Written by Jay Owen, Vice President, Schneider Electric IT Federal Solutions.
With less than two years remaining for managers of federal data centers to attain their consolidation goals – and achieve greater energy efficiency while doing so – strained agency budgets are growing ever tighter, and the initial capital investment is becoming a daunting hurdle. But there is a well-tested solution to solve this dilemma: the Energy Savings Performance Contract (ESPC).
What’s Behind the Consolidation Movement?
Most federal data centers had long been considered “excluded” from meeting federal energy mandates like those in EPAct 2005 and EISA 2007. This exclusion ended in recent years as a result of an executive order (EO 13514) and the Chief Information Officers Council’s Federal Data Center Consolidation Initiative, which require agencies to consolidate data centers and improve their efficiency and sustainability. Such requirements were driven by several key factors that increased scrutiny of these energy hogs: rising energy and operational costs, data center sprawl that quadrupled the number of federal data centers between 1998 and 2009, low utilization rates for CPUs and servers, and an increase in underutilized properties combined with the desire to remove them from the balance sheet. In addition, agencies now recognize the importance of incorporating data center efficiency into their energy management plans to comply with legislation and take full advantage of technologies that provide huge savings without sacrificing availability.
But without a capital investment, the best-laid plans cannot be accomplished. Enter the ESPC. With an ESPC, private sector investors provide the upfront capital rather than appropriations, i.e. taxpayer funds.
How Does an ESPC Work?
The beauty of an ESPC is that the agency forms a partnership with an energy service company (ESCO) that secures private sector financing to provide the upfront renovation costs. Why would a private investor want to provide that capital? Because the agency pays back the investors over a fixed period of time with surplus funds created by energy savings, and the ESCO guarantees the energy savings. The key to leveraging ESPCs for consolidation is to identify enough savings to justify the consolidation costs. That’s typically not hard to do – most data centers consume 50 times the energy of an average office building.
By incorporating energy conservation measures (ECMs) like lighting and cooling system retrofits into consolidation plans, federal data center managers can employ ESPCs to implement large-scale consolidation and optimization projects without congressional appropriations. In addition, ESPCs can help agencies overcome one of the biggest challenges of consolidation: incorporating high density equipment into an existing infrastructure that supports low density. How? By utilizing a high density pod—a pre-designed collection of IT cabinets, power distribution and dedicated cooling deployed as a unit. The high efficiencies of this pod method can significantly improve the Power Unit Efficiency (PUE), which is the commonly used measure of data center efficiency. The savings from this improved efficiency make high density pods a perfect candidate for inclusion in an ESPC.
Finally, leveraging ESPCs for data center consolidation also helps agencies target their goal of entering into a minimum of $2 billion in performance-based energy contracts by the end of 2013, as required by the 2011 presidential memorandum, Implementation of Energy Savings Projects and Performance-Based Contracts. That’s why agencies should consider an ESPC as a best practice to reach energy efficiency and data center consolidation goals.
What about funding?
Energy savings are just one source of funding for a data center consolidation or upgrade through an ESPC. With this source, energy savings are paid to the financier providing the upfront capital until the financing agreement is complete. Any savings above the financing payments, or those that accrue once the term is up, remain with the agency as a cost reduction.
Other ESPC funding sources include savings that result from reduced operations and maintenance (O&M) costs, as well as utility and tax incentives. The ESCO can identify and secure these incentives for the agency.
Capital dollars may also be used to help fund an ESPC. Coupling appropriated funds with private sector financing as a “down payment” can expand the facility upgrades achieved and shorten the contract term for the agency.
What’s Involved in Implementing an ESPC?
The success of an ESPC depends on clear definition of the desired outcome. To start, the ESCO will perform a feasibility assessment of the site to identify needs, the level of savings potential and performance requirements. This will enable the agency to determine a strategy based on the desired results, which could include critical infrastructure improvements to enhance mission support, establishment of a healthier, safer working environment, and thorough project commissioning along with life-cycle O&M support to sustain savings and deliver long-term improvements.
One additional, essential element of success for achieving data center consolidation and efficiency goals is the installation and utilization of an energy management system (EMS). With an ESPC, data centers can deploy scalable EMS platforms to monitor and control energy consumption from end to end.
An EMS brings greater visibility to data center efficiency, or lack thereof, by continuously collecting and reporting energy usage data for power conversion and distribution, server load and computing operations, cooling equipment, and on-site generation (renewables, waste heat for cooling, etc.). Data center managers can leverage the EMS to establish factual baselines, which they can use throughout the data center life cycle for monitoring, verification and regulation of performance.
U.S. data center efficiencies have traditionally been low due to a variety of factors including ineffective cooling, air containment and air distribution, improper placement of IT rack enclosures (versus hot and cold aisle arrangements), and lightly loaded UPS systems. Some data center power systems operate with efficiencies of 67 percent and below. By providing visibility into energy usage and waste, an EMS delivers identified measures that, when implemented, have proven to bring efficiencies into the 90 percent range, which is an exceptional difference.
What’s the End Result?
Through an ESPC, federal data centers can attain both consolidation and energy efficiency goals that may have been out of reach under the current fiscal constraints. Data center managers also gain access to the best technologies and custom-tailored solutions to deliver greater efficiency and optimal performance.
If they haven’t already, federal data center managers should be looking at ESPCs as a best practice for optimizing their facilities.
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