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Should I Be Generating My Own Power for My datacenter?

IntroEnergy is the lifeblood of datacenters, and as it becomes scarcer and as its cost increases, more companies will consider the feasibility of generating their own power. Although the perceived benefits of on-site power generation—especially with renewable sources like wind and solar—are tempting, the decision to pursue either supplemental or exclusive generation is one that must be made carefully. Why Would a Company Want to Generate Its Own Power? When was the last time your power rate went down? If you’re like most consumers and companies in the U.S. and elsewhere, the answer is either “never” or “I don’t recall.” The increase in energy prices is attributable to a number of factors in the U.S., not the least of which is a spendthrift federal government whose money printing is debasing the value of the dollar. And with few prospects of a reversal of this trend, prices will likely continue to increase, barring an unexpected deflationary event (which the Federal Reserve would likely fight by printing even more money). Another factor is increasing demand worldwide, especially in emerging economies like China and India. datacenters are facing increasing demand for their services, and to meet this demand, they must collectively consume even greater amounts of power. Although energy-efficiency measures are important and should be pursued for both fiscal and environmental reasons, ultimately, they cannot by themselves balance the increasing need for power to meet demand. As the cost of operating (i.e., powering) servers over their lifetimes nears the initial capital cost of purchasing them, energy is quickly becoming the greatest expense that companies face for their datacenters. So, what appeal would a company see in generating its own power? If the power comes from a renewable source like solar or wind energy, then the benefits are obvious. These sources contain abundant energy, and tapping them produces less in the way of emissions and other waste products (although manufacturing the equipment poses its own environmental problems). What’s more, they’re free—if you have the equipment to convert them to electricity. Another concern for companies is the need for reliable, high-quality power. Power spikes and other power events can cause service outages and equipment damage in the datacenter, and the broader power grid is unable to mitigate all such events. Thus, although purchasing power from a utility is simpler in some ways (for instance, it requires essentially nothing in capital costs compared with on-site power generation), it is less than ideal. If one considers the need for UPS and other systems to “clean up” the power produced by utilities, then the capital costs of relying on a utility are really much more than nil. And, of course, some companies may wish to control their own destinies as much as possible. With on-site power generation, a company need not rely on the utility company to respond in the event of a power failure or to explain why rates are going up yet again. The thought of each company (or even just many companies) meeting its own power needs—especially by way of solar, wind or similar renewable sources—sounds really neat. So, when do we get started? Well, after considering the downsides first. On-Site Power: Reversing the Trend of the Last Century The power grid, a network for distributing power to companies and consumers from central power-generation sources, ameliorated a number of difficulties when it was implemented. First, it allowed companies to purchase power instead of having to generate it themselves, enabling these companies to focus on their core business rather than more peripheral matters. Second, it exploited economies of scale by centralizing power generation in fewer, larger locations, rather than a scattering of individual plants. These centralized facilities were able to distribute power to a large number of customers rather than servicing a single company. But the 21st century is seeing something of a reversal of this trend of centralization as power generation goes from a centralized model to more of a hybrid model that relies on greater distribution of power-generation sources. This change involves both consumers and companies, and in many cases, it supplements the power grid (i.e., these smaller sources are integrated into the grid rather than isolated for service to a single location—unused power is sold to the utility and can be used by other customers). Although centralized sources of energy will likely remain the “bread and butter” of electricity pending development of some revolutionary new type of power generation technology, an increase in distributed sources will ease the burden on these larger facilities and may help improve the quality of power locally. For many datacenters that are considering on-site power generation, the hybrid approach is likely the best option. Generating all of their own power needs on site is a tall order, and the capital costs of doing so may be too much for small datacenters (even though their power needs are less than those of large datacenters). A few large companies, and perhaps even fewer smaller ones, may be able to pursue such a large-scale project; most, however, will likely opt for a supplemental approach. On-site power generation will reduce—not eliminate—reliance on the utility company. What Are the Options? The options for on-site power generation that likely come to mind first are solar and wind energy. These sources are universally available—everywhere is illuminated by the sun, and the wind always blows sometimes, at least—making them universally accessible. What’s more, they’re free, except for the capital cost of converting them to electricity and integrating the generated power into the existing infrastructure. But companies have other options as well, some more or less complicated and expensive than others. One of the advantages of solar power is its availability, but it has a striking disadvantage: it is only available for roughly half the day. The solar constant (the amount of electromagnetic radiation incident on the Earth) is approximately 130 watts per square foot. A solar panel, assuming it is 100% efficient for all wavelengths (which is not nearly the case), would have to be nearly 16 square feet to generate an average of one kilowatt of power over the course of a day (including night, when no solar power is generated). Furthermore, this assumes that the panels adjust to maintain the optimum angle with the sun over the entire course of the daytime hours and that weather conditions do not hinder the sun from reaching them. These are many “ifs,” and clearly the amount of power a solar panel can generate is much lower than the extremely optimistic numbers above. Even assuming these numbers are feasible, a megawatt of power would require over a third of an acre of solar panel space—to say nothing about the space in between individual panels. Factoring in the inefficiencies of the panels and other considerations, the required area quickly multiplies. Furthermore, complete reliance on solar energy would require energy storage infrastructure—in other words, some kind of battery system to provide power at night. Solar energy is therefore better used as a supplement rather than an exclusive power source. IT resources are generally most in demand during the day, so solar power infrastructure can help reduce peak power consumption. In cases where power rates increase during times of peak usage or when a customer exceeds