Flawed Energy Efficiency Incentives Fail Industry


Cutting costs and carbon is critical, but Romonet’s Zahl Limbuwala says the way data centre services are ‘charged back’ is the key

Behind the times

Unfortunately, whilst the technology has certainly advanced, the method a data centre manager uses to measure and then divide up data centre costs has remained unchanged.

To explain this point further, let’s return to our fictitious bank data centre. Let’s say there are two internal business units within the bank using the same data centre. One of these clients is happy to invest more in modern compute servers and software virtualisation technology – and therefore will be more energy efficient – and they’re happy to pay a premium in the upfront capital costs.

Let’s also say that there’s another department that doesn’t care so much about their energy efficiency or the overall energy bill. They’re just interested in buying the cheapest technology they can and if they need to buy more capacity – they’ll just buy more boxes later down the line. Now, these two departments might take up roughly the same physical space – so they’d be charged similar amounts on that level. Their electricity costs would be divided out depending on how much each uses – so far, so fair.  But what about the share of those fixed costs? Here’s where the unfairness arises.

Whilst the department using the more energy efficient kit will have a lower overall utilisation of that overhead (because they are achieving more with much less) they won’t be given the benefit of that lower impact because fixed costs are shared out equally. The more energy efficient department won’t be rewarded for their low carbon behaviour and conversely, the energy hungry department won’t be penalised for under-utilising their IT and wasting expensive shared resources.

If a department can’t see a cost benefit in choosing energy efficient kit, they’re unlikely to continue in the long term. If a department doesn’t think it will be penalised for carbon hungry activity, then they’re unlikely to change either. If we want to influence buyers to make more cost and energy efficient buying decisions we must get the charge-back methodology right to incentivise the right behaviour.

So, what’s the answer?

In order to present any sort of meaningful or fair charging mechanism and to get the market moving towards producing more energy efficient equipment, we need to be able to differentiate between a client’s fixed costs (building the capacity) and their variable costs (using the capacity).

Those clients with better and more highly utilised efficient equipment must pay less of the bill for the overheads because proportionally, there are actually using less. We must fix the system to ensure that whether you are running an enterprise data centre or a co-location centre, costs are allocated proportionally and fairly. Only then will we see businesses understand the real cost benefits of using the latest energy efficient technologies – and only then will we see longer term behaviour start to change.

Zahl Limbuwala is the CEO of Romonet.

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