August 26, 2013, 7:05 AM — California is rolling out a new law to reduce greenhouse gas emissions, primarily from electric generating plants, and the cost of the effort is expected to be passed along to data centers, which are among the biggest consumers of electric power in the state.
This means data center operators in California will need to step up their energy efficiency efforts in order to avoid the higher costs. And the handwriting is on the wall for data centers in the rest of the U.S., as President Obama has directed the EPA to develop greenhouse gas controls nationwide.
The law that took effect on Jan. 1 requires California to reduce greenhouse gas emissions to 1990 levels by 2020. The plan is to try to reduce emissions statewide by 2 percent to 3 percent a year. According to the California Air Resources Board, the lead enforcement agency, the law requires power plants to obtain permits, also called "allowances," for every metric ton of greenhouse gases they emit.
As they reduce their emissions, they can sell their allowances to power plants that have not been able to cut back. The allowances will be bought and sold in a cap-and-trade market in which carbon emitters who keep their emissions below the cap of 25,000 metric tons per year can sell their allowances to other power plant operators. The value of the allowances, initially set at $13 per metric ton, will fluctuate in an open market based on demand, just like any other commodity.
Entities that are over the cap can use a combination of reduced use of fossil fuels, other energy efficiencies, or the purchase of allowances in the cap-and-trade market.
The law directly affects power companies, but it's expected that they will pass on any higher costs to customers and the biggest customers are data centers.
How much money are we talking about? Nobody can say for sure, but the Green Grid Association, a global organization of technology and energy companies that support green energy, is about to publish a white paper that calculates the impact on data center electricity rates of utilities converting from carbon to green tech.
Part of the study was shared at a Green Grid Association conference in Santa Clara, Calif., in March and the expectation is that going green will increase the cost of electricity.
The following estimates are based on a model of a hypothetical power plant operating in the Midwest, says James Grice, an attorney who deals with data center siting issues for clients.
If 25 percent of the energy generated is green, the "blended rate" of carbon and green power is $0.051 per kilowatt hour (kw-hr) and carbon emissions are reduced by 25 percent.