`Server farm' boom poses threat to NW power supply: Energy appetite of proposed data centers would almost rival power load of Seattle - TUKWILA - -- 2000-12-26 by Russ Zabel

Journal Business Reporter, 2000 South County Journal

Twenty-seven or more Internet ``server farms'' proposed for the area could consume nearly as much electricity as Seattle and greatly magnify Northwest energy problems within two years.

High-tech companies, many from out of state, have submitted plans to construct a profusion of the warehouselike Internet traffic centers, most of them in South King County. Collectively, the server farms would require enough electricity to power a city nearly the size of Seattle.

The prospect of the server farms' huge demand for energy comes at a time when the region already faces nearly a 1-in-4 chance of winter power outages.

``This is just a massive load that was unforeseen by anybody,'' said Steve Secrest, director of rates and regulations for Puget Sound Energy, the Bellevue-based utility company that provides electricity to much of South King County as well as the Eastside.

One public watchdog group already worried about power shortages -- even without any new server farms -- is the Northwest Power Planning Council, which strives to balance wildlife and fish protection with power generation in Washington, Oregon, Idaho and Montana.

Based on a study completed last March, the power council predicted a 24 percent chance of winter outages in the four-state area by 2003.

That forecast didn't take into consideration the power needs of the proposed Internet server farms, said John Harrison, communications manager for the power council, which conducted its survey in March.

``The concept of server farms wasn't on the horizon (then) ... so we didn't include it,'' he said. ``Now it certainly is a concern for the region.''

A 2,400-megawatt problem

Without factoring in the server farms, the study's prediction of a 24 percent chance of power outages comes with a range of possible scenarios, from coming up short by tens of megawatts for a few hours to losing thousands of megawatts for a few days.

The study concluded there is a need for the ``equivalent of 3,000 megawatts'' in new generating capacity to ensure no more than a 5 percent chance of blackouts for the region, an industry standard in the power business.

Harrison concedes that coming up with an additional 3,000 megawatts of capacity by 2003 is not going to happen.

Two natural gas-powered electric generating plants are scheduled to come on line in 2003, and they will produce 600 megawatts of power a day, he said.

``We would still have a 2,400-megawatt problem.''

Additional demand from the proposed server farms could only worsen the Northwest's power crunch.

Tony Usibelli, a senior energy policy specialist with the state Community Trade and Economic Development Department, worries about the impact of the proposed server farms.

``I think it's definitely a concern,'' he said, ``and whether this is going to be the straw that breaks the camel's back is a good question.''

No saying no

Whatever happens, there is no regulatory mechanism that would allow Seattle City Light or Puget Sound Energy to just say no to the server farms. The utility companies, by law, have an ``obligation to serve,'' Usibelli said.

That obligation could be huge.

It is unclear now whether all of the prospective server farms will be built, but 24 -- needing a total of 700 megawatts of power a day -- are proposed for Puget Sound Energy territory. That covers the Eastside and the South King County area below parts of SeaTac, Tukwila and Renton. Most of the server farms would be located in South County, Secrest said.

Meanwhile, Seattle City Light has received requests for 125 megawatts of power a day from three Internet server-farm companies in its territory. City Light also has received inquires from other high-tech companies interested in setting up four more server farms that would need an additional 275 megawatts a day, spokesman Dan Williams said.

The potential total of 1,100 megawatts a day needed for the proposed server farms is almost the same amount of power used by the entire city of Seattle -- including large energy users such as The Boeing Co., the world's biggest plane maker.

The increased electricity the 31 possible new server farms would consume would be a jump in energy use neither City Light nor Puget Sound Energy has ever before experienced.

The server farms would represent a 10 percent jump in growth for the two utilities, both of which are accustomed to increases of only 1 to 2 percent a year.

It isn't just a question of the server farm companies simply flipping a switch to start business, either.

The transmission lines, transformers and substations supplying power to the server farms would have to be upgraded first, PSE's Secrest said, and that will cost between $40 million and $65 million a pop.

No increase in bills?

Secrest insists regular ratepayers won't end up footing the bill.

``Our plan is to make sure we don't do anything where other customers subsidize (the improvements) or face rate increases,'' Secrest said.

Puget Sound Energy is poised to submit a tariff application dealing with Internet server farms to the state Utilities and Transportation Commission, which regulates the utility. Secrest said the tariff application would require the server-farm companies to pay for the needed infrastructure improvements.

The Seattle City Council, which oversees City Light, already passed a law in October imposing such infrastructure costs on ``large load'' customers such as the server farms.

It's a necessary step for both utilities, City Light spokesman Bob Kluge said.

The utilities, he said, can't afford to spend all that money and would risk getting stuck with a ``stranded investment'' if the server-farm companies later fold up shop and leave.

Russ Zabel can be reached at 253-872-6717 or russ.zabel@southcountyjournal.com.

Server farms work like giant switchboards for Internet

By Russ Zabel

Journal Business Reporter

TUKWILA -- Internet server farms form the heart of the information superhighway.

