Why Green Colocation Isn't a Mainstream Product

About one year ago, Digital Realty Trust, the world’s second-largest data center builder and operator, said it had sourced a huge amount of renewable energy generation capacity for one of its largest tenants: Facebook. The special arrangement gave Facebook the ability to claim that it was powering a portion of its data center capacity with solar energy.

Their limited nature aside (more on that in a little bit), even virtual Power Purchase Agreements, the kind Digital made for Facebook, aren’t available to most data center customers that don’t lease capacity tens or hundreds of megawatts at a time Facebook, Microsoft, or Google might. Big announcements of renewable-energy deals by the hyperscalers have become commonplace, and it’s a positive trend. But they don’t address energy traditional businesses consume by using hosting and colocation providers. Even large enterprises don’t always find purchasing clean energy easy, and many don’t even try.

Last year, Iron Mountain, the corporate information management giant that’s in recent years been quickly growing its data center business, launched a renewable energy reporting solution called Green Power Pass, based on a voluntary standard from the Future of Internet Power (FOIP), a working group that’s part of the Renewable Energy Buyers Alliance (REBA), which represents hundreds of large corporations.

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The solution gave all Iron Mountain data center customers regardless of their size a way to record and take credit for the renewable energy the provider buys for the facilities that house their computing equipment, Kevin Hagen, Iron Mountain’s VP of environment, social, and governance strategy, told Data Center Knowledge.

The FOIP standard made the solution possible, he said. The older World Resource Institute carbon protocol, “which is pretty much the rules of the road for carbon accounting for everyone,” Hagen explained, “didn’t have a nice way to handle the chain of custody between the green power that we purchase to supply the facility and our customer.”

The FOIP working group was precisely an attempt to create a general solution for colocation customers to account for their providers’ investment in renewables. The protocol was created to “enable this transfer of green attributes from the data center to the tenant.”

Iron Mountain and its customers Goldman Sachs, Credit Suisse, and Akamai all participated in the working group. The three customers have been using Green Power Pass since launch.

Akamai’s CDN infrastructure consists primarily of small-footprint deployments in more than 4,000 locations around the globe. The company’s director of sustainability, Mike Mattera, told us FOIP and Green Power Pass fit that operating model well. “We’re a very agile customer, and it fits how we move around, and how we position ourselves in various cities around the globe.”

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It means Akamai doesn’t have to become expert in sourcing renewable energy. “We don't have to be drastically concerned of how we're going to green up our operations by finding what might be, depending on the area, very, very small projects to give us green power and lower carbon emissions,” he said.

Having green power included in the standard colocation contract is equally important, Mattera suggested, encouraging other providers to follow Iron Mountain’s lead. With the pass, “we can use a partner than has something acceptable in place that can be reported on in a meaningful way. Iron Mountain has created a really good baseline, where any colo could share this work to move this way as well.”

‘Loose’ Corporate Reporting Standards

The FOIP white paper outlines a voluntary standard for reporting renewable power purchased by colocation providers, Gary Cook, climate campaigns director at Stand.earth and former senior IT analyst at Greenpeace, told Data Center Knowledge.

“This is a useful but fairly loose standard, which outlines what level of information must be provided by the colo operator to its customers regarding renewable energy purchased for its data center facilities, but should help customers concerned about their contribution to climate change make more informed decisions,” he said.

Cook urged caution about “the loose nature of the corporate reporting standards for renewable energy,” because it’s not always clear whether there’s a local supply of renewable energy.

Technically, Facebook could make the claim that Digital Realty’s clean energy purchase agreement announced last year meant more solar energy to power Facebook servers in Digital-operated facilities. In reality, that particular arrangement didn’t cause a single watt-hour of solar energy to flow into a Facebook server inside one of Digital’s data centers. The 80MW solar farm involved is in North Carolina, where Facebook operates its own data centers, but where Digital doesn’t have any footprint. The nearest Digital data centers Facebook uses are in Northern Virginia.

It was a “Virtual Power Purchase Agreement,” which essentially means applying “Renewable Energy Credits” (RECs) associated with clean energy generated in one place to whatever grid energy is consumed in another, making that grid energy “carbon-neutral.” But it’s carbon-neutral only in name. While a big virtual PPA with a big client may make a new solar or wind farm possible, if the farm and the client’s operations aren’t on the same grid, it does nothing to address carbon emissions that result from those operations, which may be powered by any mix of fossil-fuel or renewable generation sources but pass as carbon-neutral.

RECs can also be “unbundled” from energy produced to be sold separately, and sustainability-conscious colocation customers should also look carefully at “whether the data centers they are considering are matched with new and additional sources of renewable electricity,” Cook warned.

Outdated Incentives

Iron Mountain’s energy portfolio ranges from onsite solar generation – including “in a couple of cases” owned generation facilities – to virtual PPAs for remote wind farms, Hagen said. The company has contracts for renewables in Pennsylvania, Kansas, Illinois, and Texas. A new 7MW solar installation in Edison, New Jersey, is about to come online, and other installations are in progress, according to him.

“Our data center business has been 100 percent renewable energy since 2017, and our corporate use is now up to 70 percent,” Hagen said. “From 2017 to 2018, we’ve doubled our electricity consumption, on a global basis, which is huge, so we needed a lot more renewable energy fast.”

That can be challenging: some utilities are coming up with creative solutions, but others, particularly in places where local utilities have market monopoly, haven’t yet figured out how to meet customer demand for renewable power. “Often the location of a data center is dictated by the interconnect capabilities or by latency issues, so you can get stuck with your [utility] partner,” Hagen noted.

