Experts discuss how the cost-of-energy crisis is impacting the data centre industry

Experts discuss how the cost-of-energy crisis is impacting the data centre industry

Almost eight-in-10 (79%) IT decision-makers state that the energy crisis has created concern for their future sustainability strategy, according to the latest research commissioned by Telehouse International Corporation of Europe. As a result of the currently turbulent geopolitical and economic climate, 86% of IT decision-makers have already altered their current business plans to minimise the impact on operational costs and ensure profitability.

These findings add to the concerns currently experienced by decision-makers who, despite the energy pricing pressures, have to ensure a successful delivery of green initiatives to meet their organisations and the UK’s ESG goals. A large proportion (87%) are confident that their IT infrastructure can deal with climate change impacts now, but this drops to 67% when looking ahead over the next five years.

With the UK’s ambition to cut carbon emissions and reach net zero by 2030, the current energy crisis poses a great risk to meeting the target on time. The energy market volatility, however, is not the only thing standing in the way of sustainability as Telehouse’s research revealed the true state of progress among organisations in where they currently are on their sustainability journey.

Worryingly, some businesses are yet to achieve their current sustainability goals, as over a third of organisations (34%) haven’t made progress on their objectives or haven’t yet defined them. Over half of businesses (57%) aren’t yet fully optimised to contribute to net zero targets and 52% aren’t using renewable energy sources. In addition, 52% of businesses don’t closely monitor their environmental footprint.

Greater strides need to be made in sustainability reporting too as only 20% of organisations currently focus on Scope 3 emissions and 43% cite room for improvement or little accuracy when reporting the impact of their IT infrastructure against sustainability roadmap.

Commenting on the findings, Mark Pestridge, Senior Customer Experience Director, Telehouse, said: “Our latest research reveals a perception gap among organisations that sustainability drives decision-making when practical steps haven’t been taken to enable this in reality. With the energy crisis set to wreak havoc on sustainability progress, businesses will need to explore the benefits of outsourced services to both prevent rising costs and tap into green initiatives.”

Economic pressure has already encouraged decision-makers to explore new services, with 94% having outsourced their IT infrastructure, or planning to do so. These organisations are more likely to be confident in meeting business objectives and controlling costs during the energy crisis (89%), including 27% which state they are very confident.

The Climate Crunch: How IT Leaders are Responding to Energy and Sustainability Demands research was conducted by Censuswide on behalf of Telehouse Europe and surveyed 150 UK IT decision-makers within enterprise organisations with over 100 employees to understand the impact of the intersecting threats of climate change and the ongoing energy crisis on British enterprises.

We spoke to three experts about how the cost-of-energy crisis is impacting the data centre industry and what can be done about it…

Robert Linsdell, Managing Director, Australia and New Zealand, Vertiv:

As businesses across Asia-Pacific continue creating, storing, sharing and working on data, the need to optimise systems to reduce footprint and consumption has become paramount.

Energy is a huge driver in this regard, hence the drive for renewables across the region, which has the added bonus of taking pressure off the grid. While this is encouraging, in the absence of a renewable energy strategy organisations can also greatly reduce their carbon footprint and energy spend through improving their own IT infrastructure efficiency.

Three years on from the pandemic, a lot of the ‘low-hanging fruit’ optimisation tactics have been realised by some data centre operators. Many have applied energy audits and leveraged energy optimisation software that helps identify thermal and power inefficiencies in the data centre, taking corrective actions across their ecosystems as a result.

But the latest cost-of-energy crisis is pushing our energy-hungry data centres back into the frying pan and onto the plates of CFOs’ business priorities.

As companies across Asia-Pacific look to make an impact on their energy bills, there are still options available to reduce consumption on power and cooling technologies in the data centre – especially in facilities where there have been changes to the IT equipment deployed.

Inefficiency can reach levels of as much as 50% through issues such as overcooling, poor air flow and anomalies derived from IT equipment added, relocated, or removed over time. But a skilled operator can achieve savings in just a few hours by optimising cooling unit airflows.

Further, leveraging cutting-edge technologies are fast becoming huge differentiators for businesses capitalising on improving their overall Power Usage Effectiveness (PUE). Immersion and other high-density cooling equipment can directly improve PUE, while technology such as fuel cells and long duration energy storage can reduce power bills through peak looping.

Additional cost-saving opportunities linked with optimisation exists in many countries across Asia-Pacific, with abatement schemes to financially reward companies that demonstrate their ability to invest in carbon reduction projects in the data centre.

