Utilities Dropping Virtualization Incentives

Several large utilities, including PG&E, are dropping programs that offered incentives for companies that used virtualization to reduce the number of servers in their data centers.

Several large utilities are dropping programs that offered incentives for companies that used virtualization to reduce the number of servers in their data centers, reports Mark Bramfitt.  They include PG&E, which had been a pioneer in offering incentives to encourage data center operators to reduce their energy usage, and BC Hydro in British Columbia.

The utilities have apparently concluded that many of the companies claiming awards would have pursued their virtualization projects even without the incentives. As a result, the incentives weren't promoting adopting of virtualization so much as rewarding companies that were already committed to it. PG&E also says it believes virtualization has reached a large enough market penetration that incentives are no longer needed.

PG&E first offered the data center virtualization incentive back in 2006. Bramfitt, who is now a consultant on data center energy issues, previously worked for PG&E and was a key player in advancing incentives as a tool to reduce data center energy use.

Bramfitt said the announcements by PG&E and BC Hydro were "discouraging news," and argues that there are ways to refine incentives to make them more effective." I would consider limiting applicants to certain customer size classes, or place limits on project size (i.e. providing incentives for the consolidation of no more than XX servers)," he writes.

Bramfitt said other California utility companies are likely to follow PG&E's lead. "I am even more concerned that the California position will dampen enthusiasm for utility programs in the rest of the US, where utilities are reticent to enter the IT and data center markets due to discomfort with the pace of technological change," he added.

Virtualization allows multiple applications to run concurrently on computing equipment, thereby enabling customers to consolidate their data centers and remove a large portion of their existing servers. The program pays incentives based on the annual kilowatt-hour savings from reducing the number of servers in a data center, at the rate of 8 cents per kilowatt-hour.

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