Traditionally, utilities have been rewarded for stability rather than innovation. “We’re asking them for new tricks in a very short amount of time, so I'm very empathetic, but I'm also somewhat impatient.”

Iron Mountain doesn’t buy unbundled RECs, Hagen said. “There’s no case in which we’re just going out and buying RECs alone. All the energy we are using is from electricity-plus-attributes deals.”

Renewables are more cost effective, especially for data center owners and operators that have long-term energy contracts, he pointed out. With renewables, “there's no recurring fuel charge. So we know exactly what renewables are going to cost five and ten years from now, and we can do a long-term contract really attractively. The fossil fuel folks have a hard time figuring out how to manage the risks of long term contracting in their business.”

That wasn’t obvious at first, he admitted. “When we started this process we were asking, why would we pay more for power? Green is more expensive. That's crazy! But we have never paid more than grid for green power anywhere.” Net present value of the company’s green energy accounts is “probably north of $30 million,” he said.

Today, the decoupling of the location clean energy is generated from the location it’s consumed is in many cases necessary, and for large operators the only way to be “carbon-neutral.” Clean energy isn’t readily available in all data center locations, and isn’t cost-effective everywhere.

Some of the largest operators have publicly committed to the heavy lift required to make that no longer the case. There are some big technological, regulatory, and business barriers to powering data centers with renewable energy directly, and around the clock. Google said in 2016 it was working to overcome those barriers, and Microsoft announced a similarly ambitious plan earlier this year.

Solving this problem is the next big step for all data center operators, Elizabeth Jardim , Senior Corporate Campaigner for Greenpeace USA, told DCK. “That is, how to power data centers with renewable energy around the clock, to further drive down demand for fossil fuels and replace them on the grid.”

Iron Mountain is taking one step in that direction by planning to add battery storage to the solar facilities it’s installing.

Data Centers as Energy Suppliers

In the future, Hagen said, data centers could act as energy suppliers to the grid. Whenever a data center wasn’t using all the energy it contracted for with a solar generator, for example, it could sell the excess to the grid. “What if we could shape the data center through technology through the energy storage or outside generation?”

Data centers already have a lot of capital invested in energy systems and generation capacity. Backup generators, UPS batteries are “all useless capital,” he said. “It's all insurance policy, and we're spending millions of dollars of insurance policy just sitting there in the hope we don't use it. That's a terrible use of money.

“What would it look like if all that money was actually invested in energy systems that we got to use when we were trying to arbitrage energy during the day and night on a regular basis? What if we share control with the utility, so they can see there's an asset and use it back and forth?”

Iron Mountain, Hagen said, is starting to work with Arizona Public Service, which already has deals with micro grids and onside power generators to use their generation assets to help stabilize the grid when there are frequency variations from outside their district.

As well as the technical challenges to making that work, and working out the business model with the utility, it might require renegotiating some customer contracts. “Most of our contracts have obligations like having X amount of backup generation on site, and we even have contracts that say I have to have certain amount of fuel oil stored on site so customers feel comfortable we have adequate backups for their needs.” But grid balancing is the kind of next generation solution that could move data centers from being part of the problem to helping create a greener grid for everyone.

Disconnects

Today, Iron Mountain the only colocation provider using the Future of Internet Power platform, Cook, the former Greenpeace analyst, said.

“That’s not what success [for the standard] looks like in our opinion,” Hagen said, encouraging more colo providers to join REBA and use the same reporting platform to offer programs like Green Power Pass. Other data center providers involved in the alliance include Equinix, Digital Realty, QTS, and Switch.

“The leading data center suppliers are working hard on renewable energy but there are dozens, if not hundreds of colo owners who are not in the renewable game, and that's not ok. We think the [data center] owner-operator is a terrific partner in the right place to put pressure on utilities and third-party [energy] providers, but we believe many of them are not asking for renewable energy, primarily because they have no way to connect it to their customer.”

The other part of the solution is getting enterprises to understand how their data center needs drive their carbon footprint, Mattera suggested.

The advantage of Iron Mountain’s program is that it doesn’t only help the biggest customers, Jardim, with Greenpeace, told us. “What's useful about Green Power Pass is that it makes it easier for enterprise customers to pursue renewable energy for their data center energy demand and also gives them a credible way to report this out.”

Digital Realty’s PPA for Facebook is a “bespoke solution,” she said. “Green Power Pass creates a repeatable way for all customers to pursue renewable energy solutions, even smaller companies that may not have dedicated sustainability staff.”

So far, typical Iron Mountain customers using the pass are enterprises with large footprints and commitments around climate and clean power. But, Hagen noted, there’s often disconnect between IT departments and senior leadership in many enterprises with such commitments.

Management in many large organizations simply doesn’t know how much data center capacity they have. “People still believe the whole company works on a server under someone’s desk, or there's a room in the basement,” he said. The average employee doesn’t know how much compute capacity their company uses or how quickly their IT department has had to expand that capacity, be it onsite, in colocation, or in the cloud. “They have no idea their actual compute facility is the size of a football pitch.”

Conversely, the IT department is often so busy, it’s “disconnected from their company commitments around carbon impact. I've seen many enterprise customers whose CEOs are making grand pronouncements and wonderful commitments, and their IT department is telling my team that we just need it fast and doesn't matter.”

If the broader colocation industry doesn’t play its part in making the data center future carbon-neutral, it might one day face the kind of backlash airlines are seeing from the “flight shaming” movement in Europe, Hagen warned.

“We just need more of the data center industry to realize that it's possible to not drop their values in the parking lot on their way into work: they can actually use their day job to be part of the solution, and help us all.”