Carbon Regs Seen Boosting Outsourcing

Will carbon regulation drive companies to relocate their data center operations to third-party providers in colocation and hosting centers? Or even move them offshore? Both options are getting scrutiny following the April 1 onset of the UK's Carbon Reduction Commitment (CRC).

Rich Miller

April 8, 2010

3 Min Read
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Will carbon regulation drive companies to relocate their data center operations to third-party providers in colocation and hosting centers? Or even move them offshore? Both options are getting scrutiny following the April 1 onset of the UK's Carbon Reduction Commitment (CRC). While UK industry groups fear a surge in offshoring, some US industry watchers believe regulation would boost business for monitoring vendors and colocation providers.

Two IT industry groups in the United Kingdom are investigating ways to lower the potential burden on their members who operate data centers, according to ChannelWeb UK. The groups, BCS - The Chartered Institute for IT, and Intellect UK, are researching whether  obtaining a side agreement known as a Climate Change Agreement (CCA) would be an “appropriate option” to protect the business interests of data center operators.

Incentive to Outsource?
“The combination of a published league table and increasing financial penalties creates a strong driver to outsource data centers to a third party," said Liam Newcombe, secretary of the BCS Data Centre Specialist Group. “It also creates direct pressure to offshore existing or new data center capacity, creating a direct risk to value and skills in the UK.”

The CRC applies to about 5,000 large UK companies that consume more than 6,000MWh of electricity per year. Many of the UK's larger data centers will be required to report on their energy use and attempt to improve their efficiency or face financial penalties.

One shortcoming of the CRC, Newcombe says, is that companies must purchase carbon credits based on in-house carbon emissions, but not those generated by outsourcing providers on their behalf - thus creating an incentive to shift computing workloads outside the corportate environment.

U.S. Regulatory Outlook Unclear
While U.S. data centers may not be direct targets for regulation, they would feel the impact of broader regulations on corporate carbon emissions. The Obama administration favors a “cap-and-trade” program to reduce greenhouse gas emissions 80 percent by 2050.  A cap and trade system would set limits on corporate emissions, but allow companies to purchase or sell capacity in a carbon trading market.

After a bruising legislative battle over healthcare, it's unclear whether such legislation is likely to advance this year. I recently discussed the prospect of carbon regulation with several board members of The Green Grid, who said that the overhead involved in carbon reporting would prompt increased use of monitoring tools, and perhaps boost outsourcing of data center services. 

"The adoption rate (for monitoring) is going to accelerate," said Christian Belady of Microsoft Research. "The question becomes ‘in a potentially constrained world, does this  help me?’ I think there’s going to be more openness and quicker adoption of new ideas."

Would Colo Providers Benefit?
What about the UK concerns that carbon tracking would push companies to greater use of third-party faciltiies?    

”It all comes down to the cost to the business," said Belady. "If there’s too much cost involved in measuring this stuff, it may drive people to consider third-party data centers. The cost will drive which way it goes.”  

Roger Tipley, a senior engineering strategist at HP, said that a company's response will liley depend on its size and sophitication. “A lot of the small data centers are probably going to go to colo facilities," said Tipley. "Larger data centers are able to more easily put metering in."

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