The emergence of the internet has enhanced our need for data in real time through multiple devices. Data needs could be for business, entertainment or collaboration. The latency level for those use-cases is decreasing dramatically. With evolution of cloud computing, most enterprises are shifting their technology applications to the cloud to move away from the CAPEX model to the OPEX model, thus optimizing capital allocation to realize the benefits of shared economy.
In this cloud computing era, data centers are enabling colocation of numerous customers and cloud operators at the same place. Some of these data centers are used as storage hubs as well.
This change has necessitated the need for robust data center infrastructure for larger companies, such as Microsoft, Google, Facebook and Amazon, or use of a third-party multi-tenant data center, such as Equinix and Digital Realty. Most data centers are large facilities that are energy intensive with a 24-7 source of power available with low downtimes.
According to the U.S. Department of Energy-led Center of Expertise for Energy Efficiency in Data Centers, U.S. data centers consumed about 70 billion kWh of electricity in 2014, representing 1.8 percent of the country’s total energy consumption. That figure is only going to go up with the increase of data consumption, mobile usage, cloud computing and introduction of new technologies and the Internet of Things. The report Emerging Trends in Electricity Consumption for Consumer ICT determined that data centers and networks will be the highest growth segments in energy consumption (See Figure 1 and Figure 2)
Figure 1 and Figure 2 Energy Consumption, 2012 and 2017. Source Emerging Trends in Electricity Consumption for Consumer ICT
Most data centers are specific about their energy consumption and are starting to take steps towards green building designs, intelligent building systems and efficiency improvements. Data centers use various techniques like tracking power usage effectiveness, air flow management and reducing distribution losses to efficiently manage energy consumption.
The real shift would happen with data centers adopting a time bound action plan to derive 100 percent energy usage from clean sources. This goal entails substantial investment in clean tech, such as solar or wind.
Broadly, there are three techniques through which data centers can address this issue:
- Solar rooftops supplemented by fuel cells and batteries
- Long-term power purchase agreements (PPA) backed by receivables
- Financing renewables along with underlying real estate
Is Rooftop a Viable Solution?
Rooftop solar PV is a well-established solution for commercial spaces to derive energy from clean sources. Rooftop solar is the only solution with the rising price of real estate. The mission-critical nature of data centers demands a comprehensive back-up system combined with technologies like fuel cell and battery storage to offer 100 percent green solutions, even at night. This solution also eliminates transmission losses, as power is generated on site. Companies will also be able to avail tax credits currently at 30 percent of the system cost, which could translate into huge savings.
Strengthening Creditworthiness Through PPAs Backed by Receivables
According to 451 Research, the U.S. data center industry is still very fragmented, with the majority of the facilities operated by local operators with one to three facilities each. Smaller data centers have limited financial wherewithal to enter into long-term commitments for PPAs.
The low creditworthiness of these data centers makes it difficult to finance the PPAs. Data centers can assign a portion of their receivables to make payment towards obligations under the PPAs. That assignment would help PPA providers raise cheaper costs from banks, which in effect would allow data centers to obtain cheaper power under the PPA.
Finance Renewables Along with Underlying Real Estate
Real estate lending is extremely prevalent in the market. Combining the capital spend on renewables with the real estate financing would enable data center operators to raise cheaper funds and accelerate clean tech adoption.
While at this stage, the entire data center industry only consumes 2 percent of the overall U.S. energy consumption, this figure likely will jump significantly in the near future. There is an urgent need, therefore, for sustainability to keep pace with business growth to control carbon footprints.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any company.