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.

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In Nebraska, the Omaha Public Power District charges residential consumers 7 to 8 cents per kilowatt-hour, putting it on the lower end of the electricity cost scale nationwide. But a cap-and-trade program would likely increase rates because the utility gets 60% of its energy from coal, said Marc Nichols, who is in charge of sustainable energy and environmental stewardship at Omaha Public Power.

For the utility, cap-and-trade "will do nothing but increase the cost of the product dramatically," said Nichols, who worries that prices may have to be raised by as much as 50% to 100%.

In January, Omaha Public Power announced a plan to generate 10% of its electricity from renewable sources by 2020, with a substantial portion of that expected to come from wind power.

Nebraska has some built-in advantages for pursuing renewable energy: It's the sixth-windiest and ninth-sunniest state in the U.S. And with its low power costs as a lure, the state is actively working to attract data centers. For instance, Yahoo Inc. said last fall that it planned to spend at least $100 million to build a data center in an Omaha suburb.

But Nichols said there are concerns about the reliability of wind and solar power because they're dependent on environmental conditions. "We need some time to develop additional technologies that will help us reduce carbon," he added.

A cap-and-trade program may force companies to take additional steps beyond looking for low-cost-energy locales in which to build or expand data centers.

Some businesses may be tempted to shift processing workloads to Google Inc., Microsoft Corp. and other cloud computing vendors that are building IT facilities in areas with relatively clean power sources, said Tad Davies, executive vice president at Bick Group, a St. Louis-based designer and builder of data centers.

In addition, companies that have backup data centers in areas with cheaper energy might opt to develop internal clouds so they could easily shift computing resources to those facilities, Davies said.

Higher energy costs also could be used to justify full IT outsourcing moves. "Every data center manager and CIO is asking that question anyway," Davies noted.

It's possible that data centers could be directly affected by cap-and-trade regulations targeting their energy use. If so, a big question is whether the rules would apply to corporate data centers or only to commercial ones offering hosting, collocation and disaster recovery services, said Tom Deaderick, director of OnePartner LLC's commercial IT facility in Duffield, Va.

A couple of things may work in Deaderick's favor if cap-and-trade does become a reality. First, OnePartner gets its electricity from the Tennessee Valley Authority, which uses hydropower to generate much of the energy it produces. And Deaderick said the company's data center, which was completed last year, was built with efficiency in mind; among other features, it has the means to accurately measure its energy usage.

But there's no way to accurately gauge the potential impact of a cap-and-trade initiative. "Everything is depending on how they arrange these regulations," Deaderick said. "It could go a lot of different ways."

There is a sense of inevitability among analysts, though, that the White House and Congress eventually will agree on a new energy-pricing plan.

"Anticipating zero-carbon pricing ... those days are gone," said Pat Concessi, an energy consultant at Deloitte Touche Tohmatsu.

Copyright © 2009 IDG Communications, Inc.

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