some usage level, the use of solar power can yield tremendous savings beyond just the typical cost of power. Wind energy offers similar advantages and disadvantages compared with solar. Like solar, wind energy depends on conditions: wind speed, for instance. In addition, however, robust structures for mounting the windmills and turbines are required, whereas solar panels can be placed at ground level or mounted to existing buildings or other structures. Large wind turbines require open space for construction of the supporting structures and to allow access to strong winds. Although wind, like solar, does not generate emissions, some concerns have arisen regarding their effects on wildlife—particularly birds, which can be killed by the rotating blades. A less noticeable effect is the mining of rare earth elements to create the magnets that allow the turbines to convert energy of motion into electricity. Most of the production of these elements takes place in China, and a lack of environmental regulations in that country have led to tremendous pollution problems. (See a blog post entitled “Isn’t It Ironic: Green Tech Relies on Dirty Mining in China.”) Two other alternatives are fuel cells and natural gas. Natural gas—particularly when readily available, as in the case of the Reno Technology Park (“An Example of datacenter Site Selection: Reno Technology Park”)—is a relatively clean-burning fuel that can be supplied to on-site generation infrastructure to power a datacenter or other commercial facility. Fuel cells offer a similar (but even cleaner) possibility, although some questions revolve around their safety. Another striking technology that has significant potential is the use of micro nuclear generators, such as that under development by Hyperion Power Generation. These small power plants could be delivered via truck and supply power without refueling for years—even up to a decade. Numerous safeguards are designed to ensure the safety of the product. With proper waste handling, nuclear power—especially in the contained vessels used by Hyperion—can be a very clean alternative to traditional coal power. This type of small but powerful electricity generation technology offers an exciting possibility for companies in the near future. A different alternative is so-called combined heat and power (sometimes called cogeneration). In this case, waste heat left over from power generation is used to, for instance, provide on-site heat, thereby saving the expense of converting generated electricity back into heat elsewhere, or of needing to purchase a separate fuel for heat generation. The Problem of Location Alternative power-generation technologies many times—although not always—face a difficulty with regard to location. Often, prime locations for datacenters (such as in cities, where infrastructure, talent pools and other resources are readily available) lack the power capacity for adding large, power-hungry facilities. It is precisely here that supplemental power generation can be of great value; nevertheless, space for wind turbines (for instance) is highly limited or absent. Even solar power has limited potential in such locations owing to a lack of affordable space. On the other hand, remote locations where utility-based power may be more available (owing to less concentrated demand) leave more open space for power-generating infrastructure, but these locations may also be less desirable. A lack of local talent and potentially the need to travel long distances from a company’s headquarters to a datacenter facility may make such a possibility far less appealing despite its greater capacity for supplementary (or exclusive) power generation. Who Should Generate On-Site Power? Despite its tremendous potential benefits, generating power onsite has a number of glaring drawbacks (some of which are mentioned above), not the least of which is the initial capital cost of installing the needed infrastructure. Of course, smaller companies with smaller datacenters may need less power to operate their facilities compared with larger companies, but even speaking proportionally, these companies may be in a poorer position to shell out the startup capital needed to fund such a project. Large companies, although their datacenters may require vastly larger amounts of power, may be more capable of producing the necessary capital to implement a large solar array or a number of wind turbines. And, of course, the costs for generating power on site will vary greatly. Does your company need to purchase additional space for solar panels or windmills? How much power capacity do you need? Do you plan on using a battery storage system for excess power generated? Will you need to hire additional staff to support the infrastructure? The answers to such questions can vary significantly depending on the particular company’s needs and expectations for its power system. The type of system and its infrastructure and ongoing costs (typically maintenance for renewable energy sources) will certainly affect the speed with which the company recoups its investment. Generating your own power for your datacenter is not something that should be jumped into lightly. To be sure, the startup costs will deter many businesses, but in taking steps in this direction, a company should be sure that it wants to add a new set of tasks to its work. Establishing power-generation capabilities means that a company is doing something other than its core business function, and even though the equipment, personnel and maintenance of such a system may be affordable, the distraction could potentially harm business. Thus, a company must consider a variety of factors when choosing whether to pursue on-site power generation to support or supplement its datacenter. Conclusions The potential return on investment for on-site power generation depends on a variety of factors, and giving a single number to quantify it would be deceiving. Not every company need consider on-site generation—including even some of those companies that could afford it. In some cases, the best policy is for a company to focus on its core business and let the utility companies focus on theirs: power generation. But with the rising cost of electricity and the growing appetite of datacenters for power, the expenses of running an IT operation could eventually reach a tipping point for some companies, thereby making on-site power generation—whether exclusive or supplemental—feasible or even desirable. The history of power generation and distribution is one of consolidation into a few centralized generation facilities that distribute power to consumers, but the interest in distributed power generation—whereby more consumers (corporate and residential) produce smaller amounts of power—offers some resistance to this trend. Distributed sources cannot exploit the economies of scale that larger facilities can, but they offer certain advantages, particularly in the case of companies that need high-quality power. In addition, distributed power generation offers both individuals and companies with sufficient capital an opportunity to help the environment by generating clean power (in the case of solar, wind and even nuclear energy, for example). For companies operating datacenters, location may be a significant stumbling block to their ability to generate power onsite. More desirable locations—such as urban centers—generally leave less room for power-generation infrastructure, whereas less desirable locations have more room but do not offer the benefits of, say, urban centers
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