Diesel Price Hikes an Issue for Generators

The cost of diesel fuel is soaring, vexing US truckers and motorists overseas, where diesel passenger cars are more popular. But the spike in diesel fuel prices also will make it more expensive for data center operators to support the banks of diesel generators that provide emergency backup power for their facilities. Here's a chart from the U.S. Energy Information Administration, mapping the trend in retail diesel fuel prices over the past several years:

Diesel is now more expensive than gasoline at the pump, costing up approximately $4.50 a gallon. The EIA chart includes prices through May 14, and thus doesn't reflect the most recent market pricing as oil has surged as high as $135 per barrel.

The largest data centers store an enormous amount of diesel fuel so that they can run their generators for an extended period of time in the event of a prolonged grid failure. An example is DuPont Fabros Technology's ACC4 facility in Ashburn, Virginia, which serves customers including MySpace and Facebook. ACC4 is backed by 32 huge 2.25 megawatt diesel generators, and the building has four 50,000 gallon tanks of diesel fuel for a total of 200,000 gallons of storage, enough to run the facility on generator power for up to 55 hours during a grid outage. Google (GOOG) has outfitted its Council Bluffs, Iowa data center to use as many as 38 generators, which could also require a huge reservoir of diesel fuel.

Many huge data centers are likely paying wholesale rather than retail costs, but the pricing trend appears to span both markets. Large diesel users can buy futures contracts to lock in prices for bulk purchases. That's what the city of Houston did, allowing it to pay just $1.83 a gallon for low sulfur diesel fuel through the end of September - and the price will revert to market rates of more than $4 dollars per gallon.