Data Center Customers Want More Clean Energy Options

Today, renewable energy as core part of a company’s data center strategy makes more sense than ever, and not only because it looks good as part of a corporate sustainability program. The price of renewable energy has come down enough over the last several years to be competitive with energy generated by burning coal or natural gas, but there’s another business advantage to the way most large-scale renewable energy purchase deals are structured today.

Called Power Purchase Agreements, they secure a fixed energy price for the buyer over long periods of time, often decades, giving the buyer an effective way to hedge against energy-market volatility. A 20-year PPA with a big wind-farm developer insures against sticker shock at the pump for a long time, which for any major data center operator, for whom energy is one of the biggest operating costs, is a valuable proposition.

Internet and cloud services giants, who operate some of the world’s largest data centers, are privy to this, and so is the Pentagon. The US military is second only to Google in the amount of renewable energy generation capacity it has secured through long-term PPAs, according to a recent Bloomberg report.

Data Center Providers Enter Clean-Energy Space

Google's giant peers, including Amazon Web Services, Facebook, Microsoft, and Apple, are also on Bloomberg’s list of 20 institutions that consume the most renewable energy through such agreements, and so are numerous US corporations in different lines of business, such as Wal-Mart Stores, Dow Chemical, and Target. There are two names on the list, however, that wouldn’t have ended up on it had Bloomberg complied it before last year: Equinix and Switch SuperNAP.

Both are data center service providers, companies that provide data center space and power to other companies, including probably all of the other organizations on the list, as a service. The main reason companies like Equinix and Switch wouldn’t make the list in 2014 is that there wasn’t a strong-enough business case for them to invest in renewable energy for their data centers. There was little interest from customers in data center services powered by renewable energy.

While still true to a large extent, this is changing. Some of the biggest and most coveted users of data center services are more interested than ever in powering as much of their infrastructure with renewable energy as possible, and being able to offer this service will continue growing in importance as a competitive strategy for data center providers.

Just last week, Digital Realty Trust, also one of the world's largest data center providers, announced it had secured a wind power purchase agreement that would cover the energy consumption of all of its colocation data centers in the US.

More Interest from Data Center Customers

According to a recent survey of consumers of retail colocation and wholesale data center services by Data Center Knowledge, 70 percent of these users consider sustainability issues when selecting data center providers. About one-third of the ones that do said it was very important that their data center providers power their facilities with renewable energy, and 15 percent said it was critical.

Survey respondents are about equally split between wholesale data center and retail colocation users from companies of various sizes in a variety of industry verticals, with data center requirements ranging from less than 10kW to over 100MW. More than half are directly involved in data center selection within their organizations.

Most respondents (70 percent) said their interest in data centers powered by renewable energy would increase over the next five years. More than 60 percent have an official sustainability policy, while 25 percent are considering developing one within the next 18 months.

Download results of the Data Center Knowledge survey in full: Renewable Energy and Data Center Services in 2016

While competitive with fossil-fuel-based energy, renewable energy still often comes at a premium. The industry isn’t yet at the level of sophistication where a customer can choose between data center services powered by renewables as an option – and pay accordingly – or regular grid energy that’s theoretically cheaper. Even utilities, save for a few exceptions, don’t have a separate rate structure for renewable energy.

The options for bringing renewable energy directly to data centers today are extremely limited. Like internet giants, Equinix and Switch have committed to buying an amount of renewable energy that’s equivalent to the amount of regular grid energy their data centers in North America consume, but it doesn't mean all that energy will go directly to their facilities. This is an effective way to bring more renewable generation capacity online, but it does little to reduce data center reliance on whatever fuel mix supplies the grids the facilities are on for both existing and future demand.

If, however, more utilities started offering renewable energy as a separate product, with its own rate – as Duke Energy has done in North Carolina after being lobbied by Google – data center providers would be able to offer the option to their customers, and it would probably be a popular option, even if it meant paying a premium. According to our survey, close to one-quarter of data center customers would “probably” be willing to pay a premium for such a service. Eight percent said they would “definitely” be willing to do so, and 37 percent said “possibly.”

At no additional cost, however, 40 percent said they would “definitely” be more interested in using data center services powered by renewable energy.

As the survey shows, interest in renewable energy among users of third-party data center services is on the rise, and if more utilities and data center providers can find effective ways to offer clean energy to their end users, they will find that there is not only an appetite for it in the market, but also that the appetite is growing.

Download results of the Data Center Knowledge survey in full: Renewable Energy and Data Center Services in 2016