Today, many companies are reaching a crossroads. Volatile energy prices that can change fast and frequently (varying by geographic region and even time of day) combined with a still-recovering economy have led many organizations to choose predictability and budget certainty over beating market price. Despite the assumed benefits of buying energy in bulk and locking prices in for extended lengths of time, this approach is often more expensive, especially in situations where data centers have paid for more power than they use. A growing energy-procurement trend is enabling companies to realize better and more flexible ways to achieve budget certainty while also lowering energy costs.
Small and medium-size data centers traditionally manage their energy purchasing with facility-level personnel, if at all. But there is a developing need for larger data centers to gain greater control over operating costs, better understand spending categories and save money wherever possible. This trend has led managers to rethink the way they purchase energy and look to avenues of energy procurement. By that term I mean the process whereby a company actively manages its utility contracts and bases purchasing decisions not only on contract length but also through strategic sourcing opportunities. These opportunities could include separating management-fee costs from actual power costs, negotiating currency exchange rates for international facilities and waiving security deposits from base contracts (which can amount to millions of dollars).
Outside factors contribute to the success of each energy-procurement initiative, such as data center location, grid stability, procurement options, usage patterns (size/shape of load) and the willingness of the utility to negotiate. Energy procurement, however, can provide a host of benefits for data center managers as they look to maximize utilization as well as respond to increasing efficiency pressures from customers, shareholders and the government. Through an intelligent energy-procurement strategy, data center operators will be able to achieve more price transparency with utilities. And given that energy accounts for 20–40% of total lifecycle costs, even the smallest rate reduction can equate to big savings in operating costs.
Additionally, when implementing data center infrastructure management (DCIM) tools as part of an energy-procurement plan, data center managers can easily track IT and building load. This visibility can help managers identify peaks of high consumption and demand, in turn allowing them to proactively move or limit loads, capture more savings opportunities, and improve their ability to respond to short- term incentives. It can also allow them to better utilize the current infrastructure, freeing up stranded or unused capacity they may not have known they had. Just a small savings in capital costs or the ability to do more (even sell more) in the same location can equal big dollar gains.
By using an energy-procurement strategy, data centers can also open doors to a number of long-term opportunities beyond the initial cost savings and enhanced management capabilities. They include
- Saving personnel time and effort through more-efficient data collection
- Identifying actual consumption and spare capacity, allowing for informed growth
- Monitoring supply chain and resources consumed to find savings opportunities
- Developing more-accurate utility budgets that mitigate risks and plan for increases caused by rising commodity prices or usage
- Increasing transparency by reporting energy data to stakeholders
- Developing an energy strategy that is more integrated with business strategy
- Identifying opportunities to shift compute load to other facilities
- Centralizing disparate data centers under a single energy strategy
But although the concept of energy procurement may sound straight forward and the benefits tangible, securing the best price and a contract that meets budget and risk tolerance can be complicated and time consuming. To simplify the process, facility managers might consider using a partner that will provide needed market intelligence to guide them through the following questions so they can make confident, informed decisions while optimizing contract negotiations:
- When should I initiate an energy-procurement strategy?
- How does my data center’s geographic location affect my options?
- How can I measure success, and what factors should I consider?
- How can metering and information management best serve in an energy-procurement strategy?
- How often should procurement contracts be renegotiated?
- How long is the initial procurement process—research, negotiations, contract approval?
- I have data centers in multiple locations being fed by a variety of utilities; is it possible to consolidate contracts? Is this strategy more beneficial?
From here, partners will guide data center managers by giving them the outside expertise, knowledge and capabilities they need to successfully overcome challenges and develop and implement a strategy that best fits their requirements. Consider these examples:
- Businesses that have traditionally decentralized the procurement decision process find that adopting the same corporate-led strategy across all facilities can be complex. A third-party partner can often help remove internal struggles and move all facilities under a united executive leadership.
- Understanding actual usage, how it is trending and (most importantly) peak consumption as it relates to spare capacity can be challenging. This fact has pushed some businesses to build pre-maturely or not use (even sell) excess capacity because they did not know their actual usage. Having usage data and the ability to track it over time can give managers the necessary tools to best utilize their space.
- Large data center networks with a national footprint must understand and adhere to multiple complex municipal and state energy-pricing models and regulations. Third-party procurement specialists already work in these markets and will be able to provide the detailed knowledge needed to secure optimal pricing and negotiate beneficial contracts.
Poor energy-purchasing decisions can be costly. Although the ideal time to implement an energy-procurement strategy is during the initial data center planning phase, it is never too late to start an intelligent budgeting program. Taking a proactive approach to contract negotiations can empower businesses to make informed, confident decisions and enable them reap the many benefits of a custom energy-procurement strategy. Energy-procurement planning is becoming an increasingly popular option for data center operators looking for an effective and inexpensive way to understand how energy is used and immediately see a savings on utility bills.
Leading article image courtesy of juggernautco
About the Author
Lance Bishop is Director of Energy Management Services at Schneider Electric. He is responsible for Schneider Electric’s assessment-services team focusing on data center efficiency, availability and total cost of ownership. Comprising consultants and engineers, this team routinely helps clients optimize mission-critical space through changes in operation, equipment and management /monitoring of key components. The Energy Management Services team is a crucial step in Schneider Electric’s Mission Critical Services offering, which helps clients at each point in the life cycle of their data center.
Lance holds a B.A. in business administration from Baylor University and an M.B.A. from the Fuqua School of Business at Duke University. He currently serves as a technical contributor to The Green Grid, working on projects to improve data center energy efficiency and access to utility rebates. Lance also serves as the Green Schools Chair for the North Texas Chapter of the USGBC and has lobbied Congress on behalf of Green Building Standards. He is a Certified Energy Manager (CEM) and holds the designation of Accredited Professional in Leadership in Energy and Environmental Design (LEED AP). In his free time, Lance writes informational articles for publications like Energy Manager Today and delivers educational presentations on improving energy efficiency in data centers, most recently at Gartner, AFCOM and 7X24.