Mark Bramfitt - Utilities & IT

Microsoft Moving Closer to a REC-less Future?

After reading a pretty scant report this morning on Salon, I waited for what I knew would be a more thourough job from Datacenter Dynamics regarding Microsoft's power purchase moves in Texas.

Microsoft has entered into a power purchase agreement with a new wind farm that has 110 MW of capacity. But as noted in the report, it's not a pure-play direct access deal.

Microsoft buys the power, strips off the renewable energy credits (RECs) for use across it's facility portfolio (not just their Texas data center), then evidently sells the power back into the wholesale market.

That's really not much different than simply buying the RECs directly from the wind farm project, so it doesn't get them into the kind of deal that Google often makes, which is to buy the power outright and wheel it to their facilities. (That direct investment avoids the question of whether the project would have been built anyway.)

I was under the impression that Texas was pretty wide open when it came to utility deregulation, but I'm inferring that while you can opt to purchase your power from any number of providers, perhaps you can't make a deal directly with a generator. (Remeber that the local utility still gates paid for distribution, and the transmission system gets paid too.)

So I guess I see my esteemed colleague KC Mares' point that Texas still has a somewhat closed system, though I would never advocate what he does without two crucial caveats.

If you want full deregulation, you have to put in place rules about the obligation of utilities to serve customers. If the wind farm Microsoft is buying power from goes bust, what obligation does a utility have, if any, to secure generation resources to make up for that loss?

And perhaps more importantly, in a fully deregulated market, who is responsible for ensuring that enough generation capacity is developed? In California, which of course had a disastrous flirtation with deregulation (largely at the hands of certain Texans!), the utilities have had to get back into the generation development game because the "free market" can't raise capital in a fairly regulated market (let alone a fully deregulated one).

So I will certainly add Microsoft to my very short list of data center operators that are tackling the environmental impacts of their energy use, though the REC purchase approach is probably the least effective of the ways to address the issue.

 

NYT Tackles Energy "Resale" in Colocation Data Centers

Jim Glanz at the New York Times has produced a third article on utility-scale data centers for the paper, this time focusing on the colocation market and the legalities of how leases are written in the industry.

While I spoke at length with Jim for the article, I was not quoted in the piece, so you'll have to go to Data Center Knowledge for my "official" reaction.

The points I make there include the recognition that colos that in any way charge directly for measured power use are likely in violation of utility commission regulations and utility tariffs. In California for example, Rule 18 specifically prohibits power resale, with just one exception that was added a few years back for high rise multi-tenant office buildings.

And yet, even before the move by the industry to install DCIM packages with energy metering and monitoring capabilities, it was widely known that colos often charge for directly metered energy use, and usually with some agreed-to "adder" to account for cooling and power delivery and conditioning energy use.

(In other cases tenants pay for a prescribed amount of energy capacity in their cage, which is copacetic with regulators. You can charge $XXX per amp or kW of capacity, but not $0.XX per metered kWh, and certainly not with a markup.)

My other line of commentary noted that colo tenants may begin asking for information and utility sourcing flexibility that owners may not yet be ready to provide.

Let's say my company gets truly serious about carbon reporting and mitigation, and wants to know the carbon content of the power delivered to their colos space...and whether they can pay a premium to buy more wind power in the portfolio. I doubt many retail colos are prepared to manage those issues, though it should be fairly simple for the wholesale colo market.

In summary I think that the NYT article is correct to point out that many colos are operating in a regulatory gray area, and that more light is likely to shine on the "resale" of power and how that is accounted for and managed.

For utilities, "hiding" behind the regulations (the primary intent for the ban on resale is to avoid conflicts with customers of record and lessees, after all) will not pass muster in the long run. There are too many actors playing around the edges, like colos, and it would be a far better thing to address these issues forthrightly, with solutions that satisfy customers of all types.

 

 

EUCI Presentation III: Environmental Considerations for DC Siting

This is the third of four(!) presentations I delivered at an EUCI data center forum in December in San Francisco, and I've just committed to attend their second conference on this subject in Philadelphia in June (details posted when available).

With a mixed audience of data center developers, utilities, and consultants, it was an interesting place to deliver some forthright commentary on the environmental consequences of siting large data center developments:  Download EUCI Presentation 3

On one hand, utilities like attracting these loads, but don't necessarily like to reveal the carbon content of their power. On the other side, where a utility-scale data center is located is the single most important criteria for the environmental impact of the facility, and seeking cheap rates usually means sourcing dirtier power.

