Data Center Innovation = Clean + Cost-Effective + Reliable

We are currently seeing a wave of new ideas in data centers, throwing the traditional model of data center management in the air. The ever accelerating demand for processing and data storage capacity globally, is coming together with environmental demands to create an area ripe for innovation.

This led to lively discussion last week at our Data Centers Power Breakfast, in partnership with Silicon Valley Bank and Wilson Sonsini Goodrich & Rosati. Participants – including tech companies, start-ups and investors – proved data centers can reposition themselves as sustainability leaders and pointed to opportunities for even greater innovation through energy efficiency and greening the energy supply.

We were particularly interested in what was driving innovation in the data center sector. There was a simple mantra from the panelists throughout the conversation: solutions needed to be clean, cost-effective and reliable to gain market traction.

We know that over the last decade or so, environmental stewardship has become a C-Suite goal, leading companies to set challenging but attainable clean goals. Even for companies for whom sustainability is not a central characteristic of the product or service, customers, particularly Millennials, are holding them more accountable on environmental metrics.

To attain these goals, particularly for large tech companies, data centers have to be a central target for innovation. However, the question of what a clean data center looks like led to healthy debate: grid independence vs. collaborating with utilities; air cooling vs. liquid cooling; energy efficiency vs. green energy supply. For now, depending on their uniquely structured goals, each data center operator is likely to find their own bespoke solution.

In making strategic decisions, however, cost is still King. While operational decisions (like where to site data centers) will take into account things like local grid’s generation mix, ability to procure wind/hydro/solar directly, willingness of utilities to work with them – all of these are of course weighed against cost.

Companies invest in green data center initiatives because it makes financial sense. Investing in new equipment may not be as viable in a place like Iceland, where electricity costs less. But in other areas where the cost of electricity is higher, it may be possible to invest heavily in more efficient equipment or long-term green power purchase agreements (PPAs) and achieve positive net-present-values over the typical 10-15 year life of a data center.

The over-arching requirement for data center power continues to be reliability. Data centers are now an undeniably critical piece of global infrastructure. Any changes to the traditional data center model have to prove they are equal or even better in terms of ongoing reliability.

Facebook’s recently announced deal with Iowa utility MidAmerican Energy is an example of achieving clean power goals while still showing acute concern for reliability. In this landmark deal, Facebook actually bought the rights to a new wind farm project and transferred those rights to MidAmerican with a promise to purchase all of the power output for its data center once the wind farm is built. Under this model, of course, Facebook achieves its clean power goals while still having the guarantee of utility grid reliability.

While some believe that data centers could never get off the electric grid for fear of compromising reliability, companies like Microsoft are beginning to challenge that assumption – for example, with the potential to power data centers with fuel cells running off the natural gas grid, which Microsoft believes to be more reliable than the electric grid in the first place. Regardless of energy supply, innovation in reliability is also largely driven by software development for the server architecture itself.

If one thing is clear, it’s that data center designers and energy innovators will need to work much closer together to overcome immediate energy supply and cost challenges, as well as to chart a path to a sustainable data center industry. While our Power Breakfast discussion group did not agree on a single path to that vision, their alignment on the needs of data centers – and those of the internet generation they serve – signals a growing appetite for new ideas.