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Net blamed as crisis roils California
(IDG) -- The high cost of deregulation may be bringing California's two largest electric utilities to the brink of bankruptcy, but the growth of the Internet is also to blame for the rapid destabilization of the nation's electric power infrastructure.
So concluded a premier agency of the electric power industry and officials at some utilities, who cited a huge increase in demand in areas where Internet hubs and data centers have come online in the past few years. In the heart of Silicon Valley, for example, power demands skyrocketed by 12% last year, while the rest of the state saw an overall increase of 2% to 3%, said John Roukeme, a spokesman for Silicon Valley Power, the municipal utility for the city of Santa Clara, Calif.
"A single [Internet] data center - and we have many in the area - can easily consume more power than the largest manufacturing plant we serve," Roukeme said.
Southern California Edison, a division of Edison International in Rosemead, Calif., and Pacific Gas and Electric, a subsidiary of PG&E in San Francisco, have been forced to buy power normally priced at $30 to $50 per megawatt for as much as $1,000 per megawatt on the spot market. Both companies, especially PG&E, are in a financial crisis.
But PG&E spokesman Scott Blakey said the state's power need is more dire. "If we don't get juice in here and the ability to move it around, we're going to be in trouble," he said.
The situation has become so desperate in the region that Intel CEO Craig Barrett said last week that his company wouldn't build another semiconductor plant in the state until it's resolved.
Utilities have cut power to consumers and businesses on short notice in predetermined areas. One such so-called rolling blackout affected Digital Think, an application service provider in San Francisco, last week, but its IT equipment wasn't affected because it's hosted by Exodus Communications, said Kevin Cornish, IT director.
Internet data centers contacted for this story said they haven't been affected so far. The reason, said Chris Hardin, director of Santa Clara operations at Exodus Communications, is that companies sign contracts that call for power companies to deliver electricity that the customer must pay for even if it doesn't use it.
"It's like a lunch. If you order it and don't like it, you're going to pay for it anyway," Hardin said. But he noted that to ensure power for its customers, Exodus is looking at options such as local power generation.
Preparing for data center power demands is unlike anything utilities have faced. "Internet data centers are a blueprint for 60 megawatts of power coming [into] service in 60 days. That's the equivalent of a steel plant, which you can see coming a year in advance," said William M. Smith, manager of market-driven load management at EPRI, the electric utility industry's research arm.
However, that demand could "disappear in three or four years," Smith said. Palo Alto, Calif.-based EPRI estimated that it takes 20 years for a power company to amortize the costs of building power plants.
Roukeme said Silicon Valley Power's load could double in the next two or three years, with 80% of those new requests coming from Internet data centers.
Old ways wearing out
Before the current crisis, California slaked its thirst for power by buying excess electricity from areas like Nevada and the Pacific Northwest.
According to Smith, Las Vegas-based Nevada Power and the Bonneville Power Administration in Portland, Ore., have had to cut back sales to serve the phenomenal growth in demand from Las Vegas and because of environmental restrictions on the Columbia River that cut hydroelectric power output.
Some disagree with those who attribute the crisis to data center expansion and other demand growth.
"We think that the crisis stems from poorly planned deregulation legislation, not from a supply shortage," said Susannah Churchill, an energy associate at the California Public Interest Research Group in Sacramento. Similarly, Gov. Gray Davis last week blamed deregulation in his State of the State speech.
Yet others said they agree that the Internet is a contributing factor. Bob Hepple, president of Calpine cPower in Pleasanton, Calif., said Internet data centers are the fastest-growing market segment for electric load demands among commercial industries.
"They're expanding at 13% to 14% vs. the normal 2% growth," he said. His company, which was launched last May, builds and operates on-site power and cooling plants for data centers.
California, which uses more than 260,000 gigawatts of power per year, consumes more energy than Italy and is the first state to feel the crunch, according to Smith.
"There is no safe haven," he said. Regions most at risk are those that have an optical network hub for the Internet, such as Seattle and Phoenix, where population pressures are increasing with the number of data center installations.
Power companies in the Northeast and Midwest are somewhat better prepared, said Michelle Schofield, vice president of corporate marketing at Silicon Energy in Alameda, Calif. That's because they have better load management tools than California suppliers, which, until the recent burst of Internet data center growth, were protected by the relatively mild climate and didn't need to accommodate power-intensive air conditioning and heating systems.
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