Why the Carbon Reduction Commitment is bad for data centres

The Carbon Reduction Commitment will not significantly reduce our carbon emissions, and it will also threaten to stifle growth and innovation in a sector vital for our economic and environmental health, according to this managed hosting provider.

Why data centres matter
Data centres use in the region of 2.2-3.3% of Britain's total grid power. While that is a considerable amount, ICT has been repeatedly identified as a key mechanism through which our society will reduce carbon emissions. The World Wildlife Fund has identified ICT as the way to "save the first billion tonnes" of carbon, and the Global eSustainability Initiative SMART 2020 report has identified how the intelligent application of ICT can reduce our annual global emissions by 15% by 2020.

Data centres lie at the heart of ICT's potential to reduce our collective carbon emissions.

Furthermore, data centres are absolutely key to our national prosperity. Britain's knowledge economy now employs 41% of the population, and will account for 50% of GDP by 2010. Data centres are the backbone of U.K. public companies, vital to the resilience of public services and the competitiveness of British business.

We are not idle about involvement with the European IT industry, either. Digital Europe (formerly EICTA) has already committed to reducing its carbon emissions by 20% by 2020. The U.K. has taken a leadership role on data centre energy efficiency. The British Computer Society in particular has been a key player in the development of the EU Code of Conduct for Data Centres, and the world-leading cost and energy data centre simulator (in partnership with the Carbon Trust).

As a result of this, it makes no sense to own your own data centre, and I expect to see a massive increase in data centre outsourcing.

Kate Craig-Wood, Contributor,

How the CRC will work
The CRC scheme is part of the U.K. government actively seeking to cut carbon emissions by 80% of 1990 levels by 2050. The most effective way to achieve this goal is to encourage energy users responsible for emissions to reduce their energy consumption on the one hand, and adopt efficiency measures on the other.

However, the government's scheme plans to allocate the entire carbon liability to the utility bill payer, irrespective of whether the bill payer is in fact using the energy or a key player in the decision to use this energy.

The basic mechanism, for the purpose of this discussion, is that any organisation that consumes greater than 6,000 Mega-Watt Hours (mWh) of electrical energy per year is automatically captured and all of the electrical (and some other) consumption of that organisation and all subsidiaries are totalled to represent the carbon of the organisation.

6,000 mWh per year is equivalent to a continuous load of 685 Kilo-Watts (kW), roughly 500 kW of IT equipment load in a moderately well-run data centre, which is around 5,000 efficient modern 1U servers (assuming 100W per server). For a poorly run, monolithic "old school" data centre with an excess of power and cooling infrastructure, using 3-4 year old servers it might be as few as 2,000 machines.

Operators will have their energy use baselined and then be required to report their energy consumption. The organisation then has to purchase allowances to cover the total carbon in a similar way to the power generators under the EU ETS6. This is intended to add direct financial incentives for the carbon associated with the electrical energy consumed by the data centre operator.

As the government's CRC scheme places the onus to reduce emissions on the organisation that pays the electricity bill, not the end-user, responsibly organisations like us cannot pass the carbon down the supply chain and thus encourage our customers to reduce their usage.

As a result of this, it makes no sense to own your own data centre, and I expect to see a massive increase in data centre outsourcing. That will actually be a good thing for my business, but I firmly believe that the CRC as it stands will be detrimental to our emissions overall.

Increase in outsourcing
Outsourcing a corporate data centre or entire ICT department would, under the current allocation approach, result in the carbon also being outsourced. While clear 'carbon dumping' could otherwise lead to reputational damage, data centre outsourcing is a common practice; there would be no way of determining whether the outsourcing that might take place post-CRC implementation was driven by genuine business reasons, or a desire to shift the carbon liability.

The league table is an apparently simple mechanism for the processing and comparison of the carbon reported by each CRC organisation, but will actually create utterly perverse incentives.

Kate Craig-Wood, Contributor,

Furthermore, as energy costs in the U.K. are currently less competitive than in continental Europe, the additional carbon costs could encourage businesses to offshore. Data centres are, by nature, geographically flexible. Offshoring to the continent is a realistic possibility, and the cost of running a data centre in the U.K. may tip the scales in its favour. This in turn will have wider implications for jobs in the U.K., and data and application security.

That said, if organisations do outsource the bulk of their energy-consuming activities to more efficient third parties, the overall net emissions for the U.K. will reduce, and the CRC will have proved fit for purpose. However, the current design of the performance league table inhibits this from being the case.

The current proposal suggests that rankings in the table will be determined by two metrics: absolute growth in emissions, and relative growth in emissions. After the initial phase of the scheme, the former metric is expected to be weighted at 75%, and the latter at 25% (though it is unclear how DECC reached these figures). As a result, any business growth, even if accompanied by increased overall energy efficiency, could result in an organisation dropping down the league table!

For a data centre, our energy consumption is directly related to our revenues. The CRC as it stands will reputationally damage data centres who dare grow.

Further still, for companies like Memset, in terms of energy efficiency, and for whom the opportunities for improvement are very few, the CRC is quite simply unfair. It would have been much better to start out with poor performance and then to artificially manage a slow improvement in energy efficiency in order to maximise the league table position. We will look significantly worse than our energy-inefficient competitors, which will result in the customers being mis-directed to use more carbon-intensive providers.

In summary, the CRC as it stands will encourage "carbon laundering," with the outsourcing (or even off-shoring) of data centre operations growing to avoid brand value damage. It will inhibit the growth of one of the U.K.'s most important business sectors, and it will encourage end-users to use the least efficient providers.

About the Author
Kate Craig-Wood MSc is co-founder and Managing Director of Memset, an SME that provides managed hosting services to business. It is one of the Deloitte U.K. Tech Fast 50, and became Britain's first Carbon Neutral accredited ISP in August 2006.

Kate is also part of Intellect's directorial leadership group on energy & environment, and a committee member of the British Computer Society's Data Centre Specialist Group (DCSG).

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