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Data Center Operators Double As Energy Brokers

Soulskill posted about a year ago | from the more-power-to-them dept.

Power 35

mattOzan writes "When data centers first opened in the 1990s, the tenants paid for space to plug in their servers with a proviso that electricity would be available. As computing power has soared, so has the need for electricity, turning that relationship on its head: electrical capacity is often the central element of lease agreements, and space is secondary. While lease arrangements are often written in the language of real estate, they are essentially power deals. 'Since tenants on average tend to contract for around twice the power they need, Mr. Tazbaz said, those data centers can effectively charge double what they are paying for that power. Generally, the sale or resale of power is subject to a welter of regulations and price controls. For regulated utilities, the average "return on equity" — a rough parallel to profit margins — was 9.25 percent to 9.7 percent for 2010 through 2012.'"

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Contracts (3, Insightful)

girlintraining (1395911) | about a year ago | (#43728555)

You mean, exclusive contracts can screw you over? WHO KNEW? See also: Every antitrust investigation. Ever.

Re:Contracts (1)

c0lo (1497653) | about a year ago | (#43728633)

You mean, exclusive contracts can screw you over? WHO KNEW? See also: Every antitrust investigation. Ever.

Which you are you talking about? You as in the "consumer of cloud or hosting or co-location services" or you as in "the tenant that has exclusive use of the facilities for its data-center services business"?

Because if it's:
* "consumer of the cloud services, etc" you (maybe) are getting screwed over the price of power, but nobody locks you in exclusive contracts;
* "the tenant conducting data-center business" - maybe the contract you sign is exclusive, but it is not you that is getting screwed.

And this... (1)

c0lo (1497653) | about a year ago | (#43728563)

And this is why using the cloud is good... for the business: you are going to be charged double for the price of consumed electricity and the data center operator has a secondary line of business as a power broker.

(granted, the energy cost for the user may be lower in the cloud than running whatever on your own server, in case your server does nothing most of the time. Meh... in my case, I still find preferable to use solar panels)

Re:And this... (1)

OhANameWhatName (2688401) | about a year ago | (#43728889)

And this is why using the cloud is good... for the business: you are going to be charged double for everything.

Fixed that for you.

Re:And this... (1)

cduffy (652) | about a year ago | (#43730353)

What in the world does any have to do with "the cloud"? The scenario is entirely relevant when you're putting servers you own in DC space that you lease.

If anything, using cloud services negates this impact on pricing somewhat, since the service themselves is such a large customer of their DC that they have considerably more negotiating leverage (and, commodity OpenStack instances being reasonably fungible, it can be considerably easier to switch cloud providers than to move physical hardware between datacenters... unless you did something silly like lock yourself in to a single cloud provider's extensions or API).

Welcome to capitalism (5, Funny)

cultiv8 (1660093) | about a year ago | (#43728573)

I feel like this doesn't need an explanation but:
  1. Buy something
  2. Sell it at a profit
  3. Profit

Re:Welcome to capitalism (0)

Anonymous Coward | about a year ago | (#43731127)

You capitalist and your cryptic schemes!!!

Billed on potential power consumption (2)

satsuke (263225) | about a year ago | (#43728585)

Wouldn't this be two different things?

At least if the lease agreement is written to the _potential_ power consumption, rather than the actual power used, that is a fundamentally different proposition than taking power and marking it up, or otherwise being registered as a utility.

e.g. you could potentially increase your power draw to the maximum provisioned, and the data center would be contractually bound to be able to provide that level of power, certainly on a particular circuit if there is a redundant power supply failure or other sudden spike in load.

I know in my space (telecom), the logistics of ensuring the correct provisioning of power (access to 48V power, cooling, not overdrawing power slack batteries) can be as complicated as the provisioning of other, more typical server services.