They could be compared to a railroad switching yard or an old telephone exchange -- except instead of railroad cars or telephone calls, the traffic or messages are in binary code.

An Internet data center is powered by computers -- lots of them, stacked in rows of racks.

``What it is comprised of is devices that handle the communication back and forth between servers and hosts and clients,'' explained Orville Cooper, chief technology officer for Zama Networks, a high-tech company in Tukwila that operates its own in-house Internet server farm.

An Internet server is a combination of hardware and software needed to translate the binary data, Cooper said.

When someone at home logs onto a Web site, for example, a binary signal is transmitted through telephone lines, cable modems or a digital subscriber line (DSL) hookup to the provider company's central office.

From there, the information is routed through fiber-optic cables to an Internet server farm, where the Web page exists in one of the server farm's computers. Each computer can host one or more Web sites. The information on the Web site is then returned to the person's computer at home across the same route the log-on request used.

An Internet e-mail message uses the same sort of routing, except the message is sent to someone else on his or her home or office computer.

Operating day and night, processing all the signals entering and leaving the server farm, its computers create a lot of heat. That's why so much electricity is needed. Roughly 40 percent of the power used at Internet server farms is for air conditioning to keep the racks of computers from overheating and breaking down.

Fiber-optic networks, not energy, prove big lure for server farms

By Russ Zabel and Clayton Park

Journal Business Staff

TUKWILA -- In a couple of years, this region could become home to more than two dozen power-hungry Internet server farms.

But the Northwest's energy resources aren't the reason they're coming here, local utility officials say.

To the mostly out-of-state high-tech companies that want to set up the server farms, the real attractions this area holds are the vast underground fiber-optic cable networks installed throughout the region in recent years.

Fiber-optic networks are crucial to the operation of Internet server farms because they have the broadband capacity to handle large amounts of data.

A partial list of the many companies and public entities that own or maintain fiber-optic networks in the Puget Sound region include AT&T, Qwest, Verizon Communications, MCI WorldCom, Starcom, Puget Sound Energy, the city of Bellevue, the Bellevue School District, Level 3 Communications, MetroMedia, 360networks, Williams Communications Group, GST, XO Communications, US Crossings, Summit, Sprint and Zama Networks.

The amount of fiber-optic cable operated by each entity varies widely. The city of Bellevue, for instance, operates its system only within the city limits, whereas Broomfield, Colo.-based Level 3 Communications operates a 72-mile loop circling Lake Washington.

Spare capacity

While high-tech regions in other parts of the country, most notably in California's Silicon Valley, also have extensive fiber-optic networks, what makes the Puget Sound area unusual is that fiber-optic networks here are largely underutilized.

``We happen to have a lot of spare capacity,'' said Hank McIntosh, a regulatory consultant with the Washington Utilities and Transportation Commission.

A lot of fiber-optic companies gambled by laying their respective underground cable networks in hopes of landing lucrative contracts from high-tech companies and companies such as The Boeing Co. once those networks were operational, McIntosh said.

Apparently, those contracts didn't materialize, he said.

Better here than there?

Other drawing cards this region has to offer include the concentration of high-tech companies already here and the livability of the Greater Seattle area, which makes it easier for companies to attract skilled technology workers.

``Technically, these server farms could be in Moses Lake,'' but the quality of life is better in the Puget Sound than in Eastern Washington, said Bob Kluge, an account executive with Seattle City Light. ``It's easier to recruit people to live here than elsewhere.''

While energy might not be the driving reason behind the out-of-state companies' desires to set up Internet server farms here, California's severe energy shortage could be ``accelerating the process'' of bringing them to the Northwest, McIntosh said.

Steve Secrest, director of rates and regulations for Puget Sound Energy, said companies wanting to set up new Internet server farms ``are increasingly shying away from the (Silicon Valley) region because of brownouts.''

Power outages can cost Internet companies a bundle. According to the 175-member Silicon Valley Manufacturing Association, the rolling blackouts there this past summer cost high-tech companies as much as $1 million a second, depending on how widespread the outages were.

``I don't think it (energy) is a driver,'' McIntosh said of the push to set up server farms here, ``but it might be.''

Energy relief remains a couple years away

Journal Business Staff

The more than two dozen proposed Internet server farms and their appetite for electrical power would pose the biggest concern to local utility regulators if they all were to come on line immediately.

``It could be a problem, but it depends,'' said Hank McIntosh, a regulatory consultant for Washington's Utilities and Transportation Commission. ``How fast would these loads show up? That makes all the difference in the world. In the worst case, it could be a problem. Everybody's pretty nervous about energy right now.''

If they were to come on line gradually, perhaps over a few years, it could be a different story.

Liz Klump, a senior energy policy specialist with the state's Community Trade and Economic Development Department, said she knows of at least a half-dozen private companies that have received permits to build gas-fueled electric power generators. That new generation capacity would more than offset the power demands of the server farms.

The problem, according to Klump, is that it would take an estimated two years for the new generators to be built, whereas server farms can be set up fairly quickly.

``If the numbers regarding the magnitude of new server-farm load are real (1,100 megawatts a day), that's a lot of power to absorb in a two-year time period,'' she said.

