Opinion: Carbon Tax and the Impact on Data Centres

Despite concerns in the wider economy and community, a Carbon Tax may actually have little effect on the ICT industry

The details of the Carbon Tax have finally been revealed and everyone wants to know how it will affect them. The IT industry is no exception and questions arise as to the likely impact on data centres, Cloud usage and even green IT initiatives in general.

Although the government says that there will only be about 500 companies that pay the carbon tax, we will all end up paying it indirectly, as the added costs to these companies gets passed along the supply chain. Unfortunately, it is very difficult to predict with much certainty what the actual pricing impact will be. However, it would be reasonable to assume that some broad based corrections will occur as a result of the new tax, which will include the IT sector.

When it comes to data centres, one input stands out as a potential major contributor to increased IT costs: electricity. There are varying estimates floating around as to the impact a carbon tax will have on the price on electricity. Although, relative to other expected prices rises, it may not be a dominant element.

Somewhat counter-intuitively then, it is possible that the Carbon Tax’s effects on electricity prices may actually have a relatively minimal effect.

This is because in response to electricity providers needing to upgrade their ageing infrastructure, electricity prices in Australia have been on the rise for some time, with predictions of a lot more to come. So, companies have already been preparing for this eventuality, long before a Carbon Tax came along.

Add to that, the industry’s adoption of the Green IT message over the past few years and we have a situation that probably puts the ICT sector ahead of the curve, compared to other parts of the economy, when it comes to planning and taking action to offset predicted increased prices, with or without a Carbon Tax.

These two things will therefore likely help cushion the blow with the introduction of a Carbon Tax, as long as companies have been, or soon will, take steps to address the power consumption of their IT equipment. And there are some simple steps that people can take.

The most obvious one is to replace old equipment with new. This is because newer equipment generally offers better performance per watt. In fact, the advances in power consumption per unit of performance have been significant in the past few years and so replacing a server that is only a few years old can actually realise major benefits. The other advantage of newer generation equipment is that often these devices can run at higher ambient temperatures. Cooling a server, for example, can cost as much as 40 per cent of the cost of powering the same server. So any increase in the temperature your equipment can run at means the less it needs to be cooled and thus a reduced demand on electricity, giving a multiplier effect on your savings.

It is important to note that the carbon tax is not about electricity consumption alone. It is about low carbon emissions. So consuming the same power but switching to renewable energy sources is also a way forward. But in Australia with a heavy reliance on coal fired electricity generation, and limited economical alternatives for low emissions generation, in the short term at least, the focus is likely to be on quick hits, such as reducing electricity consumption from our existing high carbon emission sources.

Longer term, there is potential for moves to alternative lower carbon emission electricity sources. How quickly this occurs depends on how effective the government assistance packages are to develop and promote alternative sources.

Will the Carbon Tax accelerate the move to public cloud computing? Ideas doesn’t think so, mainly because many companies have concerns about running their applications on public clouds outside of Australia where you could in theory avoid the tax. And in Australia public Clouds will be affected by the Carbon Tax. So in effect, a move to public Cloud hosts in Australia, just represents moving the carbon consumption, and hence the costs, around.

It is true that with public clouds and their economies of scale, in theory means that the public Cloud provider can use its assets more efficiently, than perhaps individuals could in their own data centres.

But Ideas believes that there are other issues at play, which means many companies are just not ready to take that step. And not even the introduction of a Carbon Tax is likely to speed things up.

By Gary Burgess

Gary Burgess is SVP Research & Operations at Ideas International and specialises in IT hardware research, including features, performance, Green IT, and pricing as well as IT Infrastructure Support Services research at Ideas International Limited (IDEAS, IDE:ASX). www.ideasinternational.com

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