Data centres should have their own climate change agreement, and not be in the CRC tax, says Peter Judge
The government’s promise to be the “greenest government ever” is in tatters, but those tatters still include a green energy tax, the CRC – which is on life support but still exists.
CRC, in its final form, amounts to an extra charge on energy use by organisations above a certain size. The idea is to encourage businesses to operate more efficiently and cut their energy use – thereby cutting the country’s emissions. But data centres are fighting the idea, saying it will make them less competitive than other countries.
CRC versus CCA
What gives data centres the right to ask for special exemptions? Well, climate change policy which dates back to the previous Labour government includes options to let whole industries off any carbon tax.
Any industry which is energy intensive and subject to competition from abroad can apply for a Climate Change Agreement (CCA).
Compared with CRC, this is a carrot rather than a stick. A CCA gets the industry a 65 percent discount from an existing carbon tax called the Climate Change Levy, providing it meets agreed targets to reduce carbon emissions. The discount will go up to 80 percent in 2013.
“The data centre industry meets those criteria easily,” said Emma Fryer, director of climate change programmes at the UK tech industry body Intellect, who is a prime mover in the campaign to get data centres out of the CRC and onto their own CCA.
A sector is considered energy intensive if energy makes up ten percent of its costs – and three percent is enough to get it into a CCA if it is subject to intense international competition, according to Intellect.
At the moment energy is something like fifty percent of the running cost of a data centre, so it is clearly over that threshold. “We believe that data centres are within the top five industry sectors in terms of energy intensity.” says Fryer.
Data centres also pass the qualification of having international competition. The cloud makes it very easy for firms to move their processing tasks to any country they like, where the emissions and energy costs are favourable – today we saw the news that BMW is moving its HPC workloads to Iceland.
Give that, I would have thought it a foregone conclusion that data centres will move onto a CCA regime – but the government will have to forgo tax revenue so may resist the change. For that reason, Intellect and other bodies are beavering away behind the scenes on applications.
Getting a CCA would also represent a big improvement, because the CRC regime may actually be counter-productive, Fryer told me. CRC applies to the organisation paying the power bill, and only if they use more than 6000MWh per year of energy.
Because it only applies to organisations whose power bill is over a certain size, the CRC actually acts as an incentive not to consolidate data centres into larger units, says Fryer. This means it operates against any moves towards greater efficiency in the data centre industry, whereas the CCA would actually mean consolidation is a benefit as long as it improves the energy use.
Should we be worried? Maybe we could decide that we don’t need data centres in the UK. They use around 2GW of the UK’s power, and Ofgem says we are heading for a power generation crisis. If the data centre load went away, then we might have more of a chance of getting through our power generation crisis unscathed.
That may be true, but it would also do away with a significant business, which has benefits across other sectors. Despite its uncertain tax regime and energy future, the UK has managed to stake out around five percent of a huge world market for data centres – running at more than $100 billion a year.
The campaign to get a CCA for data centres is running through diplomatic channels at the moment. If it looks like going off the rails, the industry should be ready to man the barricades.
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