The Real Green it Machine (a)

4 Pages Posted: 10 Jun 2009

See all articles by Brandt R. Allen

Brandt R. Allen

University of Virginia - Darden School of Business

Luann J. Lynch

University of Virginia - Darden School of Business

Abstract

A large bank is attempting to cost justify a proposed, large (60,000-square-foot) data center based upon energy savings achieved principally through the green technology of water cooling and energy recovery. The investments total about $100 million, offset somewhat by funds recouped from the closing of an older facility. The new building is expected to open with 700 racks of server computers. The power consumed by each rack costs more than the amortized cost of the computers themselves. The bank expects a 12% return on discounted cash flows.

Excerpt

UVA-C-2295

Rev. Aug. 5, 2014

THE REAL GREEN IT MACHINE (A)

Judi Ritts was senior project leader in the Corporate Information Services Group at Central Bank, the third-largest bank in the United States. In November 2008, she and her boss were reviewing the economics of green practices as they applied to the bank's next data center. Because the economics of computing had changed so dramatically, Ritts was certain she could justify the cost of investments and protect the environment at the same time. “Today's servers are providing 75 times more performance for the same hardware costs than just eight years ago,” she explained. “In addition, performance per watt has increased 16 times, which means the performance per watt of a server has been doubling every two years.” But Central Bank's business applications growth had outstripped performance improvement in servers; the cost of power and cooling infrastructure had become the primary cost drivers in a data center.

Central Bank was proposing a 60,000-square-foot center, which would replace its site in Charlotte, North Carolina, and, at the start, would contain 700 “racks,” each of which held 40 servers and their associated peripherals, memory, and disks. On average, such a rack consumed about 20 kilowatts (per hour)—or 20 kilowatts × 24 hours × 365 days × 2.6 efficiency × $ 0.10/kilowatt hour = $ 45,600 per year—almost as much as the three-year depreciation expense on those servers. The new center's energy efficiency was the crucial factor. The standard metric was power usage effectiveness (PUE), which was the total power usage of the data center divided by the power usage of the servers. The ideal PUE was 1.0. Ritts thought Central Bank might be able to reduce its efficiency rating from 2.6 to 1.30 if all the green technologies worked as planned.

Built to Tier IV standards, the most stringent in the industry, the new center would cost more than $ 100 million and include a raised-floor building, an uninterruptable power infrastructure, energy recovery, and the technology for water cooling and recovery. Tier IV standards were designed to achieve 99.995% availability; they required multiple active power and cooling distribution paths and redundant fault-tolerant components throughout. For some servers, the water cooling would come right down to the chip level. Other energy-saving technologies staged data to disk drives based on frequency of use and switched off idle drives.

. . .

Keywords: green data center, cost justification, capital investment, energy efficiency, return on investment, power saving technology, Power Usage Effectiveness, Tier IV data center standards, investment analysis, Monte Carlo analysis, depreciation, hurdle rates, N

Suggested Citation

Allen, Brandt R. and Lynch, Luann J., The Real Green it Machine (a). Darden Case No. UVA-C-2295, Available at SSRN: https://ssrn.com/abstract=1417165

Brandt R. Allen (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924 -4842 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/allen.htm

Luann J. Lynch

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

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