Impact of a Data Center’s Energy Cost on TCO
June 21st, 2012 By: Julius Neudorfer
Like fuel cost to an airline, the cost of energy represents one of the most significant Total Cost of Ownership (TCO) components in the data center. Over the long term it is one of the most variable costs, and based on current and foreseeable trends, it will continue to rise over time.
The cost of energy is typically expressed as cents per kilowatt hour (KWH) and varies widely by region, as well as the underlying source of power generation. It can also vary based on the time of day, seasons and changes in the cost of fuels sources, such as natural gas or coal. In the United States the basic energy rate can vary by a fac¬tor of as much as 10:1 ratio (2.5 – 25 cents per kwh), which is primarily based on geographic location.
One of the issues that can also impact the cost of the energy is if it is purchased directly, vs purchasing via an aggregation contract. When doing an energy cost projec¬tion analysis, be sure to compare the directly purchased cost from the local utility, which would be based on only your own energy buying requirements, compared to the cost of an energy aggregation contract. Taking advantage of aggregation can be done independently, or in con¬junction with some of the larger facility operators, some of whom may offer this lower cost energy as part of their lease. In effect, they may buy 10-20 times more energy for their customers across their multiple facilities and sites, which can lower the energy rate. In addition, energy aggregators are focused on power costs and may have fixed price or capped contracts to prevent price shocks. However, be careful to see if the facility operator is offer¬ing to pass-though those savings or if you are forced to purchase power only from the facility at a price that may actually be higher than the regular cost you would have paid directly from the utility.
In addition, there may be some capital costs involved to bring in new utility service if you are building your own site in a newer underdeveloped area, while land may be cheaper, its lower cost may be offset by the high cost of new utility service. In some cases, the facility operator may have already installed a large sub-station on the data cen¬ter campus, as part of the overall site development. This can not only minimize some capital installation expenses, it can also mitigate the risk of extensive delays in getting utility approvals for your own new multi-megawatt service facili¬ties and potential local right-of-way or permitting issues.
When making an initial decision as to location of the site, energy rates should be given close scrutiny and serious weight in the decision, but should not be the only or overriding factor.
This article is part of a series on a Data Center’s Total Cost of Ownership.
To download the entire DCK Executive Guide on Data Center Knowledge TCO with additional sidebars and charts, courtesy of Digital Realty, click here.