Strangely Written Article (0)

Anonymous Coward | about a year ago | (#43728605)

It is half an article about the nature of financial data centers, and half about their other business model, electricity sales. At first I thought it was a re-write of the recent Radio Lab - Planet Money show where they discussed the desirability of the location. Then they were all about power consumption and selling high availability for double the cost. Hmm, yawn. Next thing you'll tell me is that I can have a backup generator for a little over 500 times what the utility charges me to have electricity *most* of the time, and the generator sellers make money from that. Wow, I'm shocked.

Electricity is a scam! (5, Funny)

camperdave (969942) | about a year ago | (#43728607)

AC power is a scam. First the electricity runs one way, then it stops and it runs the other way. They're selling you the same electrons over and over and over again.

Re: Electricity is a scam! (0)

Anonymous Coward | about a year ago | (#43728649)

I smell a class action lawsuit in the works.

Re:Electricity is a scam! (5, Funny)

c0lo (1497653) | about a year ago | (#43728775)

AC power is a scam. First the electricity runs one way, then it stops and it runs the other way. They're selling you the same electrons over and over and over again.

One's not better even with DC power: no warranties that a closed circuit won't recirculate the same electrons over a certain period of time. Even worse, once you power on the device, they are taking the electrons which are stored by your device and just replace them with foreign ones in the same amount - how can you be sure the others have the same quality? Furthermore, the electrons that are stolen from you are used to carry the same heinous substitution on other unsuspecting customers.

Believe me, AC is much better - after powering off, you still do have the original electrons that the manufacturer of your device put in.
No-no-no-no... don't underestimate the importance of this fact!!!... For example: never-ever use the Monster Cables with DC current: they'll quickly lose their quality if you do it... and this for no other reason than you replace the original carefully nurtured and handpicked electrons... (shudders) God forbid: maybe even with ones "Made in China".

Re:Electricity is a scam! (0)

Anonymous Coward | about a year ago | (#43729307)

how can you be sure the others have the same quality?

This [wikipedia.org] is how you know that.

(Yeah, I know, I ruined the joke...)

Re:Electricity is a scam! (1)

c0lo (1497653) | about a year ago | (#43729425)

how can you be sure the others have the same quality?

This [wikipedia.org] is how you know that.

Go away! Maybe for so the less educated in the matter [wikipedia.org] , but you won't trick me into believing that "organically grown free range 100% fat free light-elements-inner-shells electrons" aren't much better and healthier than the rest.

Re:Electricity is a scam! (1)

Required Snark (1702878) | about a year ago | (#43728865)

Eeeeew, used electrons. Icky icky icky.

Re:Electricity is a scam! (1)

Hognoxious (631665) | about a year ago | (#43728937)

Plus AC power kills elephants.

Re:Electricity is a scam! (1)

Anonymous Coward | about a year ago | (#43730329)

AC power is a scam. First the electricity runs one way, then it stops and it runs the other way. They're selling you the same electrons over and over and over again.

What are you on about? There is only one electron [wikipedia.org] anyway.

Don't forget they are built for a given load... (0)

Anonymous Coward | about a year ago | (#43728653)

There is only so much power and cooling capacity a data center is built for. So it's a pretty precise thing and "going over" on power or cooling is a bad thing. It's up to their customers to be more precise with actual power draw and estimates. Then the density also affects what cooling is available. In general it's done on kW. So if you want 100kW of racks, the room is averaged per rack already based on the generator load capability and cooling capacity. I'm sure there is good margin above all the costs per rack, but the costs aren't just power, its largely facilities. Fire protection, cooling, chillers, water systems, generators, battery banks, air quality, humidity control, an then there the physical space added on. They up charge off power because the costs of facilities is high. Trying getting a rack at a tier 4 facility for 100 a sq ft.

Only for the Little Fish (2)

aaarrrgggh (9205) | about a year ago | (#43728685)

Sure, if you have a half-rack you are going to get screwed in terms of power provisions; you aren't really paying for power. Likewise, if you go with a site that is designed for high density and you are a low density tenant (or the reverse), you are going to get screwed.

