IMN CONFERENCE:
More Developers Adding Power Plants
Calif. crisis, utilities' demands for large deposits driving trend

NEW YORK, Feb. 13, 2001 -- Ask OptimalPATH President Jack Pressman why his company is investing in power generation equipment for its carrier hotels, and the answer is simple.
"Our motivation was because we had no other choice," said Pressman. "The cost or delay can become such that it would prohibitively cramp the project."
OptimalPATH is based in Chicago, where the electric company, Commonwealth Edison, recently imposed a requirement that data center operators put up large deposits - in some cases as much as $10 million and more - to gain service for a facility. Florida Power & Light has also begun seeking deposits from carrier hotel operators.
As a result, OptimalPATH is among a growing number of carrier hotel and data center developers who are building in-house solutions as a way to ensure a supply of affordable electric power.
"The issue of dealing with utilities is absolutely critical," said Pressman. "As you get up to 150, 175 and 200 watts per square foot, the costs to power that building can become prohibitive. For some buildings, it just won't work.
"Our approach is to come in asking for 40 to 50 percent less (power from the local utility) and then build our own natural gas generators facility, which almost pays for itself," Pressman told a panel at this week's IMN Forum on Financing and Developing Carrier Hotels and Data Centers. "Natural gas is, in many areas, much more available than electric power."
The power crisis in California has focused attention on the availability of power, and heightened anxiety about similar problems developing in other markets with high concentrations of power-hungry technology businesses.
"There's some anecdotal evidence we'll see brownouts this summer in New York city,and perhaps some capacity issues in Northern Virginia," said Lewis Shadle, Senior Vice President of Business Development for US Dataports. "This is an extremely serious issue. We build dedicated cogeneration facilities on each of our campuses, which provides considerable cost savings."
Operators in markets where supply is plentiful must contend with the cost issue, as a growing number of utilities seek large deposits as a prerequisite to providing service. Utilities say the demands are justified by data centers' requests for huge amounts of capacity, ranging from 100 watts per square foot up to 200 watts.
"There's no question that the power demands per square foot are increasing steadily," said Brian Friedman, President of ABR Infocom.
That demand is driven in part by the trend toward smaller server appliances that allow colocation providers to maximize their per-square-foot return on investment. With data center buildouts running between $200 and $400 per square foot, that extra income can be a big boost to margins.
But a higher density of equipment also requires more power to run the equipment and cool the rack space.
In most cases, tenant power usage never actually rises to the 100 to 200 watt range, but customers want to know that the juice is there if they need it.
"Over the past six months we've been monitoring our power usage, and we've not seen demand of more than 50 watts per square foot," said Tom Jones, President of Infomart, a Dallas-based developer of carrier hotels. "But we'll provide 100 watts per square foot in our facility. So the first thing we do is make friends with the power company."
The power issue also looms large for developers targeting smaller markets, like Convergency Centers LLC of Grand Rapids, Mich. Company President Peter Berns says bring-your-own power is a crucial cost-management tool.
"We build our own power plants, bringing in our own mini-turbines," said Berns. "It allows us to answer questions that have become barriers to entry in many second-tier markets."
Adding a power generation facility to a site also adds a wrinkle to the company's relationship with local residents and officials, according to Pressman.
"If you walk into a neighborhood and say you're building a utility, you can easily become hated," he said. "If you say you're developing a high-tech center that's fully contained, you're able to mask it a little and have a different process, perhaps."
OptimalPATH's strategy has also altered its relationship with the power company.
" We've actually been approached by Commonwealth Edison about them buying power from us during peak loads," he said. "We're looking very seriously at selling excess capacity back to the utility."

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