In Australia, certain states offer energy reduction programmes that attract subsidies. Full circle, these rebates can be used to fund legacy equipment replacement with more efficient, right-sized equipment.

Energy consumption is a significant contributor to data centre costs – now more than ever. I urge data centre operators to look to optimisation exercises, leverage the latest fit-for-purpose technologies and capitalise on government financial incentives to increase PUE and support considered efforts to lower the power bill, as well as their carbon emissions.

Jim Steed, Managing Director, Nutanix A/NZ:

Digital capabilities are no longer a ‘nice to have’, they’re now a ‘need to have’. 

Between the ubiquity of remote work, the explosion of e-commerce and the adoption of innovative technologies like Artificial Intelligence and Machine Learning in even the most traditional industries, businesses today are generating an incredible amount of data every single second.

It is in the data centre that all this information is generated, stored, analysed and actioned. All the computing power needed to do this requires huge amounts of energy, dwarfed only by the amount of energy required to prevent all the necessary components from overheating.

This voracious energy consumption is compounded in traditional data centres that are notorious for their inefficiency. Without getting too technical, the legacy approach to three-tier data centres is to have at least two of everything – servers, storage and networking – in case something fails.

Making matters even worse, most servers are unbelievably underutilised, often running below half their capacity to leave a buffer for additional resources to cater for unforeseen spikes in demand.

So not only is there two of everything, the duplicates run at an even lower fraction of their actual capacity.

As the cost-of-energy crisis continues to take a toll on business balance sheets, even Australia’s Department of Industry, Science, Energy and Resources highlights ‘low server use remains one of the largest opportunities for energy savings in data centres’.   

So as Australian businesses look to make a real impact on their emissions and reduce their energy bills, transforming their data centres is often the first port of call.

An exemplar of this data centre transformation is Victoria’s Natures Organics.

The manufacturer of popular brands Earth’s Choice and Australian Pure implemented Nutanix hyperconverged infrastructure – which collapses duplicate infrastructure needs and runs even the largest workloads with less physical equipment through server virtualisation – and immediately lowered their IT-related energy consumption by 55%. 

This supported the companies’ commitment in eco-initiatives and complemented their 1299kW roof-mounted solar array installed on its manufacturing plant, reducing carbon emissions by 1,000 tons annually. 

So, the biggest impact the current cost-of-energy crisis is having on the data centre industry is that it is highlighting just how inefficient the legacy three-tier approach really is. This is motivating organisations across the region to modernise their infrastructure and, in the process, transform their businesses.  

Anthony Mayall, Chief Commercial Officer, Sustainable Energy First:

It’s no secret that data centres are an energy-intensive part of the economy. The International Energy Agency (IEA) estimates that data centres account for around 1-1.15% of global electricity use, even after significant energy efficiency improvements. This share of energy consumption reflects the importance of data centres to modern life; global Internet traffic has increased 20 times since 2010. So, what can be done about it?

Take control of your sourcing

The more energy your servers get from renewable sources, the greener your operations will be. But switching to a ‘100% renewable’ tariff from a regular supplier may not be the best choice. For cheaper energy and greater control over your energy sourcing, you have better options.

Develop an on-site generation asset

This means ownership of the energy that powers your business and there are various financial models for it. If you want to own the asset outright, you may choose lease-to-own, third-party finance or CapEx. Or you may choose another model whereby another company owns the generators and uses your site. You just need to choose a financing option that works for the individual structure of the business.

However, you fund the investment, you can be confident that it will swiftly pay for itself. Soaring energy prices have dramatically shortened the ROI period for renewable generation assets from over 10 years to around four years.

The intermittency of renewables means that you will still need grid energy when your asset isn’t generating any power. Installing battery storage as part of the project will help you maximise the benefits and get as much free green power as possible. You may also develop an income stream from selling energy back to the grid.

Corporate power purchase agreement (CPPA)

Thisis your second main option. This means buying power directly from renewable generators. The deal may be brokered by a supplier, but it is very different from a traditional supplier contract.

You almost always pay below market price for energy through a CPPA and the price per unit can be fixed for part, or all, of the contract. Having this agreed in advance protects your business from market volatility and offers welcome budget certainty.

For an energy-hungry business like a data centre, investing in renewables is the obvious way to cut your costs and your carbon footprint. But making big choices in unchartered territory can slow you down.

Steve Wright, Data Centre Expert, Redcentric:

Energy price hikes have hit the data centre industry hard and while a lot of investment has gone into energy efficiency, there’s no escaping the core requirement of a data centre: to power the servers. But how can they do this in a way that best serves the customer?

