one megawatt of capacity. And this power is produced only during the day. So while solar panels may be able to cost-effectively serve some fraction of a data center’s energy needs, other sources of power will also be necessary.

Onsite solar energy systems carry a significant upfront cost, and may be customer financed, or financed through a third-party PPA.

Apple is set to become a leader of onsite solar.  In March, Apple announced plans to build a 20 MW solar farm on 100 acres at their Maiden, North Carolina data center.  Apple just recently doubled this solar commitment with the announcement of another 100 acre, 20 MW solar farm a few miles away. When both facilities are completed they will comprise the largest private solar array in the U.S. and provide 84,000 megawatt-hours (MWh) of power to the data center annually.

Other companies deploying solar at data centers include eBay (665 kW), Facebook (100 kW), i/o Data Centers (4.5 MW), McGraw-Hill Companies (14.1 MW), and Quality Technology Services (1 MW) have all installed, or announced plans to install, solar PV systems at a data center facility.

Fuel Cells –Fuel cells, which produce electricity from natural gas or hydrogen, are also emerging as an onsite renewable energy solution for data centers. Fuel cells offer high availability and uptime, capable of providing large amounts of energy around the clock as needed in data centers.  Additionally, waste heat from fuel cells can be used to help cool the data center and further improve efficiency.

A downside is that fuel cells require a constant fuel source of gas to produce electricity, typically utility-provided natural gas.  While natural gas burns considerably cleaner than coal, it is a fossil fuel and generates a net GHG impact. Some companies are addressing this issue by directly or indirectly procuring biogas from sources such as landfills, waste treatment facilities and hog farms, for their fuel cells. Another significant issue is that fuel cells are very expensive, and available incentives vary by location.  A variety of financing and power purchase options are emerging to help mitigate the upfront cost issue.

Apple has plans to install 4.8 MW of fuel cells at its Maiden, North Carolina data center.  Microsoft recently launched a pilot project for a grid-independent data centers powered by fuel cells directly supplied with biogas.  To provide the biogas, Microsoft is exploring siting data centers at landfills and wastewater treatment plants.  AT&T and NTT America have also installed fuel cells at their data center facilities.

Onsite Wind – Wind is another potential onsite option, though significant upfront cost, space requirements, intermittency and siting issues make it impractical for most existing data center locations.  Yet wind power is plentiful, and can be less expensive than other renewables options. Effective use of significant onsite wind resources is more likely to result from bringing a data center to a wind farm, than vice versa. As an example, Other World Computing in Illinois installed a 131-foot-tall turbine to provided 100 percent energy for its data center. However, the data center is still reliant on the utility grid to handle intermittency issues and serve as a back up power supply.

And as discussed previously, wind power is playing a major role in other green power strategies being used at data centers, as a source of renewable energy credits and power purchase agreements, as noted in the Google PPA example.

A wide variety of clean energy solutions are available for IT companies looking to mitigate GHG emissions in their data centers. Yet these solutions must be evaluated on a site-by-site and solution-by-solution basis, in the context of a comprehensive data center energy strategy comprising both energy efficiency and clean power.

As Greenpeace accurately points out, “global IT and cloud computing companies have a tremendous opportunity and unique responsibility to take greater control of their electricity supply chain, and to manage their energy ecosystem both outside and inside the data center.”

When viewed in total, data centers may indeed represent a ‘killer app’ for green power.  Data centers are proliferating, their energy requirements are substantial, and these facilities have the potential to be flexibly located where green power is most economic and plentiful.  The IT industry is progressive, consumer aware, and under intense scrutiny by NGOs on this issue. All of this makes data centers and IT companies natural candidates for increased green power use in the future.

Don Bray is cofounder and president of AltaTerra Research. He has led a broad range of research and consulting engagements in corporate sustainability, resource efficiency, and renewable energy systems. He has deep expertise in enterprise information systems, and has authored several reports on enterprise sustainability management solutions. He is a frequent writer, speaker, and moderator on emerging developments in resource efficiency and corporate sustainability.

Don Bray
Don Bray is the President of AltaTerra Research and co-author of the recently released report, “Enterprise Sustainability Management Solutions: Reference Architecture and Buyer’s Guide”.
 
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