In late September, while on the stump in Michigan, George W. Bush outlined his energy plan for America. More domestic oil drilling was needed, he told the crowd, because the country's energy needs far exceed its current production. We also need more renewable energy and more electric power because, he said, "today the equipment needed to power the Internet consumes 8 percent of all the electricity produced in the United States."

Bush isn't the only one to use the 8 percent figure. Over the last 18 months, that estimate - first published in a May 31, 1999, article in Forbes by Peter Huber and Mark Mills - has appeared in reports issued by investment banks, in energy projections issued by natural gas companies, and in numerous magazines and newspapers.

But is it, in fact, an accurate reflection of reality present and future?

Questions about the Internet and electricity usage gained velocity this fall, after tech guru George Gilder and the Energy Information Administration both weighed in on the topic. In September, Bambi Francisco at CBS' MarketWatch.com reported that Gilder was predicting the Internet would "eventually use as much electricity as the entire U.S. economy does today." In late November, the EIA significantly increased its projections for future electricity usage and named computers as a cause.

Meanwhile, California continues to be rocked by serious electricity shortages. On Dec. 7, the state declared a Stage 3 emergency, meaning that residential and commercial users could face rolling blackouts. On Dec. 13, the power shortage became so severe that U.S. Energy Secretary Bill Richardson threatened to hit out-of-state power producers with federal price controls if they didn't begin shipping more electricity to California immediately. Richardson also ordered federal hydroelectric networks to boost power generation. His moves helped the state avert widespread blackouts, but the long-term prospects for California's electric power system are unclear.

These predictions and events have helped fuel a surge in the prices of once-stolid electric utility stocks. They have also contributed to the widespread belief that the Internet is causing big increases in domestic electricity usage. And while evidence supports that belief, it's not yet certain that the Internet is causing or will cause Americans to use vast amounts of additional electric power.

There's another problem: Huber and Mills' 8 percent estimate appears to be wrong. All office, telecommunications and network equipment in the country actually uses about 3 percent of the power consumed in the U.S., said a group of staff scientists at Lawrence Berkeley National Laboratory. That analysis is supported by Steven Taub, an associate director at Cambridge Energy Research Associates, an energy consulting firm. The Lawrence Berkeley scientists are "much closer to right," Taub said.

Questions about the Internet and electricity consumption are part of a broader debate over global warming. If Huber and Mills are right, the Internet's expansion is contributing to the warming of the planet and is therefore damaging the environment. If their critics are right and the Net is lowering the quantity of power needed to keep the economy humming along, it should be having a positive impact on the environment.

Despite the attack on their estimate, Huber and Mills have refused to back off their 8 percent figure, triggering a rancorous debate over their motives, methods and credentials.

Not surprisingly, the debate is suffused with politics: Huber and Mills are free-market conservatives who argue that the solution to looming electricity shortages is to build more big power plants. Their critics, generally speaking, are left-leaning energy analysts who favor distributed generation plants, higher-efficiency products and renewable energy programs, while opposing big new power plants. Increased use of the Internet, these critics argue, is increasing productivity and significantly reducing the nation's "energy intensity" - the amount of power needed to produce goods and services.

Quality Vs. Quantity

Even if Huber, Mills and Gilder are wrong about the quantity of power used by the Net, the debate they have spawned is long overdue, and the issues they raise are crucial for the Internet and those who use it.

The nation's ageing power grid is sagging under the strain of surging economic growth and the need for more reliable power. According to the Electric Power Research Institute, America's generating capacity has grown 30 percent over the past decade, but its transmission capacity grew just 15 percent. EPRI predicted that over the next 10 years generation will grow another 20 percent, but the infrastructure needed to deliver that power will grow by just 4 percent.

Nowhere are the problems of generation and transmission more evident than in California. "It's a dire situation," said Michelle Montague-Bruno, a spokeswoman at the Silicon Valley Manufacturing Group, which represents 190 companies in the region. To save power, members are turning off nonessential equipment, including some lights and computers. Electricity became a key issue for the group in June, when Pacific Gas & Electric was forced to cut power to about 100,000 customers after managers of California's power system warned that the San Francisco Bay area's power grid was near collapse. Those problems continued into December, when the problem was exacerbated by cold weather, power plants idled for maintenance and a shortage of electricity that can be imported.

"There's a perception that the high-tech industry is responsible for the boom in power consumption. That's not necessarily accurate," Montague-Bruno said. "It's due to the boom in construction and the overall growth in the economy and population in California."

