Utilities Dropping Virtualization Incentives

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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.

About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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3 Comments

  1. Jeff

    “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. As if they have a choice? Customers are either buying power for their datacenter without influence from the utility, or with it. Either way, they are still buying their power from the utility. I would guess (I am not an expert) that they don't want to offer virtualization incentives across the board because they don't see enough ROI. It takes a VERY carefully crafted program if you want to spend money on allowing customers to purchase less of a product, and improve the bottom line at the same time.

  2. Thomas

    PG&E's constituency is a unique set of customers compared to the rest of the country (or world for that matter). They tend to have more early adopters and technology savvy companies. So it could be argued that incentivizing virtualization to their customers is likely to have as less of an impact in the future than it did over the last 4 years. I don;t think this is true for other parts of the country, including the rest of California. This being said, once a server goes virtual, it's not coming back (to physical). So I don't understand why they decided to sunset the whole program. I do not believe that many other utilities will follow suit for a while. My question is what will the "leading" utilities like PG&E do now to lead us into the next generation of energy efficiency incentives in IT infrastructure. My guess/hope is that it will involve asset management or DCIM software.

  3. Michael Dinsmore

    Why reward virtualization, instead of other energy saving opportunities? This smells of back room dealmaking by VMS. If PGnE, and others, wish to reward energy-conscious datacenters, they should reward low PUE.