On the carbon content point, I noted in the presentation that utilities are pretty lax in reporting the sources for their power. In California, there was a pretty good mandatory framework imposed by the state that has unfortunately been watered down somewhat (utilities can put all of their purchased power in an "other" category, making an often large chunk of their portfolio invisible to consumers).

The other key issue is that the carbon content varies utility-by-utility, even in the same geographical region. I charted California utilities in a white paper (link to your left) and found that municipal providers in California are often providing much dirtier power supplies than the investor-owned utilities.

The cheaper-is-dirtier paradigm doesn't hold in all cases. I cite the Pacific Northwest where some data center operators have been able to get utility power almost wholly reliant on large hydroelectric plants at very low rates, and the surprising amounts of nuclear and more recently even renewables in parts of the country like Virginia where coal has always been king.

My message to data center operators considering locations for new developments is to be sure they know what they are getting from the local utility, and to consider the risks of price increases going forward. States are imposing renewable energy requirments that will lead to greater rate impacts in areas of the country with low use of renewables, compared to other states that are meeting established targets.

For both audiences, I pointed out that regulators and NGOs like Greenpeace and the Natural Resources Defense Council are watching, as well as the mainstream press, a la the series of articles published recently by the New York Times.

 

CA Title 24 For Data Centers: Stakeholder Meeting

Just a reminder that the second stakeholder meeting for the project to develop energy efficiency standards for new data centers in California is being held next week in San Francisco.

We'll be reviewing the technical work that Taylor Engineering has performed to evaluate minimum efficiency standards for air conditioning systems, as well as work on standards for power conditioning equipment. (I think the biggest result is that air-side, water-side, or equivalent free-cooling strategies must be incorporated in any new data center after 2012.)

If you design, build, or operate data centers in California, and want to be part of the stakeholder team, drop me a line. For those who can't attend the meeting on Thursday the 16th in person (at the PG&E Pacific Energy Center in San Francisco), we have established a webinar, so you can participate from a remote location.

Battle Brewing Over Data Center Efficiency Standards?

Are utility-scale data center operators on a pre-emptive mission to slay energy efficiency regulations? A "gang of six" released a letter of opposition to energy efficiency recommendations under consideration by a technical committee of ASHRAE, at least begging the question of their motivations.

The signees of the open letter represent real heavyweights, not just in terms of their collective data center infrastructure, but also in their leadership in energy efficiency. 

They are James Hamilton from Amazon, Kevin Timmons of Microsoft, and Urs Hoelzle of Google on behalf of utility-scale data center operators, Chris Crosby from Digital Realty Trust and Hossein Fateh of Dupont Fabros on behalf of the wholesale developer business, and Mike Manos, formerly of Digital Realty and Microsoft, now on behalf of telecomm leader Nokia.

What is their beef? On the face of it, they want to make sure that any regulatory requirements for energy efficiency at data centers be "performance based" rather than "prescriptive". A performance-based system would essentially say "you must be at least this efficient, but get there any way you want", whereas a prescriptive system says "you must do at least X, Y, and Z".

This ignores at least one thing: ASHRAE doesn't set building construction regulations, individual states do. Yes, ASHRAE recommendations do inform the setting of those standards, but clearly there is all kinds of time for deep breathing here. 

Further, ASHRAE has not proposed a prescriptive standard at all - you can use water-side economizers to get your energy use down instead of air-side. (This is of particular importance to container/modular data center designs, and to anyone seeking to use liquid cooling solutions.)

What the open letter authors appear to dislike is a potential mandate to have air-side economizers in all new data centers, even though all of them are using that very technology to reach low PUEs. Their proposal that regulators simply set a maximum PUE standard belies the fact that you simply can't get into meaningfully low PUE territory without using air-side and/or water-side economizers.

Now to inject some real controversy into the debate, such as it is. As I have noted here before, a project is underway in California to set minimum efficiency standards for data centers under Title 24, the new building code determined by the California Energy Commission. I am doing the stakeholder outreach for the project, which is sponsored by Southern California Edison.

My challenge to the "gang of six" and any other interested parties: join the stakeholder group to explain why some economizer requirement doesn't make sense, for the builders, owners, and users of data centers, and in the public policy arena. Contact me!

Only in...San Francisco (I Hope)

Perhaps just a bit difficult to see, but this is one of at least a few "solar-powered billboards" in San Francisco (the panels are mounted at the bottom).

