Utility company rebates for virtualization yet to take off

Utility companies now offer rebates for data centers that reduce power consumption with server virtualization technologies. But so far, few companies have benefited from these incentives.

Several utility providers that are on the hook for power efficiency have created incentive programs for companies that deploy server virtualization technology, but thus far few companies have been able to take advantage of the cash rebates.

The current growth in server energy consumption levels will necessitate additional capacity of more than 10 1,000 MW power plants by 2010, according to a December 2007 a study by Jonathan Koomey of Stanford University.

With alarming statistics like this, several states have put pressure on utility companies to reduce power consumption. Last year, California put in place an executive order that calls for the state to reduce electricity demand 10% by 2010 and 20% by 2015. And now, utilities have encouraged companies to turn to virtualization technology to increase physical server utilization and reduce data center power consumption.

"Lawmakers in 20 to 25 states have recognized that rewarding utility companies for selling the maximum amount of power is not the best plan," said Josh Leslie, the director of alliances at VMware Inc., who has traveled the country to lobby utility companies to add rebate programs for use of virtualization technology. "Now some states are penalizing utility companies for going over certain thresholds."

Gaining critical mass?
And with California in the lead, utility rebates will be -- or already are -- available in Massachusetts, New York, Connecticut, Florida, Ohio, Minnesota, Oregon, Texas Washington and Hawaii, Leslie said.

Some organizations have begun to see the benefits of rebate programs. 18 months ago, the IT group at Brandeis University in Boston, for example, implemented virtualization and now has 210 virtualized systems on better-utilized physical servers with a power bill that is 20% lower than it was prior to the virtualization project, according to John Turner, director of networks and systems at Brandeis, who provided an overview of the virtualization project at a recent VMware user group meeting in Boston.

With those kinds of results, utility companies like Texas-based Austin Energy now offer cash incentives of up to $200,000 rebate per site per year for retrofit virtualization projects.

Austin Energy requires an application to be submitted before the installation and the manufacturer's volt-amp rating information for each and every server has to be submitted. A pre-inspection of the existing server systems is required prior to removal, and the removed equipment can't be re-used within Austin Energy's service area.

After the project has been installed, an Austin Energy representative does a final inspection and virtual server rebates are sent within four to six weeks.

Roadblocks remain
Still, whether it's because these initiatives are in their infancy or because of the hurdles required by these rebate programs, there is question as to whether these programs will in fact reduce data center power consumption on a wide scale.

In November 2006, California-based Pacific Gas and Electric Co. (PG&E) was the first to launch an incentive program for virtualization. Under the program, companies can be reimbursed up to 50% of the costs of a server consolidation project, including software, hardware and consulting, up to a maximum of $4 million per customer.

That sounds great, but PG&E's program has been quite slow to catch on, said Mark Bramfitt, the principal program manager for customer energy efficiency at PG&E.

"We spent the first six months, it seems, educating vendors about how the program works. The market has picked up, and now we have about 60 project applications in the door," Bramfitt said. So far, there have been only four rebates given to companies for virtualization projects, Bramfitt said.

These rebate programs can help offset the initial acquisition costs of virtualization projects, but in most cases users don't contact their utility companies about a project until after it has already started, which disqualifies them, said VMware's Leslie.

"A lot of people don't know they have to call their utility company before they start a virtualization project and report to them every step of the way," said Leslie. "That is where a lot of the problem is."

In hopes of increasing participation, PG&E simplified the calculation model that determines energy savings and incentive levels, Bramfitt said. The company will now pay a flat incentive of about $150 per server removed but will retain the requirement that customers apply for the incentive program before a project is undertaken, and PG&E has to see the equipment before and after the project to verify the number of servers removed, Bramfitt said.

Let us know what you think about the story; email Bridget Botelho, News Writer.

Also, check out our news blog at Server Virtualization blog.

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