Obama's 'cap and trade' energy plan could hit data centers

The president's proposed electricity pricing program, designed to reduce the amount of carbon emissions in the U.S., may have big implications for power-hungry IT facilities.

Data centers are part of the greenhouse gas problem, and their operators may soon start paying to help fix it under President Barack Obama's proposed cap-and-trade energy plan.

The cap-and-trade scheme is designed to impose higher costs on power generators that don't use so-called clean energy sources. The government would cap overall carbon dioxide emissions and then auction off permits enabling companies to exceed the limits — essentially adding an indirect tax on some forms of energy, such as coal-fired electricity.

Power bills likely would increase as utilities forced to buy the permits passed the added costs on to their customers. And over time, the pool of permits would decrease, sending electricity costs further upward unless generators switched to cleaner energy sources.

The White House has yet to detail the mechanics of its cap-and-trade plan, and a major battle is expected in Congress. But Obama appears to be committed to the idea. His proposed budget for the next fiscal year includes funding for a cap-and-trade program. And at a March 24 press conference, he reaffirmed his support for the new approach, saying that it would start "pricing the pollution that is being sent into the atmosphere."

Data centers clearly are among the facilities that would be in the bull's-eye of a cap-and-trade program — either directly or indirectly.

"It's a new metric for the data center, and [IT managers] must deal with it," said Luke Leung, director of building services engineering at A. Epstein and Sons International Inc., a building design and construction firm in Chicago.

Leung has run some estimates of what a cap-and-trade rule might mean for a 100,000-square-foot data center. Assuming that the facility emits about 16,800 tons of carbon annually, it could see additional costs of $252,000 per year if emissions permits are priced at $15 per ton, or $756,000 if they cost $45 per ton, he said.

Costs are expected to vary by region, though. For instance, Leung said that carbon costs likely would be higher in Chicago, which relies heavily on coal, than in New York, where nuclear power is more prevalent.

Even though the outcome of the congressional debate is unknown, Jim Smith, chief technology officer at Digital Realty Trust Inc., is already preparing for the advent of cap-and-trade.

Digital Realty, a data center operator in San Francisco, runs 75 IT facilities in the U.S. and Western Europe. Smith's goal is to ensure that he has all the information he needs to understand the potential impact of a cap-and-trade program on the company. That includes being able to meter energy consumption to the point where he can specifically see how power is being used inside the data centers.

With more accurate and detailed consumption data in hand, Smith said he could then ask his staff members this question: "If this is the new landscape, how is it going to affect our business?"

Digital Realty's response to a cap-and-trade program may include focusing on states with lower power costs for data center expansions and new facilities. For instance, the company has seven data centers in Virginia. But that state generates a lot of its power from coal. If electricity costs go up significantly under a cap-and-trade approach, "we're going to stop investing in Virginia," Smith said.

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