How to Determine ROI on Capital Expenditures when Going Green

When it comes to creating a greener future for data centers, industry leaders have to face two facts. The first fact: we need to act on reducing our electricity usage now. We’re already consuming 10 to 50 times as much energy as the average commercial business building, representing three percent of the world’s available power. That number is set to grow rapidly unless we initiative immediate changes. The second fact: achieving green initiatives can be exceedingly difficult for data centers. From operations to advisory boards to investors, it often takes considerable work with stakeholders throughout the organization to gain support and approve funds. Although both facts represent crucial truths that data centers must confront, they are oppositional to each other, making the entire project even more difficult.

In my time in the data center industry, I’ve learned that it’s not enough to simply choose to prioritize environmental initiatives. Once that choice is made, then the real work begins. Data centers cannot simply spend $100 million to construct a solar farm that provides fully renewable energy. Sustainability measures need to keep important business elements like uptime reliability and goal-tracking in mind. Perhaps most importantly, they have to keep profitability in mind. After all, reducing emissions doesn’t count for much if the business goes bankrupt doing so.

Like any other business decision, environmental measures that require capital investments need to be evaluated in light of a return on investment—setting a return on investment (ROI) threshold and crunching the numbers to determine the payback. When working through the economics of becoming a greener data center, there are four main categories for energy efficiency projects: short-term payback, long-term payback, no payback, and—trickiest of all—unclear payback. Identifying the different ROI considerations for green initiatives, we can better understand the task that lies ahead for all data center leaders as they determine where to persuade and where to compromise on the path to a greener future. Let’s take a look at the four types, in order of difficulty from easiest to hardest.

Short payback

The easiest kind of green initiatives are ones that provide an immediate and considerable payback. One example of such a project in my career was addressing Involta’s air supply distribution to make it more efficient and precise. In order to provide a more consistent air supply to computer room IT equipment, we worked with a partner to design, construct, and implement a way of providing cool air to our cold aisle with a fabric sleeve instead of metal. The result is the ability to turn nozzles on to create more air in the places that really need it. Because the results were immediate and impressive in terms of both costs and sustainability, this was a straightforward decision.

Long payback

For projects without such a quick payback, the decisions are less straightforward. Committing a large amount of money on technology to enable savings that you might not see for years can be challenging. For instance, look at computer room air conditioning (CRAC). CRAC unit power consumption represents one of the highest overhead costs in a data center’s budget, and is a prime target for increasing operational efficiency and sustainability. Installing a solution like hot and cold aisle containment addresses the problem, but the payback schedule is long, and the benefits may not be on the timeline leaders would like to see in the marketplace.

No payback

Some projects don’t deliver a long-term or short-term financial payback. On their face, these decisions seem like easy ones to not pursue. However, that’s not always the case. One example of this kind of decision from my career occurred after a devastating storm struck the area surrounding our central Iowa facility, resulting in major damages to not just the buildings and infrastructure in the area, but the natural ecosystem as well. Initially, our response efforts centered around maintaining uptime and providing communication lines to support local collaboration efforts to get the community on its feet again. Beyond that, though, we also chose to enter a program led by a local non-profit organization to restore native trees in the region, donating trees to all employees who wanted to participate. They often aren’t simple decisions, but serving your communities and doing the right thing can often mean capital outlays with no chance of paying financial dividends.

Unclear payback

The most challenging environmental decisions for data centers are ones where, after analysis, the ultimate financial payback is uncertain. The uncertainty can come from unknown variables, variables that are only partially known, or variables that are too fastidious to nail down. An example of this type of decision can be found with solar initiatives. Solar power presented very little payback 10 years ago, and facilities that invested in solar power did so without being able to determine a viable payback. It represented a blind jump, but today those investments are slowly approaching cost parity. As time passes and technology progresses, green initiatives with ambiguous payback evaluations initially can become more clear later on – but it requires an initial investment where the ROI assessment appears risky. In the past few years I have observed more companies being willing to make this type of decision, which is a great sign for the industry. Acquiring an ESG rating, paying extra for renewable energy, or even going out of your way to seek out alternative power sources have all become more common.

The two indisputable facts of data center sustainability – firstly that energy reduction presents an urgent need and secondly that environmental initiatives present difficult business policies to enact – aren’t going away. Data center leaders need to learn how to face them both simultaneously, which will require determining just what kind of ROI is involved. Whether the predicted payback is right around the corner, longer down the road, hazy, or not there at all, there is always a way forward. The different types of decisions require different approaches and individualized problem solving, but none are roadblocks on the path to a greener future.

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