Since 1998, California has licensed eight new power plants. But that new power won't begin coming online until next summer, which means the state's electricity woes are likely to continue for many months to come. Some companies have begun to look more closely at on-site generating equipment, including gas-fired turbines and fuel cells. Those technologies could be implemented at far lower cost than centralised power plants, and would obviate the need for big investments in new high-power transmission lines. In addition, on-site generation is more efficient - when electricity is transported long distances, significant amounts of power are lost due to resistance from the wires themselves.

Deregulation was supposed to lead to cheaper, more reliable power. But so far, deregulation, now under way in California and about two dozen other states, has only confused the nation's power picture. And all types of businesses - from manufacturers to dot-coms - are being forced to deal with questions about the availability, reliability and quality of electricity. America's power grid was "built on a 1950s and 1960s design that doesn't address the type of reliability that we need," said Karl Stahlkopf, vice president of power delivery at EPRI.

Stahlkopf, too, believes that Huber and Mills overstated the amount of power used by the Net. But he argued that much of the debate is over the wrong issue. Yes, the quantity of power used by the Net is important. But Stahlkopf said Huber and Mills have been prescient in their discussion of the reliability issue, which may be a longer-term problem than questions about availability. "The nature of power usage in America is changing, because all silicon-based equipment needs absolutely reliable power," he said. EPRI estimates that power interruptions - some lasting just one-sixtieth of a second - are costing American businesses some US$50 billion each year. Sun Microsystems has estimated each minute of power outage costs it $1 million, Stahlkopf said.

Power quality has become a white-hot topic in boardrooms and on Wall Street. Recent initial public offerings for flywheel-based uninterruptible power supply companies, such as Active Power and Beacon Power, and fuel cell makers, such as H Power and Proton Energy Systems, raised hundreds of millions of dollars. Companies of all kinds are spending billions of dollars per year on technologies, ranging from batteries and flywheels to diesel engines, to assure a constant flow of power to their factories, clean rooms and data centers. But that reliability has a cost: Much of the equipment consumes more electric power, which Mills said supports his contention that the Internet will increase power consumption.

"I don't believe for a second that electric power demand is going down," Mills said. "It hasn't for 100 years, and it won't go down now."

So who's right?

In the debate over power demand and the Internet, data centers are often exhibit No. 1. These facilities, also known as "server farms" or "telco hotels," consume vast amounts of electricity. With power concentrations of 100 watts per square foot, a 10,000-square-foot data center can demand as much power as 1,000 homes. But unlike homeowners who turn their lights off when they leave for vacation, data centres require full power 24/7.

In Seattle, a raft of new data centres is forcing the city to scramble to meet their needs. Over the next 24 months, the city's utility company expects a handful of data centres to raise its average daily demand by about 250 megawatts, an increase of nearly 25 percent over current loads. Other regions, including the San Francisco Bay and Chicago areas, are also facing power supply problems caused, in part, by data centres.

Little doubt remains that electricity usage is rising. Until recently, the EIA was projecting that domestic power demand would rise 1.3 percent through 2020. But in late November, the agency increased its forecast by 38 percent, to an annual growth rate of 1.8 percent, citing higher-than-projected economic growth and a "re-evaluation of the potential for growth in electricity use for a variety of residential and commercial appliances and equipment, including personal computers."

Although the EIA listed computers as a possible reason for the increase, economists and energy analysts cannot say with certainty why electricity usage is increasing, how fast it will grow or even the best way to meet that new demand. Nor is it clear how much of that growth is caused by Internet-related facilities, such as data centres.

Some experts, like Taub, believe that much of the growth is the result of the "wealth effect." Americans are making more money, so they are buying more gadgets that use electricity. In addition, people are buying bigger houses that require more lighting, air conditioning and other comforts that require lots of power. And as the American economy grows, more companies are launched, more stores and offices are built and, thus, more electricity is consumed.

Mills agreed that the wealth effect plays a role, but he firmly believes data centers will increase consumption. "When we get tens of millions of square feet of data centers, the power supply problem is going to be more acute," Mills predicted.

In fact, the two sides find some common ground when it comes to power consumption by data centers. Jonathan Koomey, a staff scientist at Lawrence Berkeley, has calculated that by 2005, data centers could be consuming slightly more than 1 percent of all electricity in the U.S. Koomey based his projection on a report written earlier this year by Richard Juarez, a senior Internet analyst at Robertson Stephens, who predicted that 50 million square feet of data centres would be online by that time.

