Incentive programs for greater energy efficiency are a common offering of electricity providers. Many of these programs don’t require special action in order to take advantage of them. Utilities offer incentives designed to change purchase choices and consumption habits while allowing enterprises to remain focused on business goals. Many IT departments can integrate incentives and rebates into existing refresh cycles for computing equipment.

Follow Info-Tech’s recommendations to ensure IT receives significant monetary incentives from utilities, in addition to the ongoing cost savings associated with energy efficiency projects.

The Current State of Utility Incentives & Rebates

In December 2006, Info-Tech published the note, “Government and Utilities Offer Breaks for Green Data Centers.” This note recognized Pacific Gas & Electric Company (PG&E), a Silicon Valley utility giant, as a leader in greening the IT department through data center energy efficiency incentives. PG&E still leads North American utilities when it comes to energy efficiency programs for IT. This makes sense because of California’s large population, overwhelming power demand and high concentration of energy-intensive, industrial-sized data centers.

Most regional utilities aren’t as aggressive as PG&E, instead offering a number of standard programs that may apply to IT (which are described later), but fewer incentives specifically targeted to IT. Info-Tech predicts this situation will change quickly. IT departments, as well as regional and federal governments and regulators, face increased pressure to ease the burden on taxed power grids and reduce carbon emissions. The U.S. Environmental Protection Agency’s landmark 2007 data centers report is a federally-sanctioned clarion call for energy efficiency.

Some utilities are, in fact, already developing IT-targeted programs. For example, Pennsylvania, Nevada and Connecticut utilities are now offering tradable energy efficiency certificates, with considerable payoffs for large IT projects.

Uptake on such programs is inconsistent because utilities do not heavily market them to IT departments, resulting in a low level of awareness. Additionally, IT is not always responsible for enterprise energy consumption. Moreover, enterprises usually need to apply before projects start to qualify. Therefore, IT should learn about incentives proactively, and apply for them before a project starts. IT loses nothing by applying, and has the potential to accrue significant one-time cost savings from rebates and credits, not to mention the ongoing savings resulting from increased energy efficiency.

Program Types

• Energy Efficiency Rebates. These are available as an incentive to encourage energy efficient choices when considering purchases and upgrades. For example, Avista, a utility in the Pacific Northwest, offers a $10 per-PC credit for power management software purchases. Info-Tech’s research has found that most power management apps cost between $7 and $20 per PC. Depending on the software chosen, Avista covers most of the cost of power management software.
• Renovation Incentives. For bigger changes to infrastructure and data centers, incentives are intended for choosing energy efficient construction or upgrades. Ontario’s Toronto Hydro offers a Business Incentive Program with payouts for energy efficient renovations if businesses apply before beginning projects.
• Performance Contracts. Most utilities offer these contracts, and in many cases, they can be customized to any enterprise energy efficiency project, such as data center virtualization. PG&E’s Virtualization & Server Consolidation Projects Initiative provides a credit of 8 cents per kilowatt-hour (kWh) for the energy saved due to virtualization. This typically works out to $150-$300 per server removed. Southern California Edison offers a similar program; in some cases, modifications to data center HVAC systems may allow a credit of up to 14 cents per kWh saved. Alliant Energy in Iowa may pay up to 150% of the annual energy dollar savings on projects with paybacks of two years or longer.
• Shared Savings Investments. This program is less common, but is particularly advantageous to cash-strapped IT departments. The utility makes the up-front capital investment for the energy efficiency project. Then, the business repays the investment via savings accrued on its power bill over a number of years. Alliant offers such a program to Minnesota and Wisconsin businesses.
• Loan Assistance Programs. Many utilities provide zero or low-interest loans to businesses wishing to make significant energy efficiency investments. Connecticut Light & Power’s Small Industrial & Commercial Loans Program, for example, provides an interest-free loan for the installation of "electric energy-savings measures" with a maximum loan of $250,000 and a six-year payback.
• Energy Efficiency Certificates. As mentioned earlier, a few utilities are beginning to offer these certificates. Although they are rare at present, Info-Tech believes they will become more common. In the case of Pennsylvania, Nevada and Connecticut, regulators mandated that utilities must offer these programs to their customers. To learn more refer to the Info-Tech Advisor research note, “Understand the Benefits of Energy Efficiency Certificates.”
• Education & Consulting Services. Many utilities offer a surprising range of technical materials for energy efficiency improvements, as well as consulting in the form of free audits, energy use analyses and other services. Each utility’s offerings can vary significantly, but the services are generally free, and may be helpful to some IT managers in pointing out quick wins with minimal investment.

Recommendations

1. Regularly investigate local utility offerings. Almost all utilities will offer incentives and rebates of some kind. IT doesn’t have to do much work to research what’s available or contact a utility representative for a consultation. Even if incentives are not applicable to IT, there are likely other programs available that the enterprise isn’t taking advantage of, such as incentives for efficient heating or physical plant improvements. Moreover, many utilities will apply their generic incentive programs to energy efficiency improvements in IT if the enterprise can prove energy savings. Investigate programs on an ongoing basis, as utilities will introduce more IT-specific programs in the future.
2. Talk to utilities before starting projects. Ensure programs are closely checked before beginning major new projects. Although the benefits are there to be had, most utility providers will only provide incentives if the project is approved before it commences.
3. Be prepared for required energy efficiency projects. Tighter regulations on how IT can consume energy are a definite possibility in many regions. In December 2006, U.S. federal authorities announced that all government PC purchases will soon be required to conform to EPEAT specifications, which limit the amount of energy PCs can consume. Keep abreast of local developments, which may be communicated or enforced through utilities.

Bottom Line

Rebates and incentives from utilities for enterprise energy efficiency projects are increasingly common, but tend to be underutilized by IT departments trying to go green. Understand the current state of energy efficiency programs and learn about what’s currently offered. Ensure that, before starting major projects, the IT department investigates utility incentives that improve ROI with minimal additional cost.