Cummins Hikes Prices on Diesel Generators

The price of diesel generators from Cummins Power Generation (CMI) is going up. Cummins said today that it will raise prices by 2 to 7 percent on commercial generator set products between 15 kW and 2700 kW as of Jan. 1, 2009. The company cited “rising commodity and fuel prices as well as the consequence of the current industry dynamics.”

The data center building boom has created backlogs for the large generators that provide emergency backup power, with some facility operators reporting lengthy delays on new units of the most popular 2 megawatt models. With its core market of truck sales lagging, Cummins has benefited from record sales of generators, supported by strong demand from the data center sector.

Securing Diesel Delivery in Disasters

If a major disaster leaves you without utility power for days, will you be able to get refills of diesel fuel for your generators?  Digital Realty Trust isn’t taking any chances. The company has signed an exclusive agreement with Foster Fuels to provide  emergency fuel delivery for generators at any of Digital Realty Trust’s Turn-Key data center facilities in the U.S.

Digital Realty, which is the world’s largest landlord of data center facilities, said the new service was “unique in the data center industry” and will ensure that its customers can keep their facilities online even during lengthy utility outages.

The scenario is not without precedent. After the Sept. 11 terrorist attacks in New York, the Telehouse carrier hotel facility at 25 Broadway experienced diesel fuel shortages and generator problems that left its customers offline for more than two days. In the 2005 aftermath of Hurricane Katrina, New Orleans colocation provider Zipa had to scramble to find diesel fuel at a time when the city was without power.

Digital Realty Trust (DLR) is seeking to address those type of worst-case scenarios with the agreement with Foster Fuels, which allows Digital’s Turn-Key Datacenter customers to obtain emergency fuel emergency fuel within 24 hours.

Installing a 2.25 Megawatt Diesel Generator

How do you get a 38,000 pound generator into a sub-basement beneath the streets of a major city? Minnesota hosting provider VISI has posted video of the June 21 installation of a new Caterpillar 2.25MW diesel generator for its St. Paul data center. The process involved closing the streets, lifting out a chunk of the roadway to expose the basement, and using a 175-ton crane to lift the equipment into the opening. Watch the video below, and then check out Gary Elfert’s entry at the VISI blog for additional details.

Check out our Generator Channel for more articles about diesel generators. For additional video, see our DCK video archive and the Data Center Videos channel on YouTube.

Diesel Price Hikes an Issue for Generators

The cost of diesel fuel is soaring, vexing US truckers and motorists overseas, where diesel passenger cars are more popular. But the spike in diesel fuel prices also will make it more expensive for data center operators to support the banks of diesel generators that provide emergency backup power for their facilities. Here’s a chart from the U.S. Energy Information Administration, mapping the trend in retail diesel fuel prices over the past several years:

Diesel is now more expensive than gasoline at the pump, costing up approximately $4.50 a gallon. The EIA chart includes prices through May 14, and thus doesn’t reflect the most recent market pricing as oil has surged as high as $135 per barrel.

The largest data centers store an enormous amount of diesel fuel so that they can run their generators for an extended period of time in the event of a prolonged grid failure. An example is DuPont Fabros Technology’s ACC4 facility in Ashburn, Virginia, which serves customers including MySpace and Facebook. ACC4 is backed by 32 huge 2.25 megawatt diesel generators, and the building has four 50,000 gallon tanks of diesel fuel for a total of 200,000 gallons of storage, enough to run the facility on generator power for up to 55 hours during a grid outage. Google (GOOG) has outfitted its Council Bluffs, Iowa data center to use as many as 38 generators, which could also require a huge reservoir of diesel fuel.

Many huge data centers are likely paying wholesale rather than retail costs, but the pricing trend appears to span both markets. Large diesel users can buy futures contracts to lock in prices for bulk purchases. That’s what the city of Houston did, allowing it to pay just $1.83 a gallon for low sulfur diesel fuel through the end of September - and the price will revert to market rates of more than $4 dollars per gallon.

Generator Sales Remain Strong for Cummins

Cummins (CMI) said strong sales of diesel generators in overseas markets boosted its fourth-quarter profit by 5 percent. Sales in Cummins’ Global Power Generation unit surged 28 percent in the fourth quarter to $840 million, driven by strong gains “around most of the world” and significant growth in alternator sales in Europe and China.
The company said its power segment saw strong sales gains in virtually every line of business, led by a 31 percent increase in commercial sales and a 34 percent rise in alternator sales.

With its core market of truck sales lagging, Cummins has benefited from record sales of generators, supported by strong demand from the data center sector.

Utility Hacks Tied To Foreign Power Outages

The security of generators and electric utility systems has been vigorously debated in recent months following the release of a video from the Department of Homeland Security showing a diesel generator being disabled by an electronic attack. The utility hacking issue is back in the news after the CIA told the SANS Institute that attacks have caused power blackouts in other countries.

