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IT energy crisis reaching critical mass

In the midst of an energy crisis, companies are paying more than ever for utilities in the data center. IT organizations are being hit from both sides with spikes in both price and demand.

This is the first in a series of articles on the price of power in the data center. Read part two here.

The 2005 energy crisis has businesses running for cover. Oil prices have been predicted to go over $100 per barrel, demand for natural gas is set to explode and electric utilities are already bracing customers for significant spikes.

IT organizations are spending more than ever on electricity, and both the price and the demand for power are on the rise. Traditionally, power consumption was just a cost of doing business, the realm of facilities management. But it's about to become IT's problem.

According to energy experts, the cost of producing electricity with natural gas, coal and uranium accounts for 90% of the price of power. Natural gas has the largest impact on the electricity market, however, and its prices have fluctuated from $2 per million British thermal units (BTU) in January 2000 to over $12 per million BTU recently.

These forces translate into spikes at the meter. Just ask Bob Doherty, data center manager at Beth Israel Deaconess Medical Center in Boston and a Board Member for AFCOM's Data Center Institute. Doherty said his electric company just announced a 27% jump in price.

"Historically, I haven't managed the electric bill. But now we're aware and interested in it," Doherty said. "If I told my boss that my staff wanted a 27% increase [in pay], I'd be downstairs on the carpet."

Good to know

Gas powered electricity on the skids

According to energy experts, the biggest factor in the price of electricity is the price of natural gas. With demand for winter heating approaching, combined with hampered production in the Gulf of Mexico due to an unusually violent hurricane season this year, the price of natural gas is likely be passed on by the electrical utilities. Various news outlets have reported several pending spikes, including a 46% price increase in Michigan and 71% in Illinois.

Check out the Energy Information Administration's weekly forecast for natural gas prices here.

Doherty said typically, companies would eat the rising price of electricity as a cost of doing business. But a jump that large won't go unnoticed. So Doherty prepared his financial executives for a 27% increase in the price.

"I'm fearful of what it means for my department, so I called attention to it," Doherty said. "I'm sure facilities people are will aware of this issue, so I brought it up to non-facility executives."

Data centers power hungry

And as the price is going up, so does demand. According to AFCOM's 2005 survey of its members, data center power requirements are increasing an average of 8% per year. Power requirements of the top 10% of data centers are growing at over 20%.

The Energy Information Administration projects commercial demand to grow at a more modest rate of 1.9% over the next 20 years. But it acknowledges that the most rapid increase in demand is going to come from IT equipment.

According to Richard Sneider, managing director of Concord, Mass.-based InterUnity group -- the research firm that produced the AFCOM survey -- the primary reason for new demand is the increased densities of servers and switches. More powerful machines packed into tighter footprints is causing cooling headaches, and cooling that equipment eats up a lot of power.

"It's the other side of Moore's Law," Sneider said. "As the cost of [buying] these machines decreases, the cost of powering and cooling them increases."

According to IT infrastructure vendor, West Kingston, R.I.-based American Power Conversion Corp., the total cost of ownership for a rack of servers is between $80,000 to $150,000 per rack, and power consumption accounts for 20% of that cost.

Charles King, principle analyst with Hayward, Calif.-based Pund-IT Research, said the cost of powering IT infrastructure comes out of businesses' bottom line and organizations can only pass on a certain amount of that cost before losing competitive edge.

"Power is something people are becoming increasingly sensitive to," King said. "Over the past few years, it's finally gotten through to people that when the price of kilowatts goes up, you're going to take it in the neck."

The old ways of throwing equipment at IT problems -- more air conditioning units, servers, UPS units -- is going to have to be revisited. And IT pros are going to be asked to find more efficient ways to increase reliability and computing capacity.

Let us know what you think about the story; e-mail: Matt Stansberry, News Editor

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