Klump also believes it would be unfair to single out the new server farms in placing blame for the Northwest's worsening energy outlook.

``I don't see utilities offering energy efficiency programs they should be offering,'' she said. ``The part I see missing: I don't see utilities with comprehensive plans for managing their consumers' loads.''

In 1993, utilities in this state spent $150 million on energy efficiency programs. Since then, funding for those programs has been reduced by about 70 percent, Klump said.

``The West Coast energy market is quite tight right now,'' she said. ``There is no energy abundance on the West Coast.''

Warehouses may become digital farmbelt

By Russ Zabel

Journal Business Reporter

TUKWILA -- South King County, once known as a farmbelt before giving way to an onslaught of industrial warehouses that now dominate the area, is on the verge of once again becoming farm country.

For Internet server farms, that is.

Local real estate brokers and developers, many of whom helped fill the Kent Valley with warehouses, are ready to welcome the newcomers with open arms.

High-tech properties have ``become the most active portion of our business in the South County area,'' said Chris Corr, a real estate broker with Kidder, Matthews & Segner. ``Plus, tech users pay more rent.''

Developers and tenants of high-tech property also are willing to pony up more cash. The Valley Industrial Park, an eight-building, 960,000-square-foot complex in Kent, is a good example.

RREEF Funds, a pension manager for California Public Employees Retirement Fund, bought the property last year for a little less than $37 a square foot, or about $35.5 million.

According to a third-quarter report from real estate brokerage firm Cushman & Wakefield, the property was sold this past fall for $48 a square foot to TrizecHahn, a Canadian company based in Toronto.

The $46.1 million purchase price represented almost a 30 percent jump in value in a year's time.

TrizecHahn didn't return phone calls for comment, but the Cushman & Wakefield report says the company plans to convert four of the eight buildings to data centers that will command significantly higher rental rates.

The report also indicates the campus is located near fiber-optic lines and that extra power service will be brought to the site.

The Kent Valley -- and to a lesser extent the Eastside -- are especially attractive to Internet server farm companies, said Dave Magee, a Cushman & Wakefield real estate broker who is working with several high-tech companies.

``Downtown (Seattle) has less than a 1 percent vacancy rate,'' Magee said of space suitable for high-tech development. By contrast, the Kent Valley has a high-tech vacancy rate of 2.12 percent, while the Eastside has 2.02 percent, according to a third-quarter report from real estate brokerage firm CB Richard Ellis.

For the Kent Valley, that 2.12 percent vacancy rate covers only space already built for high-tech use. It doesn't reflect the area's abundance of warehouse properties that easily could be improved to accommodate Internet server farms.

When it comes to warehouse properties, no other area in the Puget Sound region has as much as the Kent Valley.

But not just any old building can be retrofitted to house an Internet server farm.

Because server-farm equipment is heavy, a building must bear a minimum floor-load capacity of 150 to 250 pounds per square foot, Magee said.

Ceiling space of 12 to 14 feet, often found in warehouses, also is required.

``Then you need anywhere from 30,000 to 300,000 square feet of space,'' Magee said.

Corr said Internet server farm operators also favor the Kent Valley over urban areas such as downtown Seattle because warehouses offer more room to set up generators to provide backup power, an important consideration.

Magee said lease rates are another factor for high-tech companies, but not a major one.

``Price is important,'' he said, ``but it's probably fourth or fifth on the list of priorities.''

Then there's the power issue.

``It's not so much the cost,'' Magee said. ``The biggest issue is the timing.''

If the Internet server farm companies can't arrange to meet their power needs in a reasonable amount of time, they're likely to look elsewhere, he said.

``This is tip-of-the-iceberg stuff,'' Magee said. Acquiring the needed power is problematic, and pursuing it is not for the faint of heart, he said. ``But I'm convinced these people who commit themselves to acquiring (power) are going to be rewarded several-fold.''

Steve Secrest of Puget Sound Energy agrees.

``What you're seeing now is a mad scramble to get a piece of the pie,'' he said.

Mark Weed, president of commercial real estate for Fisher Properties, thinks the Internet server farms should be set up in the Puget Sound region.

``I see it as integral to the Northwest and our actual growth pattern,'' he said.

Weed concedes the power issue is a key one, but he doesn't think accommodating the Internet data centers presents an insurmountable problem.

``I think it's real important for everyone to work together,'' he said, ``because it (high-tech development) is important to the continuing economic viability of the region.

http://www.southcountyjournal.com/sited/retr_story.pl/37943

-- Martin Thompson (mthom1927@aol.com), December 26, 2000

Answers

Perhaps the state's utilities have an obligation to provide electricity to server farms. But the state does not have to allow such businesses to incorporate. Since server farms are unlikely to bring many jobs to a state, serve mostly people outside the state where they are located, and can be relocated at modest cost compared to a factory AFTER huge investments have been made in expanding electricity infrastructure, they do not seem like the kinds of businesses that benefit the people of any state.

-- Neil Ruggles (nmruggles@earthlink.net), December 26, 2000.