Greater energy efficiency is a laudable goal, but it is not and cannot be the chief goal of business. There’s always room for greater efficiency, but the costs of improvement area eventually become prohibitive. In light of increasingly frequent calls for regulation in this area, as well as potential emerging standards (such as ASHRAE 90.4P), it’s important to consider who should really be driving energy efficiency in the data center—and it’s not providers.
You Make the Call
The typical grocery store today offers a selection of both organic and conventional produce. Ignoring the finer details of what specifically defines each category, let’s simply say for the sake of argument that organic means no harmful pesticides and no unsustainable farming practices, whereas conventional means all bets are off: the food may be filled with toxic pesticides, and the farming practices may driving the next Dust Bowl. Sounds like a no-brainer; why would any consumer in his or her right mind choose conventional produce?
Given that most people aren’t completely insane, the obvious answer is price: organic produce typically carries a fairly stiff premium, but even were it only in the range of a few percent, many (arguably most) shoppers would still go for conventional produce on the basis of cost alone. And as that price difference rises to the more realistic level of 20% or more, the fraction of consumers choosing conventional likewise increases. This example illustrates an important economic principle: It’s not all about what’s in (or not in) the product. It’s how much that product costs.
The same reasoning applies to any aspect of a product or service. To be sure, a portion of a clientele may be willing to spend extra—perhaps even a lot extra—for some intangible benefit to the products or services they buy, be it healthiness, fairness, diversity, environmental stewardship, a social cause or any number of other factors. And many of these same people probably think their cause is important enough that you should also pay more to support it. The problem, however, is that all these premiums would add up, potentially making some products completely unaffordable. By offering choices, the free market enables people to “vote” democratically by purchasing products and services that fit both their consciences and their wallets—although compromises are virtually inevitable.
Energy Efficiency and the Data Center
Consider data centers, where energy consumption is perhaps the biggest focus. Clearly, greater efficiency is wonderful as far as it goes; who can argue with the idea of using fewer resources to accomplish a task? The problem, however, is that greater efficiency typically costs money, and those capital outlays will typically appeal to companies only if they stand to gain from them.
The market will drive a certain level of energy efficiency naturally. Say two competing data center providers (A and B) are offering the same service to customers. Provider A, however, has found that by investing some amount of money in energy efficiency, it can reduce its prices (thanks to lower operating expenses) and yet still make more money in the long term than if it refrained from that investment. To boot, it will gain a price advantage over Provider B. All other things being equal, Provider B will likely lose business and be forced to implement a similar energy-efficiency measure or face lower revenue and the prospect of going out of business.
Now, consider a tougher case: Provider A finds that a certain investment can increase energy efficiency, but it will have to also increase prices to make up for the losses it would otherwise incur. Will customers flock from Provider B to Provider A simply because A’s data center is more efficient, even though it charges more for the same service? Recall the case of conventional produce: most consumers would rather risk eating potentially harmful pesticides than pay extra for food they know is free from those chemicals.
In other words, data center operators face a tough decision—or not so tough, depending on how you look at it—when it comes to energy efficiency. And we’re not necessarily talking about some obvious and perhaps inexpensive fixes that can save money by cutting gratuitous waste; we’re talking about the finer matters that take some real capital and expertise to implement.
Don’t Blame the Company
So, the market will drive energy-efficiency improvements as long as they deliver price benefits in some form. A company that offers the same service for a greater price (regardless of how many LEED certifications it has) will be at a disadvantage. It may attract a certain dedicated clientele that’s willing to pay more, but that clientele must also have its own customers who are willing to pay more for its products and services further up the production ladder. Companies that refuse to implement industry-standard energy-efficiency measures will likely lose revenue as a result, possibly forcing them out of business. (On the other hand, they may balance the cost of lower efficiency with the savings on financing costs for new equipment, so the market will still see an efficiency spread.)
The matter ultimately comes down to what end users will pay—and they will tend toward what they think offers them the best value. The same service for a higher price, despite being slapped with an “energy efficient” sticker, will tend to garner less business than an equivalent (but less efficient) service at a lower price. So those who wish to place blame for energy use and its environmental effects should look no further than consumers. Companies are not in the business of going out of business—they will do what consumers ask of them. Conventional farmers are simply meeting the demand for cheaper produce; data centers that don’t quite make a 1.07 PUE are meeting the demand of customers who are interested the value of the service, not in how it’s produced. That’s the reality of the market.
What to Do About It
Of course, as with organic produce, educational campaigns may encourage many people to pay a little more to gain certain intangible benefits—and that’s fine. In grocery stores, organic-produce sections are growing, and in the data center industry, so is a focus on greater efficiency. The problem is when do-gooders decide it’s time to call in the guns of government to enforce their ideals for efficiency.
Unfortunately, however, regulations (and their counterpart, subsidies) typically just hide the problem—forcing it to emerge elsewhere—rather than solving it. For instance, subsidization of wind energy combined with strong environmental regulations has led to a booming rare-earth-mineral industry in China. (Rare earths are necessary to manufacture the powerful magnets that wind turbines need to produce electricity.) Unfortunately, however, China is paying a high environmental cost for this industry.
Of course, that doesn’t mean we should have no concern for the environment, but there must always be some balance: every activity (even by animals, some of which are rather destructive) has an impact on the environment, so the key is striking a balance. And speaking of balance, the government is clearly no legitimate authority in this matter.
If the data center industry is inefficient, the blame ultimately falls on the consumers of the services. If these consumers want greater efficiency, they must patronize companies that implement it; if they don’t, then they’re signaling to providers that it’s unimportant. Companies, therefore, will only implement efficiency in so far as it saves them money. Some efficiency investments may be clear winners, but others may be risky bets; it’s up to data center operators to determine the best approach rather than having standards imposed from outside. Informing consumers can help improve awareness of efficiency and promote it in the industry, but even consumers have limits: they can only spend so much on a given service. The key is not to make energy efficiency a goal that stands alone, but to treat it as just one factor in achieving a good business balance.
Leading article image courtesy of cbowns