“We have information, from multiple regions outside the United States, of cyber intrusions into utilities, followed by extortion demands,” the CIA spokesman said at a SANS workshop on industrial security. “We suspect, but cannot confirm, that some of these attackers had the benefit of inside knowledge. We have information that cyber attacks have been used to disrupt power equipment in several regions outside the United States. In at least one case, the disruption caused a power outage affecting multiple cities. We do not know who executed these attacks or why, but all involved intrusions through the Internet.”

i/o Data Centers Lines Up Generators

i/o Data Centers said today that it has reached an agreement with Empire Power Systems, the Caterpillar distributor for Arizona and Southeast California to ensure that it will have backup power for the build-out of its data centers. That will include 16 megawatts of backup power for i/o Data Centers’ Scottsdale ONE facility, all supplied by Caterpillar.

“The Caterpillar name implies quality,” said Tony Wanger, Senior Managing Director of i/o Data Centers. “Cat has a reputation as being a premium product in this market, and that matches up well with our desire to create a high level of confidence in our ability to host our client’s most important information. In the arrangement with Empire, we get the highest quality of product and we also have access to the capabilities of a very large Caterpillar distributor.”

Strong demand for diesel generators from data center builders and growing economies in China and India have contributed to a delivery backlog for large generators, with backlogs approaching a year for some larger models. Many new data centers are arranging for large volumes of power, which places additional pressure on manufacturing capacity. DuPont Fabros has 32 generators at its new facility in Ashburn, Virginia, while Google has received permits for up to 38 generators for its new data center in Council Bluffs, Iowa. With that level of demand, procuring generators becomes a key element of the data center construction timetable.

FCC Ruling May Spur Generator Demand

In an effort to keep phone and wireless networks online during natural disasters, the FCC is now requiring telecom and wireless companies to provide backup power for cell sites and remote telecom facilities. The new measures, prompted by an FCC review of telecom outages in the aftermath of Hurricane Katrina, are likely to increase demand for generators, batteries and other power protection equipment. The rules also pose a challenge for carriers with equipment in locations that may not easily support backup equipment due to space constraints or environmental considerations.

The new rules cover most local exchange carriers (LECs) and mobile service providers, who must provide backup power systems for central offices, cell sites, and remote switches and terminals. There are more than 210,000 cellular sites and about 20,000 telecom central offices in the U.S., according to industry statistics. The FCC says central offices should be able to operate for 24 hours without grid power, while eight hours of backup power is required for cell sites, remote switches and remote terminals.

The new rules could affect the market for diesel generators, which are widely used by data centers to provide backup power to keep servers running during grid power outages. The current data center building boom has led to lengthy delivery delays for 2-megawatt generators. Most central offices and cell towers would require smaller generators, but it’s not clear how the additional demand for components and raw materials could affect production capacity for major generator manufacturers.

More on Generators and SCADA Hacking

The recent generator hacking demonstration from the Department of Homeland Security continues to generate discussion among Internet security experts. Ira Winkler, a former National Security Agency analyst and author, has done extensive “white hat” penetration testing of computer systems running the U.S. power grid. In a column at Internet Evolution, Winkler said the “Project Aurora” demo - in which DHS staff used an electronic attack to destroy a large diesel generator, apparently by altering the engine’s operating cycle and causing it to malfunction - couldn’t be expanded to threaten the power grid.

But vulnerabilities in power control systems known as SCADA (Supervisory Control and Data Acquisition) offer plenty of other avenues for skilled hackers to damage the grid, according to Winkler, who described a test he conducted 10 years ago on a utility company’s network:

My team was supposed to perform a simple assessment of the security of a Website owned by a power company. The Website had a security vulnerability and provided us a connection to the company’s internal network. From there, we could get to any system in the company, including its SCADA systems. We were told by the security manager to leave out access to the SCADA system in our report, but we were allowed to download the personnel records of the CEO and CIO, so that the results would be hard for them to ignore.

In discussions of the generator attack and SCADA hacking, many people are surprised that these kind of systems can be accessed via the Internet. Aren’t they managed by some secure internal network?

Generator Shortage: A Barrier to Entry?

“Web 2.0 has joined Silicon Valley and the Rust Belt at the hip.” So notes Nicholas Carr in his post today about the continuing supply-demand imbalance in the booming market for large diesel generators. In Caterpillar: Web 2.0 Giant, Carr observes that demand from data center builders for generators helped boost Cat’s sales of electric power applications by 44 percent. That trend has also been a driver in the sensational rise in shares of Cummins (CMI), which have gained 137 percent this year.

Carr also passes along a report that will be of interest to data center builders:

I hear that supplies remain short today, delaying construction projects nine months or more. Rumor has it, in fact, that Microsoft and Google have locked up a significant portion of Caterpillar’s production for the foreseeable future.

The availability of generators is a major reason why we won’t see any oversupply of data centers anytime soon. Lengthy backlogs for 2 megawatt generators persist, and in an environment of scarcity, Caterpillar (CAT) and other major generator manufacturers will look after their largest existing customers.