For a bigger tenant (every lease I have ever worked on at least), you generally negotiate a fixed PUE* of 1.4-1.6 to cover cooling and system losses. The annualized PUE is usually closer to 1.3-1.4 for most general-purpose sites at reasonable load factors, so they effectively have 14% markup. If you have a really good lease, that markup gets factored out based on actual operating costs.

*PUE(tm) = Power Utilization Effectiveness(tm) = Peak Critical Demand (kW) / Peak Total Demand (kW)

They are not selling only power... (1)

InvalidError (771317) | about a year ago | (#43728709)

At the very least, every watt that comes in the building also needs to come out so the power price needs to include the cost of getting rid of the resulting heat. This adds another 20-30% to power cost after you factor in the amortization, operating and maintenance cost of cooling equipment and the datacenter needs to make a profit off of that too on top of the underlying power utilities' own profit to justify the expense. We're already half-way to doubling the utility rate if the datacenter does not further process power such as conditioning to add further value.

In any case, datacenters do not have a monopoly on the server hosting business. If your current datacenter's power rates are high enough to become a deal-breaker for you, taking your servers elsewhere is always an option to consider - at least until datacenters end up under common ownership and become an actual mono/oligpoly.

Re:They are not selling only power... (1)

OhANameWhatName (2688401) | about a year ago | (#43728897)

taking your servers elsewhere is always an option to consider

If only someone could figure out how to do that without unplugging the servers, they'd be rich.

Re:They are not selling only power... (0)

Anonymous Coward | about a year ago | (#43729069)

vmotion

Re:They are not selling only power... (1)

Buzer (809214) | about a year ago | (#43729669)

Veeeeery long cables & redundancy.

Re:They are not selling only power... (0)

Anonymous Coward | about a year ago | (#43729753)

Put them in the cloud!

Re:They are not selling only power... (1)

InvalidError (771317) | about a year ago | (#43729999)

If those servers earn you so little money per unit that you need to seriously consider moving due to power and cooling cost, you can probably get away with telling your customers that your service will be down for a few hours while you switch over to new servers next time you need to upgrade them.

The likelihood of finding a datacenter with P&C costs low enough to justify the expense of moving servers for that reason alone is pretty low so the decision to move would require additional motives in most cases.

Re:They are not selling only power... (1)

petermgreen (876956) | about a year ago | (#43730877)

The likelihood of finding a datacenter with P&C costs low enough to justify the expense of moving servers for that reason alone is pretty low so the decision to move would require additional motives in most cases.

The obvious one being hardware upgrades. Many companies replace their servers every few years anway and there is no real reason the replacements have to be hosted in the same datacenter as the servers being replaced.

Re:They are not selling only power... (2, Interesting)

gbjbaanb (229885) | about a year ago | (#43729367)

its often not so easy - they need the power because of modern inefficient programs running on supercomputers - your web app goes slow, just add a dozen more cores and a hundred gig of RAM, and then wonder why the cost of hosting is so high.

As a result, you can take your business elsewhere, but they'll be charging as much. That power is not cheap in the first place.

It is time to reduce the requirements of our programs, I understand that datacentres are 2nd only to the airline industry for co2 emissions.

Be Careful With Your Contracts! (0)

Anonymous Coward | about a year ago | (#43728837)

I fell into this situation with a company of many many past tenses. I didn't write it, sign or was I very happy with it, but I did inherit said contract.

Effectively, the entire room had a limited selection of power and through the wonders of modern science our rack positions had become more dense. Density of course was something no one had apparently planned for properly. Christ on a stick! Moores fucking law? You cheap stupid bastards.

I'm quite certain the deal would have been amazing if our rack positions were powered by systems with 386 dx processors, but jesus even a single dell blade chassis was over provisioned in terms of power availability. (In fairness, those things can suck a watermelon through a garden hose.)

Eventually, we made it work and we were faced with the purchase decision of buying out the floor space next door. How it ended? I have no idea. My advice was to GTFO and or negotiate a better deal there or somewhere else.