I don't know this for sure, because the power conditioning gear and service panel aren't visible, but I highly doubt that there is a battery system in this installation, so let's assume we're looking at a typical grid-connected (parallel) set up.

That means that all of the power generated goes to the utility, and none of the power is used by the billboard lighting, which after all is only on at night.

What could be wrong with that?

I suppose nothing, really, except that it goes to the heart of the issue of regulatory fairness and misuse of environmental perception. The sentiment goes: "I have solar PV panels on my home/business/facility, so I'm power/grid/environmentally neutral."

These installations are most certainly not grid neutral. There is still a utility service point, with transformer, distribution, transmission, and power plant infrastructure to support it. 

The problem in California is that under net-metering tariffs, the bill board owner could "zero-out" their bill and pay for none of the carrying costs of that infrastructure. They simply have to size the solar PV to generate the same amount of power used by the lighting on an annual basis.

That means the neighbors do pay more, by the way, because they now carry the infrastructure costs. And that is the heart of my criticism, not of solar or distributed generation of any type, but of the manner in which it is treated in the regulatory arena.

Utility Stats: Just How Fractured is the Industry?

Through my consultancy practice and in conferences and forums, there is a steady drumbeat of criticism of the utility industry, citing a miasma of territorial boundaries and the vagaries of fifty state regulatory bodies.

Let's look at just a few statistics, and then let me share a few thoughts on how best to plot your course with utility engagements, whether in the energy efficiency, demand response, or smart grid areas.

First, there are about 3,100 utilities in the US, but in true 80/20 rule fashion, just 213 investor-owned utilities (IOUs, in utility parlance) serve 73% of the national population. These are the utilities that are regulated by state public utility commissions.

Next come the municipal utilities, typically run by cities, but sometimes run by separate governing boards and covering a regional area. There are about 2000 munis, serving about fifteen percent of the US population.

Lastly, there are some 900 co-ops, generally in rural parts of the country, capturing the last 12 percent of the population.

Utility EE Programs: Funding is Not the Barrier

Looking back to the PacificCrest Emerging Technology Summit last week in San Francisco, let me summarize the discussion of the Energy Efficiency panel I appeared on with William Rodgers, CEO of GoodCents, an energy services provider, and Gary Boyd, a VP at SAIC, a large engineering and consulting firm that works in the energy efficiency, renewables, and smart grid areas.

No surprise at a venture capital conference, but our moderator asked us all to reflect on the positive business atmosphere for the energy efficiency industry. I was able to point to the very large and ever increasing pool of utility program funding, citing statistics from CEE regarding the number of utilities offering programs and the growth in funding in the US over just the past three or four years.

But what we really wanted to talk about were the market barriers that prevent the vibrancy of energy efficiency implementation efforts.

District Utility Services - Great Idea for Data Centers?

If you're interested in the alternative energy space, I recommend hitting the earth2tech site from time to time for news on everything from clean power to the smart grid. It's particularly good for news on start ups and M&A activities.

In a report today, Justin Moresco talks about Veola Energy North America's purchase of a district cooling system in Baltimore.

Two things struck me about the story. 

First, this is only the second district cooling plant that I have heard of in the US - the other is in downtown Austin, TX. I've been wondering why there aren't more district heating and cooling plants, and why utilities aren't all over this as a business opportunity (both the Baltimore and Austin systems are run by local utilities).

It seems to me that utilities have only limited opportunities for growth, and many of those opportunities are hampered by regulatory constraints.  Getting into appliance sales, leasing, and servicing, for example, is generally out of bounds for this reason. But building utility infrastructure, delivering steam, hot water, or chilled water, looks a lot like traditional utility business that a regulator could understand and allow.

New Construction Standards For DCs in CA

Not a big surprise to people who are in the utility and regulatory arenas related to energy efficiency - there will be an effort beginning this year to establish and enforce minimum energy efficiency standards for data centers in California.

Here's how the regulatory system works and how this effort will proceed:

The California Energy Commission establish two broad categories of mandatory energy efficiency standards. The first is Title 20, which sets minimum performance standards for appliances. The second is Title 24, which sets standards for building efficiency. The Title 24 standards apply to new construction as well as any significant remodeling or rehab of existing space.

Title 24 standards apply to the majority of building types - if you want to build a house, hotel, or office building, you have to prove to the local building authorities that your design meets the standards, so this is in essence a building code. Title 24 is generally updated every five years or so.