Juarez's estimate may be conservative. On Dec. 12, IBM Chairman and Chief Executive Lou Gerstner announced that Big Blue will build 50 new data centers to meet the growing demand for the outsourcing of information technology services.

Still, Koomey and energy efficiency experts such as Amory Lovins, CEO for research at the Rocky Mountain Institute, an energy think tank, believe that Huber and Mills drastically overestimated overall demand from the Internet. For one thing, they said, the two erred in estimating that each computer now on the Internet uses 1,000 watts of power. In reality, the average desktop unit and monitor use about 150 watts. When in sleep mode, they said, that figure drops to 50 watts or less. Laptops are even more efficient, with some newer models using less than 30 watts.

Furthermore, they charged that Huber and Mills are carrying coal for the mining and utility industries. Last year, a day after the Forbes article appeared, the Greening Earth Society, a group financed primarily by companies that mine, transport and burn coal, published a report authored by Mills titled The Internet Begins with Coal. One of the Greening Earth Society's primary objectives is to cast doubt on the science behind global warming theories and to promote the message that "the Earth is actually getting greener thanks to increasing CO2 levels."

Huber and Mills are the co-editors of the Huber-Mills Digital Power Report newsletter, which is published by the Gilder Technology Group, the company headed by George Gilder.

In their Forbes article, Huber and Mills predicted that the "infoelectric convergence" would result in a massive increase in energy use.

Moving 2 megabytes of data on the Net, they said, requires the energy equivalent of 1 pound of coal. And with hundreds of millions of new digital devices, ranging from digital X-ray machines to Palm handheld computers, getting plugged in, the future of our economy depends on burning more fossil fuels, including coal, which produces 56 percent of the electricity used in America. All those Net-related electronics consume "up to 290 billion kWh [kilowatt-hours] of demand. That's about 8 percent of total U.S. demand," they wrote.

"Add in the electric power used to build and operate stand-alone [unnetworked] chips and computers, and the total jumps to about 13 percent. It's now reasonable to project that half of the electric grid will be powering the digital Internet economy within the next decade."

Critics and politics

Several statistics counter those assumptions. For instance, Koomey and Alan Sanstad, a staff scientist at Lawrence Berkeley, pointed to the EIA's 1999 calculation that all personal computers, including residential and commercial, use just 1.4 percent of the nation's power.

In fact, EIA data reveal that American homeowners use twice as much electricity running color televisions as they do operating PCs, and that TV power consumption will grow at a faster rate than demand from PCs will grow. An EIA stat that supports Mills predicted that electricity use by PCs in the commercial sector will grow at 5.1 percent per year through 2020, a rate far above that predicted for overall electric consumption.

The sharpest criticism of Mills has come from people like Lovins - who calls Mills a "liar" - and Joe Romm, executive director at the Centre for Energy and Climate Solutions, who has written extensively about how the Net is increasing the U.S. economy's efficiency. Last year, a report he co-authored about the Internet and global warming argued that computers and the Internet were creating structural changes in the economy that were reducing the demand for energy. EIA data appear to support his thesis. The amount of energy needed to produce US$1 of gross domestic product has been falling since 1991, and that trend has accelerated dramatically. Since 1996, energy intensity has fallen at an average rate of 3.2 percent per year, a phenomenon that Romm said is difficult to explain without including the effect of the Internet.

Romm and others said the equipment used to power the Internet is becoming much more efficient, thanks in part to the Environmental Protection Agency's Energy Star program, which is reducing the power demands of personal computers. What's more, they said, the basic building blocks of the Internet are also becoming more efficient. Intel's Pentium-class processors can require several dozen watts of power. Lovins pointed out that the new Crusoe processors from Transmeta, which will compete with Intel's chips, "draw, at most, 6 watts." And it won't be long, he predicted, before manufacturers begin building more energy-efficient servers to reduce their operating cost.

Despite Lovins' projections, there's a nagging question: If the Internet is making the economy more energy efficient and the 8 percent figure is wrong, why have Huber and Mills received so much attention, while Lovins and his allies have largely been ignored?

Romm accuses Huber and Mills of making radical estimates to draw attention to their $295-per-year newsletter. (Full disclosure: This reporter is a subscriber). "You get media coverage if you adopt an extreme, offbeat, unusual point of view," Romm said. Others, like Taub, blame it on the "Gilder Effect." Since Huber and Mills are associated with Gilder, many people assume they must be correct. "And if you repeat it enough, it starts to gain credibility because you hear it from so many sources," Taub said.