On the plus side, companies that chronically plan so poorly tend not to last very long. I'm in the very upside of the relationship in that I can now cherry pick the truly great ones from the bunch. Really, the only reason I kept in touch was for just such a situation. I'm glad I get to take whats left of your brightest and feed them to my machine.

utilities are monopolies. datacenters are not (1)

Anonymous Coward | about a year ago | (#43728971)

If you aren't happy your datacenter deal, change. We've been in three different datacenters. One was very cheap. Because it didn't have more than twice the cooling it needed. When a cooling unit died, the DC went down. Now we pay more for more reliable cooling and power. We can pick whatever cost/reliabiity we want. Competition between DCs gives us options.

That's completely different from uitility power. You normally can't cchoose a different electric utility for hour house, there is no competition for pricing. THAT is why rates are regulated for electric utilities - because there's no competition yo keep rates correct like there is with datacenters (and with most things).

Yes and no (1)

swb (14022) | about a year ago | (#43733059)

Yes, utilities are monopolies in the sense that there's generally no way to pick and choose among different utilities at a specific address (with the exception of rare addresses on the edge of two different grid segments served by different utilities).

But no, in the sense that utilities don't have a monopoly on power generation. Nothing is preventing someone from generating their own electricity. Sure, at many scales it isn't competitive with the cost of utility power.

My guess is that in the right location, self-generation is viable at small scales where renewables like wind and solar could power small setups. At the large scale, natural gas generaiton may be competitive with utility power.

I think there have been a number of articles on slashdot highlighting private data centers trumpeting their use of fuel cells or other "green" power generation on site.

I think that we'll probably see an increase in self-generation of power both at home and commercially as the grid gets less stable, prices increase and conservation-driven efficiency grows.

Re:Yes and no (0)

Anonymous Coward | about a year ago | (#43744495)

also as batteries get better, solar gets better, someone figures out a small turbine for use as a backup generator with NatGas

As always, "know theyself" (1)

Bearhouse (1034238) | about a year ago | (#43730105)

I've worked with professional buyers; the good ones can get you a great deal, if you give them time and all the factors.

The trouble is, how many managers are on top of the real cost of their processes & associated outputs?
(Cost per transaction, Kw/h consumption, support etc.)

Hell, most of them don't even know these concepts.

So, most outsourcing is done on the basis of "saving costs". Surprise, surprise, instead of the expected "econmoies of scale", service level drops and costs, (after lock-in period) rise.

BIG MISS (0)

Anonymous Coward | about a year ago | (#43730957)

You are not paying double for the power. The rent or lease is the financing over time of the $10-$15mm per MW it takes to build out the concurrently maintainable infrastructure. The utility is usually a pass through.

datacenter types - retail, wholesale, and owned (0)

Anonymous Coward | about a year ago | (#43731853)

A few things that the article doesnt do a good job of explaining.

There are (generally) 3 types of datacenters.

- The retail datacenter.
      This is generally a datacenter where the prices are higher than most similar datacenters. You pay a premium to be in these locations. Lots of other networks are in here, (from content providers, to transit providers, to financial networks etc.) (Lots of customers). Most of these places have a small footprint, generally from 1 rack to up to 250Kw (1/4th of a Mw).
        Everything in here has a fixed price.
        - You pay a monthly fee to interconnect with other networks.
        - You pay a monthly cost to lease the rack space.
        - You pay a monthly fee for the power circuit, including the backup circuit (if you have one). This fee is a use it or lose it fee.
              As an example, lets say that you have a l6-30, a 30 amp 208v circuit.
              At full load, you are paying for 208*30 = 6240 Watts.
              But realistically, you are only allowed to pull 80% of that 6240*.8 = 4992Watts. (lets call it 5000)
              Now, lets say the price for the primary circuit is ~$900, (this will vary based on market, volume etc.)
              The price for the backup circuit is half that ~$450.
              This means that to use power of up to 5KW, will cost ~$1350 a month. + rack space
              The numbers also include cooling for your power. PUE (without getting into too much of a discussion), can vary wildly depending upon the layout of equipment, the clue of the customer. Equinix assumes a worst case assumption, and puts a high PUE rate into this number as well.

