The End of Utility Rebates for Server Virtualization?

Frankly discouraging news from California, and British Columbia, indicating that leading utilities are considering ending server virtualization/consolidation incentive programs.

First off, Pacific Gas and Electric Company has announced that they plan to expressly prohibit consolidation projects from their customized incentive program, likely early in 2011. (Under the program, customers apply before pursuing a project, using an energy savings calculation worksheet approved by PG&E.)

Given the efforts by investor-owned utilities in California to offer consistent efficiency programs, both Southern California Edison and San Diego Gas and Electric will likely follow PG&E's lead, and the few municiapl utilities in the state that were offering incentives are likely to drop their programs as well.

So the question is why? PG&E was the first utility in the nation to offer an incentive program for what is the leading data center IT efficiency measure, but they now seem to think that program participants will be "free riders". In essence, they think virtualization has reached sufficient market penetration that incentives are no longer justified.

That view is supported by a recent evaluation of BC Hydro's program that indicated that three quarters of program participants would have pursued their projects absent the utility incentive program.

Yet leading industry analysts as well as virtualization software vendors and project implementers note that less than ten percent of IT workloads are running on virtual platforms.

Who is right, and more importantly, is there a justification for continuing utility incentives for the technology?

I can sympathize with the view that sophisticated IT managers have implemented some virtualization efforts, though usually in Dev/Test and not in production, and that these customers may need no further inducement to use extend the technology as a means of addressing data center capacity issues.

However, there is a clear lack of penetration in the vast portion of the market that includes server rooms and closets - the type of facilities operated in the SMB and institutional markets.

That's why I would recommend against shutting down an existing program (or failing to launch a new one at utilities that haven't yet entered the market). Instead, I would consider limiting applicants to certain customer size classes, or place limits on project size (i.e. providing incentives for the consolidation of no more than XX servers).

PG&E claims to be getting ahead of the market by providing incentives in the future for dynamic provisioning of servers (controlling a pool of servers based on variable IT loading), ignoring that this technology is hardly proven, despite market entrants such as VMware.

I am even more concerned that the California position will dampen enthusiasm for utility programs in the rest of the US, where utilities are reticent to enter the IT and data center markets due to discomfort with the pace of technological change.

 

Comments

[Ray Van Dolson]

Is there a link available to the PG&E announcement? Or is this based on the absence of the program in the list here[1]?

[1] http://www.pge.com/mybusiness/energysavingsrebates/rebatesincentives/

[fcoluccio]

One has to wonder if this is a trend that will also preclude incentives in the virtual LAN space as well. Currently, due to the embedded mind-share that is owned by the copper cabling sector and the powerhouse vendors that haven't changed their model in over twenty years, there is absolutely no incentive, except for very-small businesses that elect to move to WLANs (WiFi networks), to disembowel millions of equipment rooms that occupy tens of millions of square feet of rentable real-estate within office buildings, which are presently filled with air conditioners and UPSes and copper-based Ethernet switches: the "other data center", as it were. Any thoughts concerning this subject would be greatly appreciated.

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