Shine a Light on Energy Costs

Shine a Light on Energy Costs

September 6, 2006

The digital world floats on a sea of energy. Data centers and workstations are powered by electricity and countless trillions of bits traverse the globe via electrons. Even optical networks and processors are made possible by electricity powering the transmission infrastructure.

It's amazing to stop when you stop and ponder it all. Digital information technology today is so intertwined with electricity, that one must wonder how energy costs could impact our world.

"Plastics" was the advice given to a young man about to enter the workforce in 1967's film The Graduate. "Energy" might very well be today's advice. The military-industrial complexes of the world know that having access to cost-effective energy supplies can make or break an economy. This is true not just from a manufacturing perspective but from an information technology perspective as well.

For IS organizations, this is a critical debate. For one thing, large data centers can consume a megawatt of electricity per month, which can then translate to a $50 million annual budget. Urs Hoelzle of Google once noted that at 400 watts of consumption, a PC's electricity expenses can add up to half the cost of the PC.


With expenses such as these, not only should IS organizations be very interested in managing energy consumption in their organizations but they should also understand energy consumption at the national and global levels to manage the associated risks and leverage new opportunities.

The Invisible Impact of Rising Oil Prices

Globally, oil is an interesting case in point. It is in so many products ranging from plastics to tar and asphalt to lubricants and fuels, such as heating oil, diesel and gasoline, that price fluctuations have far reaching impacts.




Coal has long been a staple of low cost energy but then pollution concerns shifted production to nuclear power. The Three Mile Island incident on March 28, 1979, slammed the brakes on the building of new nuclear power plants in the United States. Further fueling concerns over nuclear power, was the April 25, 1986, accident at Chernobyl. These incidents pushed electricity generation back toward coal fired plants and also natural gas. With the increased natural gas prices, coal has shouldered a great deal of generation needs in both the United States and China — the world's two largest energy consumers.

One issue is that these are all unrenewable fossil fuels. Once used up, they will be gone. It may be in 50 years, maybe in 100 – there are many different estimates out there and some state that the exact extents of oil and coal reserves are unknown.

The more energy equipment uses, the hotter the equipment is, the hotter the data center is, and thus the larger the air conditioning systems installed, which then consumes even more power./B>

Of the fuel source listed — oil, coal, nuclear and natural gas — nuclear power has the best potential for providing clean power into the future. To do so, the industry must address perception issues and show how it has evolved in the last 27-plus years in terms of efficiency, effectiveness, economy, and most importantly, safety.

Now, as the prices of the traditional fuels increases, the prices become such that research and development into new fuels becomes possible. At a $1 per gallon of gasoline, the desire for substitutes just isn't pressing. At $3 to $5 per gallon, the interest grows significantly from companies, consumers and governments. The invisible hand of the market, as Adam Smith called it, will push companies to evolve their offerings to try and get ahead of their competitors. This is just what we need.

Cooler-Running Equipment Needed

At the same time, we must beware of price controls and rationing. They always appear as political machinations to try to appease the populace, but they have extremely a negative impact. All things being equal, if you fix prices or try to ration out distribution, the net result is energy producers will send their products elsewhere to maximize profits. In today’s world, if the United States fixes prices to consumers, but China, or elsewhere, does not, then energy resources will go there.


The more energy equipment uses, the hotter the equipment is, the hotter the data center is, and thus the larger the air conditioning systems installed, which then consumes even more power. Moving outside of our data centers, workstations and other devices cause the same issues in the office environment.

IS organizations and the enterprise behind it must recognize the risks associated with rising energy costs and take a proactive stance. Not only must actions be taken within the firm to manage the risks, but the risk management must also extend into the web of utilities, other businesses and government.

Today, we have local governments and entire countries realizing that they must be actively involved in the competition for scarce energy resources. Those who can secure lower-cost energy and reduce their consumption requirements in concert will have a distinct advantage.

This article was originally published on Datamation.