Power price hikes to hit IT hard
If Eskom gets its way, electricity prices will more than double in the next five years, pushing up the cost of running data centres and providing cloud computing services to businesses and consumers. By Craig Wilson.
Eskom has asked for a 16%/year increase in electricity prices for the next five years — an effective doubling in the price over the period. This will increase costs for mobile operators and data-centre providers, with costs eventually flowing through to consumers, industry players have warned.
“We’re focusing on energy-efficient solutions more than ever before,” Reed says. “We’re forced to if we’re to keep costs down, but I don’t think these efficiencies will outweigh the increased costs and so some of that is going to have to get passed on to consumers.”
Similarly, Teraco Data Environments MD Lex van Wyk says the data-centre operator has absorbed the effects of Eskom’s price increases in the past three years but that may not be possible if further big hikes are approved by Eskom’s regulator, the National Energy Regulator of SA.
“We’ve passed nothing on to our customers in recent years,” Van Wyk says. “We’ve tried to keep our rates in line with consumer price inflation, even though the increases have been three to four times higher than it.”
He says Teraco has managed to absorb the increasing cost of electricity by growing its customer base and relying on efficiencies obtained through economies of scale. “Even though we’re investing more in increasing energy efficiency, it’s being offset by increasing power costs. We can probably keep doing it for another year or two, but then there is going to be an impact.”
Another challenge is that although the demand for space in data centres is growing, Van Wyk says hardware is becoming more condensed while using more power. “Equipment is using less space but more power, so the cost there is heavy,” he says. “[The increase] will impact the whole industry.”
Teraco’s Johannesburg data centre, the largest in the country, has a capacity of 6MVA, of which it is using roughly 2,5MVA. Its Cape Town operation is using approximately half of its 1MVA capacity.
Eskom’s proposed increases will more than double the price of electricity from 61c/kWh in 2012/13 to 128c/kWh in 2017/18.
MTN SA chief technology officer Lambo Kanagaratnam says the proposed price hike will have an impact on mobile operators, too, given that they use large amounts of power for base stations and data centres. “We’re looking to various energy-efficiency measures, particularly more efficient base station equipment.”
MTN is also trying to institute “green measures” for its data centres. Kanagaratnam says it is a “real challenge” to offset Eskom’s price increases and that operators are expected to bring down prices but that this is made more difficult because “in the basket of inflation a number of costs are going up”.
Internet Solutions’ cloud services business development manager, Barry Hatfield, says the IT industry is “feeling the pinch” of the electricity hikes, but adds that, relative to global pricing, power prices in SA remain “relatively reasonable” and that it would be “short-sighted to expect prices not to increase”.
“Prices should have been realigned a long time ago,” Hatfield says. “We’ve been partnering with clients to minimise costs. This includes investing in the most energy-efficient technology available when upgrading data centres or rolling out new ones and encouraging clients to use virtual, cloud-based environments wherever possible as these are almost always more efficient that dedicated, on-site environments.”
Internet Solutions is also encouraging customers with rack space to upgrade to more efficient hardware because manufacturers are realising that power is an issue and are trying to make more efficient equipment that can also run hotter, reducing cooling costs in the process.
“The problem for us is waiting for the last client in a data centre to upgrade because we have to cool on a worst-case-scenario basis,” Hatfield says.
He says Internet Solutions has tried to absorb the increases in recent years as much as it can, but has put up its prices recently. The company has also taken to billing for power as a separate line item so that customers can see the input costs and increases can be shown to customers rather than trying to compensate for them by increasing pricing on bundled packages. — (c) 2012 NewsCentral Media