Data Centers - the return of the giant sucking sound

Computers have always been known to be one of the biggest energy hogs. Due to the increasing number of web servers required to continue our expansion into the digital age, new data centers filled to capacity with computer server racks are popping up all over the United States. This expansion should be a good thing for our economy, but until recently, energy efficiency was not high on the list of priorities for data center operators. Their chief concern was location location location as they looked to expand near place that had access to cheap electricity, which is why Microsoft, Yahoo, and Google have all invested in data centers close to cheap hydro electric producers in the Northwestern US. This lack of planning and foresight could really come back to bite us.

According to a report the EPA just released, power consumption by these data centers is growing out of control. At 1.5% of total electricity consumption, computer data centers are fast becoming the biggest consumers of electricity in the United States. Data center power consumption is on a tear, having doubled since the year 2000 and scheduled to double again by 2011. With Google's digitization of just about everything, and with everyone signing up for blogs, myspace accounts, and online photo sharing, data center operators such as Equinix cannot open enough data centers to keep up with the demand.

From one of my new favorite green blogs, Green Wombat:

"Left unchecked, data centers could double their energy consumption over the next five years at a cost of $7.4 billion annually, according to a report [to the US Congress] issued today by the U.S. Environmental Protection Agency. By 2011, the equivalent of 10 new power plants would be needed to supply 12 gigawatts of electricity unless the energy efficiency of data centers can be improved. That's bad news for the corporate bottom line and the environment. It's also a hit on taxpayers' wallets: federal government data centers alone consume about 10 percent of that electricity.

With the concern for global warming and increasing number of studies related to data center inefficiencies, the free market has the opportunity to once again save the day as a number of established and new companies bring products and technologies to meet the demands of the marketplace. Mature tech firms like AMD, Sun Microsystems, and even Dell, who I picked on for their plant a tree program, have taken the lead among tech companies in promoting energy efficient products and practices. This segment of the tech market has even spawned significant M&A activity as of late, with the recent acquisitions of virtualzation software firms VMWare and OpsWare by EMC and HP, respectively.

The opportunity for startups in this field is wide open. Besides microchips, which has been the focus of AMD and Sun, data center server software and hardware companies have a chance to make a huge splash in solving this growing problem. Even with the industry giants such as IBM and Cisco investing hundreds of millions into solving the energy consumption issue - small startups like Quellan and Net Effect are finding that they can capture a slice of the $4 to $5 billion dollar market with niche products such as more energy efficient cables and adapters. Like the fervor of investing in everything related to green power generation, I expect startup activity in the energy efficiency segment to start making some noise, with the data center segment being the most obvious opportunity for success.