Mills said his critics are missing the point. He no longer cares what percentage of domestic electricity the Internet consumes. "I have chosen not to engage in the question of whether it's 5 [percent] or 6 [percent] or 8 percent," he said. Lovins and Romm can discuss global warming all they want, Mills said. They want to "save the planet," he said. "I'm not interested in saving the planet. . . . My objective is to keep silicon lit. And there's going to be a huge market for people who want to keep silicon lit."

Wall Street is more skeptical. "It's too early to call this," said Sam Brothwell, a stock analyst at Merrill Lynch who has been monitoring the debate. "I think there's anecdotal evidence that computer usage is growing, and it's having a significant impact" on total electricity consumption, he said. "But it's very hard to translate that into a number."

Right or wrong, Huber and Mills have left their mark on discussions about power and the Internet. And given the shortage of power in California and the EIA's projections for increased electricity usage, the utility industry is investing billions of dollars in new power plants. Lovins hopes that much of new demand will be met by nonpolluting technologies, such as fuel cells, and by renewable energy sources. "Wind power is growing 25 [percent] to 26 percent per year," he said. And photovoltaic cells, he predicted, will soon compete in price with other generation methods.

Mills said he, too, favours using fuel cells and renewable energy sources. But he said he doubts they can supply all the power needed. "We have to face real life. We have to provide power for the Internet economy," he said. "And that means burning gas, oil and coal."

Diesels fuel always-on service

Amid the quest for more bandwidth, faster networks and petabytes of storage capacity, the Internet still demands an old-fashioned commodity: horsepower.

Lots of horsepower. And Old Economy companies like Caterpillar and Cummins are happily providing New Economy enterprises with the muscle they need.

It's one of the strange but true equations of the Internet Age: More bandwidth equals more big diesel engines. Every major new data center, telecommunications switching facility and information technology center must have a backup power system. And the cheapest, most reliable technology for that task was invented 107 years ago by French engineer Rudolf Diesel.

"We just got a significant order from a long-distance company for 148 of our 2-megawatt generator sets," said John Heckelsmiller, a senior market manager at Cummins' Power Generation division. Heckelsmiller said the company is seeing double-digit increases in annual demand for its large generators. But getting one of those 2-megawatt diesel generator sets - each of which uses a 60-litre, V-16 engine that produces 2,500 horsepower - will take a while. Though Cummins' engine factory in England is running at full output, customers have to wait up to three months for delivery.

Caterpillar, the mining and construction equipment giant, has responded to the surge in demand for its big generator sets by doubling the capacity of its engine manufacturing plant in Lafayette, Ind. But demand is so great that Internet companies still must wait five to six months before they can get one of the company's 2-megawatt generator sets - at a cost of US$500,000 each. Demand for Caterpillar generators has been growing at 20 percent per year, and much of that demand is coming from Internet-related businesses. Larry R. Wilson, Caterpillar's director of strategic planning for electric power, estimated the company now sells some $200 million worth of generator sets per year to the Internet sector, and demand is "growing faster than any other segment" of Caterpillar's customer base, he said.

Although Internet data centres are spending heavily on generators, the owners of the expensive machines hope they never have to use them. Electricity produced by on-site diesel generators can cost three times as much as power bought from the grid.

But data centre owners have few choices. Fuel cells are still too small and too expensive. Small natural gas turbines are becoming more common, but have yet to capture significant market share. "Right now, diesel is the only choice," said Ed Doherty, a senior product manager at American Power Conversion, a leading manufacturer of uninterruptible power supply systems.

Indeed, backup power equipment has become as essential as fibre-optic cable. Companies vying for a share of the colocation and data center business are "differentiating themselves in the market by saying our redundancy and reliability is unsurpassed," said Elizabeth Moore, a program manager in the energy communications practice at The Yankee Group. "Power supply plays a very big part of that." Moore recently visited a 60,000-square-foot data centre that was equipped with rows of backup diesel generators worth millions of dollars. The power redundancy provided by the diesels is one of the most expensive parts of a data centre, Moore said. "But for the companies involved, cost is no object," she said. "They simply have to have the horsepower to keep the lights on."

Keeping juiced

By Max Smetannikov

Owners of data centres that house everything from corporate records to Internet content are exploring building their own power facilities, as well as other options, as they face tight supplies and rising costs of electricity.

Managed Web hoster Digex, for one, is looking into erecting its own natural-gas-powered turbines in front of its data centers. Companies such as Digex are worried that a lack of electricity will cripple their ability to scale their fast-growing and power-hungry businesses. They're also worried that deregulation, which has made power generation a private business in half the states in the U.S., will result in wild fluctuations in seasonal energy prices.

