Sustainability’s Bottom Line: Incentives
September 27th, 2012 By: Industry Perspectives
Ron Vokoun is Mission Critical Market Leader, Western Region, at JE Dunn Construction. Ron was previously Director of Mission Critical for Gray Construction and also served in leadership roles with Qwest Communications and Aerie Networks. You can find him on Twitter at @RonVokoun.RON VOKOUN
Implementing sustainable measures in your data center can be a complex and cost-prohibitive task, but there are many incentives available to offset the cost and improve your Total Cost of Ownership (TCO). In previous columns, I discussed the implementation of renewable energy and energy efficient measures, as well as the pros and cons of LEED Certification and Energy Star for Data Centers. I will address the incentives that are available for greening your data center, as well as other incentives that, as a whole, will lower the Total Cost of Ownership (TCO) of your data center.
Renewable Energy Incentives
Renewable Energy incentives require research – not just general industry knowledge – to assess. For example, who would have thought that New Jersey would lead Arizona in solar installations until recently? Arizona has some of the best solar potential in the world, but New Jersey was more aggressive in its’ incentive structure, thereby making the ROI on solar more attractive.
Most states have incentives available for the implementation of renewable energy, the extent of which can vary drastically from state to state. Each state’s Renewable Portfolio Standard (RPS) typically causes the difference in incentive levels. States like California have implemented a more aggressive RPS (33% of their energy must be provided from renewable sources by 2020), giving rise to incentives that will help them achieve this requirement.
There are federal incentives as well, but they have not fared well in the last couple of years. Information on federal and state incentives can be obtained from the Database of State Incentives for Renewables & Efficiency (DSIRE).
Energy Efficiency Incentives
Most states also have incentives and rebates for energy efficiency. Typically, these are available whether you are building a new, energy efficient, data center or upgrading your existing facility. The power company that serves your facility usually administers these programs.
The incentives may be based upon your building’s performance when compared to a baseline building or the efficiency of a piece of equipment when compared to a baseline. In either case, it is critical to engage the power company as early in the design phase as possible to maximize your financial benefit, as some require approval of incentives prior to placing the order for the equipment.
Other Legislated Incentives
In many states, there are other incentives legislated that can help defray the cost of your data center. Although they may not be sustainably oriented, why turn down free money and the opportunity to increase your profitability?
At last count, there were 22 states that had passed data center incentive legislation. These incentives can take many forms, but usually include tax breaks on servers, which can save millions of dollars over the course of a tech refresh cycle.
For the most part, these incentives are aimed at the data center owner/operator, which does not help colocation providers or their tenants. An exception is in Virginia where data center providers are able to obtain incentives for their tenants.
Some states also have incentives for the creation of jobs. They will typically require that the jobs pay over the median income for that state. Given the well paying jobs in the data center industry, that’s not going to be a problem in most cases.
Local Spot Incentives
Spot incentives are usually offered by a city or county that is trying to attract your new data center. As the name would imply, the incentives are provided on a case-by-case basis and are not legislated. Non-legislated incentives are more prone to change, so they are not always viewed as favorably. The incentive may take the form of a land grant or reduced land purchase price.
In other circumstance, the incentive involves discounted utility pricing for power and/or water. I have even seen occasions where rural land is offered, along with its’ water rights. Depending on the size of the data center, this can add significant value.
Total Cost of Ownership
In order to account for the full value of these incentives, you should perform a TCO analysis of your facility. A well-performed TCO analysis will include, at a minimum, the cost of power, water, land, taxes, equipment, incentives, and all other operating expenses to provide a holistic view of the true cost of the data center. This will help you evaluate which measures to implement to provide the greatest impact to your companies’ bottom line.
Branding is an area for which it is hard to assign a value. Do you know if your brand will take a hit if you locate your data center in a particular part of the country? How much marketing value does obtaining LEED or Energy Star for Data Centers offer? It’s difficult to measure, but make sure you truly understand how your brand will be affected by your data center decisions. For example, a colocation provider may gain great value by LEED Certifying their data center, as many Fortune 500 companies have a sustainability program and see value in taking space in such a facility.
At the end of the day, you may not have the flexibility to locate your data center where you can obtain the most incentives, but make sure you take advantage of everything you can and keep an eye out for new opportunities to lower TCO and increase ROI.
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