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Wednesday, 06 June 2012 15:32

IT sector braces for 50% electricity hike

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The managing director of one of Australia’s largest data centre providers has warned that electricity prices could surge by 40-50 per cent over the next three years, forcing chief financial officers to run a ruler over their IT departments.

Aidan Tudehope, managing director of hosting at Macquarie Telecom, speaking at a VMware hosted roundtable on the expected impact of the now looming carbon tax, said that the electricity price increases would mean that companies could expect to spend the same amount powering a server over three years as they did to purchase it in the first place.

For chief information officers this meant; “The CFO is coming calling to say ‘what the hell is happening in your computer room,” he warned.

Mr Tudehope’s forecast is way ahead of the Australian Energy Market Commission’s which has tipped that electricity costs will increase 5.6 per cent this year and 5.7 per cent next year as a result of the price on carbon. But the cost of carbon is only one element affecting electricity company pricing, and Mr Tudehope said he had based his 40-50 per cent increase forecast on discussions with a number of electricity vendors regarding future spot prices and longer term contracts.

He said it was important CIOs got a better handle on understanding the cost of powering computer equipment. He said that the costs of powering a standalone server were typically $700 a year, while an entry level rack would cost $8,400 a year.

By the time the 40-50 per cent price hikes hit that could rise to as much as $12,000 – a figure which still does not account for the electricity costs associated with cooling the system.

With less than a month until the government introduces the price on carbon, many companies are holding their breath and waiting to see the full impact, but rising input costs in terms of electricity pricing is still expected to be the most significant change for IT companies, IT service providers and all but the very largest enterprises.

However Steve Hodgkinson, Ovum research director, who also spoke at the roundtable event, said that many companies could find that as part of a larger supply chain they could be asked to provide data regarding their carbon footprint by large clients. Mr Hodgkinson acknowledged that very few CIOs were yet accountable for the energy consumption of their ICT and would have to introduce better monitoring systems in order to comply.


He believed that ultimately the impost of the carbon price could prove; “A catalyst…to make the transition to more efficient infrastructure” and consider alternatives to in-house ICT such as cloud computing. However he acknowledged that the speed with which companies were impacted would depend on the nature of the contracts they had in place with some of their suppliers.

While some long term services contracts might not allow fee changes until the contract ran its course, others would. Mr Hodgkinson also warned that there were; “Already concerns about the gaming of the regime with some people using it as an opportunity to hike their prices even though the purpose (of the price on carbon) is to decrease energy consumption and emissions.”

Macquarie Telecom is close to completing a $60 million new data centre in North Ryde NSW which has focussed on using modern technologies such as power tri-generation and extensive virtualisation in order to increase efficiency and reduce its reliance on grid sourced electricity. Although it will plug into the grid, that will be purely a back-up source of power according to Mr Tudehope.

The new data centre is aiming for a PUE (power use efficiency) rating of 1.3 which means that for every $100 spent on powering computers, just $30 is spent on air conditioning or illumination.

Mr Tudehope said that there were “profound” cost impacts available from reducing data centre PUEs, adding that he believed; “In the data centre space the greenest data centre will win on a cost basis” and would have to pay half as much carbon tax as less efficient operators.

Duncan Bennet, vice president and managing director of VMware ANZ, stressed that the carbon footprint of IT users was not trivial, citing statistics from Hitachi which suggested that ICT accounted for around 7 per cent of all electricity use, which was about equivalent to the airline industry. He forecast that the introduction of a price on carbon, and resulting electricity price increases would likely force companies to take another look at how they could become more efficient by increasing computer utilisation rates using techniques such as virtualisation.

Mr Bennet said VMware clients and prospects were already; “putting - economically and morally -more pressure on us” to address environmental issues in proposals. “We see it in FRPs from Government agencies and in many enterprises it is coming from the board.”

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