With the advent of new cap-and-trade regulations in California, like the recent Network World article mentions, some data center operators are also wondering what the impact of new electricity-related regulations will be for Data Centers? Other articles, however, reassure us that the cap-and-trade rules along with new carbon regulations on coal will have negligible impact on data centers in the near-term. New coal regulations are set to minimally impact electricity prices because they only apply to new coal power plants, and there aren’t any new coal power plants planned due to the much cheaper methane supply available and previous pollution regulations. A great article on this was written by Yevgeniy Sverdlik “New coal-plant regulations coming in US! Brace for…nothing much“.
Regarding the California cap-and-trade program, currently it only targets very large carbon emitters (25k tons/year) and are designed to limit impact on electricity prices by design, and currently no known data center has reached this limit of annual carbon emissions to be regulated directly by this program. (Article from DataCenter Dynamics “Cap-and-trade impact on Cali data centers will be small”). Any electricity rate rises will be small (1-2 cents) and slow to manifest (2+years). This is because the carbon permits so far have sold for under the price valuation of the auction (around $10) suggesting most California utilities find the emissions allowance manageable like the program intended, and which also means that there won’t be a huge impact on electricity prices at this time. In addition, a proposal was passed in 2012 to give dividends to California rate-payers from the cap and trade program proceeds. This means an average home-owner will get $60 back per year, which will also offset electricity price increases for a period of time as well. It is very difficult to predict the future of emission regulations and the subsequent impacts due to the unpredictable nature of political will, changes in program rules over time, and unintended consequences which are often speculative. However, it seems that significant upward impacts on the electricity prices due to cap-and-trade regulations are not evident at this time.
Although we may not see any immediate rise in electricity prices, they are still inevitable in the long run. Additionally, there may be other considerations to keep in mind, with potential implications on data centers. According to a paper titled “Implications of Carbon Cap-and-Trade for Electricity Rate Design, with Examples from Florida” by Hethie Parmesano and Theodore J. Kury, another important and perhaps even more pertinent consideration for a cap-and-trade program in general is actually electricity price volatility rather than rate increases. This is due to the potentially dynamic pricing of electricity and the possibly more frequent changes in rates due to the utilities’ permit allowance costs as well as potential revenues when electricity suppliers are able to sell excess carbon permits for gain. Electricity price volatility is perhaps a greater concern for data center operators attempting to plan energy budgets for the future because it becomes harder to predict budgets or create a business plan for energy-related investments. Extremely volatile electricity markets can threaten smaller businesses unprepared for a spike and significantly impact a high electricity consumer’s bottom line. We have yet to see such impacts, but this is something organizations with heavy reliance on their data center or organizations whose business is the data center and consequently are heavily impacted by electricity price volatility, will have to pay attention to and eventually take action to mitigate. Luckily, there are solutions and technologies out there which can help with mitigating risks, help improve efficiency, and help organizations create a long-term strategy for dealing with changes in electricity prices, volatility, and regulatory changes. DCIM tools are critical for supporting a data center organization’s energy strategy as well as helping the organization be prepared for the future of electricity by enabling them to be in a position to more easily adjust to external changes. Being connected and having full visibility into the data center environment via a DCIM tool enables an organization to have the confidence to make changes in the environment when necessary or determine what other course of action is possible when desired. Tools like CA DCIM that help data center operators manage energy consumption, improve efficiency, and help enable compliance with carbon and other regulatory requirements will also continue to evolve in this fast-paced industry to help data center operators and managers stay ahead.
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