So far, the government’s Energy Bill Relief Scheme for businesses has offered support for soaring bills, but it is still unclear what will happen once the financial aid is withdrawn.

On the back of the hikes experienced in 2022 and so far this year, UK energy bills are set to rise by over 50% in April which means data centres, for example, have little choice but to pass on their cost increases to their customers or risk going out of business.

Data centre energy contracts

Data centres have typically negotiated their energy contracts on the basis of a two-three-year fixed rate or longer. However, in a changing market, it’s not easy to find those long-term agreements, especially ones offering optimum value. After all, being fixed at the highest rate is a risk if the market disruption resolves itself sooner than expected.

Instead, data centres are looking at day-ahead markets to get the best possible rates. While it’s a more complicated way of buying electricity, it can generate significant cost savings compared to fixed-term contracts – savings that data centres can share with their customers. Of course, as with any variable contract, there is always the risk that costs will continue to climb. However, keeping an eye on these markets will also alert data centres to changing market conditions, so that if prices begin to plateau, they will be able to get a fixed-rate and affordable contract.

Protecting customers from price volatility

Despite price hikes, data centres continue to offer an economy of scale that surpasses what the majority of organisations could achieve in an on-premises server room. They should also be working on other ways to keep costs down; for example, passing on energy price rises at-cost and at the minimum level the site can manage. 

Other ways data centres can support customers include help with budgeting, being transparent with price rises and supporting efficiency goals that could make a real difference to energy bills.

For those not in data centres, it is worth investigating whether money can be saved by moving IT infrastructure offsite. Despite the price hikes, data centres still offer greater cost- and energy-efficiency. In addition to cost savings, organisations also get the benefits of greater performance, higher reliability and the partnership that working with a data centre brings – all of which could lead to financial gains that will help you get through the energy crisis with greater resilience.

Ciaran Forde, Data Centre Segment Leader, Eaton:

The rising cost of energy has become a serious concern for large energy users such as data centre owners. Many face an uncertain future, unsure whether prices will continue to rise, whether to pass the cost on to their customers and whether they even have the cashflow to manage the situation. This lack of certainty has left some unable to plan or unwilling to invest in their infrastructure.

All of this has highlighted an urgent need for greater efficiency, requiring data centres to minimise the amount of energy they use, and serves as an important reason to accelerate the transition to renewable energy sources and offer grid support.

Investing in renewables

Businesses of all sizes across Europe are exploring renewables to varying degrees. Iceland runs predominantly on renewable energy, for instance, while biofuels and waste make up a sizeable proportion of Latvia’s energy mix and Norway enjoys a surplus of hydropower. On the other hand, renewables only account for 8% of the Netherlands’ energy supply. Regardless of this regional disparity, the transition is undoubtedly underway across all sectors and economies.

Organisations are also beginning to adopt new architectures such as energy storage and on-site generation of primary power to reduce dependency and enable greater resiliency. This may reduce pressure and demand on the grid and help mitigate against fluctuations in the currently volatile energy market. Microsoft’s expansion to its Dublin data centres, for example, will feature both primary power generation and banks of Lithium-ion batteries approved for special grid-interaction. This interaction provides auxiliary services to the grid to enable it to contend with variable sources like ‘onshore’ and ‘offshore’ wind, solar and other renewables increasingly powering the grid. 

And in the tech sector, inspired by the big cloud providers, a growing number of organisations are exploring the active market for Power Purchase Agreements (PPAs), allowing them to procure green energy at the same time as being directly involved in investing in next-generation renewable technology.

Giving back to the grid

A critical component in the data centre is the Uninterruptible Power Supply (UPS). This extensive backup power system ensures power quality and protects the data centre against unforeseen grid outages. That same energy store can now be used to provide auxiliary energy services back to the grid when required, without impacting the data centre’s performance or integrity. The Eaton EnergyAware UPS is one such system and has already been deployed in several data centres for a class of service called Fast Frequency Response (FFR).

With data centres implementing such services, it will allow the grid operator to onboard ever-increasing levels of renewable energy and help to accelerate the transition. This coupled with the energy crisis may also foster a more collaborative relationship between the producers, grid operators and large energy users.

As a large energy user, the data centre industry is very much affected by the cost-of-energy crisis. Addressing its impact – on data centre owners and their customers – requires a greater focus on both the transition to renewables and how existing infrastructure can be utilised to improve efficiency and resiliency, and to help stabilise the grid.

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