Digex is evaluating one plan to set up several turbines the size of tractor trailers in front of data centres and run them seasonally, said Bill Masker, senior director of facilities and infrastructure. Another option would be to run the turbines year-round, using the public power grid as a backup and selling excess power. Digex has even considered setting up a joint venture to actually run its power operation.

With California's recent brownouts heightening concern about power, other Internet data companies are looking to forge closer ties with local utilities or sign national supply contracts.

An average data centre consumes as much power as 5,000 to 10,000 homes. Some of the bigger centres, such as the 180,000-square-foot Equinix Internet Business Exchange, consume as much power as six baseball stadiums, according to Jay Adelson, Equinix's founder and chief technology officer. With Level 3 Communications, Qwest Communications International and Sprint as the latest players to commit to building more of such facilities, data centre electricity demand will keep zooming.

Colo.com cut its energy costs by negotiating a power contract with the help of a national utility and, as a result, was able to lower costs in smaller markets. "Because we have a predictable demand, national utilities - with their expertise in commodities and hedging business - can help us go to energy providers in a given market and get a more cost-competitive buy on a long-term contract," said Jim Smith, CTO at Colo.com, which plans to have 47 facilities in the U.S.

Once a data centre operator grows to a meaningful size, Smith said, there are plenty of choices among national power companies acting as consultants, including Enron and The Williams Companies.

Another way to ensure energy availability is to negotiate special status with the local power company so that the data centre is one of the last operations to be cut off should there be a brownout. Terremark Worldwide, the company building the network access point for the city of Miami and the first operator of a data centre in China, is negotiating for just such a deal with Florida Power and Light.

"We try to get ourselves designated as a utility," said Brian Goodkind, chief operating officer at Terremark. "Then you are less likely to be subject to power outages than anyone else. And if the power does go out, you are more likely to get it back first."

Companies that know the power industry are jumping into the fray. Enron, which owns both data and energy business units, already has plans to develop power plants dedicated to data centre support.

"We believe players in our market, like Enron, will address our needs," said Lloyd Howison, senior manager of construction and engineering for Web hosting at WorldCom. "Besides, we feel it is our responsibility to deal with any contingency."

Data centre architects such as Howison develop elaborate backup systems in case a power outage hits. Most of these facilities are equipped with backup diesel generators that can keep servers online from two days to a week.

Chipping away at power consumption

By Bill Scanlon

If the Internet would just stop expanding for a year or two, breakthroughs in chip technology would dramatically lower electricity consumption.

Alas, demand for more bits and bytes threatens to gobble up electricity and bandwidth faster than companies such as Broadcom, IBM, Intel, Motorola and PMC-Sierra can lower power consumption. But the chipmakers are trying.

By the end of 2001, Broadcom plans to deploy chips with wires just 0.18 micron thick that can power network devices and use just one-fourth the wattage of last year's chips. "That's a huge amount of power reduction by migrating to newer technologies," said Victor Hu, product line marketing manager for the high-speed networking group at Broadcom.

IBM last week said it will produce a high-performance chip with wires so thin that 800 bundled together will be as thick as a human hair. It uses IBM's silicon-on-insulator technology and consumes less power than more complex chips while providing equivalent performance. "As far as we look, we don't see a real physical limit" to shrinking semiconductor size, said Russ Lange, chief technologist at IBM's microelectronics division.

Chips or processors are the key to most Internet devices, from personal computers and servers to routers and the chassis that switch signals from optical to electronic and back to optical.

Broadcom and IBM are also putting into their chips the intelligence to detect whether the device is running at just partial capacity. If it detects an absence of activity, it powers itself down, saving electricity. When it detects that more power is needed, it ramps up. "That can save from 5 percent up to 90 percent if the chip is just idling - and that's all the way through the network," Hu said.

Last week, scientists at IBM and Nikon announced they are working on a chip that uses beams of electrons to etch circuits onto chips and that may perform the same functions as today's chips at one-thousandth the expenditure of electricity. Scientists at Applied Materials, ASM Lithography and Lucent Technologies are developing similar technology. Transmeta also developed a lower-power chip.

Intel, meanwhile, released a paper last week showing that its scientists can produce transistors with structures just 30 nanometers in size and three atomic layers thick. They will enable microprocessors that run on less than a volt of power, include 400 million transistors on a chip and run at 10 gigahertz. Possible applications: searching complex optical databases or translating conversations from one language to another.

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