            From the article, yes this is where all the networks are, and they want to interconnect together or join common exchanges.
          http://www.equinix.com/solutions/by-industry/financial-services/overview/ - The equinix financial exchange.
        One other thing, the level of management needed to get this up and running is not that much. You say: lay the cage out like this, give me X circuits here sign some paperwork, and things start arriving.

Moving on to the wholesale datacenter.
          These are locations where you are taking a much larger footprint (generally from 250Kw (.25Mw) up to 6000Kw (6MW).
          Prices are lower from a $/Kw range. For rent you are paying anywhere from ~$120-200 per Kw.
          The power is generally done as a pass through. (Which means, you pay the actual metered rate.)

          The cooling is done ideally as a pass through for your space, or is estimated if there is a shared central equipment.

        Lets go back to the 5Kw example.
        Assuming power is ~$0.10 / Kw Hr, that means: (.10*24*30) = $72 per month for every Kw you draw.
        For a 5 Kw total draw, you are paying for (72*5) = $360.
        With a 1.3 Pue (it takes 1.3Watts coming in, to deliver 1 watt to your equipment), your monthly expenditure is: 360*1.3 = $468. (compare this to the $1350 above example and you can get an idea). One other thing to keep in mind from above, is that its 5Kw possible, you pay $1350, wether you use, 1kw or 5Kw, so you really can pay more if you dont keep a close eye on your power and adjust accordingly.

        This is a multi month project. Most datacenters will deliver you a room, and its on you to get it to a usable state. You work with electricians, cabling vendors etc. to make it all work and come together.
          A wholesale datacenter will generally have less than 10 tenants in it, in some it can have 1.

The last type is an owned datacenter.
These are ones that are generally purpose built for your company, or retrofitted for your company,
There are various type:
- greenfield - buy an empty plot of land and start building
- brownfield - buy an old building, and start upgrading
- anchor tenant - have someone else do a lot of the work, but you will make a long term commitment to being there, and someone (eg:DRT) will operate it for you

The main thing to remember is that this is a huge project, and can take 24 months to get done.
You should understand everything about the building, from electrical layout, to cooling, to security, structural support etc.
This is also a huge cost, you need help from finance people to amortize it out etc.
Also, depending upon where you build, there may be no connectivity nearby. It can cost up to $1Million per mile to bring connectivity into your building.

If that's true... (1)

evilviper (135110) | about a year ago | (#43735167)

If that's true, then APC counts as an electrical utility, too... They're CHARGING ME for their device that just takes utility power in, and pushes it back out! What a scam UPSes are!

Datacenters charge for space, security, remote-hands services, power, cooling, etc. It just so happens that power happens to be the bottleneck these days, and also the single best proxy for their operating costs...

How much power you will draw indicates how many lines they need to run, how much cooling capacity they need on-hand, how much they need to beef-up their battery-bank, and how many generators they need to have ready to go on-line.

The NYT calls it a scam that you pay for the power you have available, even if you don't use it... I'm somewhat sympathetic, having just gone through having to pay thousands for a couple new PDUs to be connected, all for the sake of one server that really needed it.

But on the other hand, power use is dynamic, and the datacenter can't closely police your usage... If power was usage-priced, I'm sure all those cloud-service providers would colo in rented datacenter space for next to nothing, with all their servers shut off, and then during peak load, network outage, or high temperatures in their own passively cooled datacenters, they could suddenly power up thousands of servers, and the datacenter would be on the hook for having the power infrastructure and cooling capacity to handle that, even though they weren't getting paid for all that standby equipment until it was put into service.

The only decent point the NYT article makes is that datacenters are trying to use a loophole to get out of paying taxes. Sucks wherever it happens, and the solution is to close those loopholes, not forcibly reclassify various businesses that don't nicely fit into previous definitions.

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