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Don’t Panic, but the Grid’s Going Down

Summertime evokes the sounds of Beach Boys songs, the smell of suntan lotion - and the sudden darkness of a blackout. The dog days of August, when New Yorkers run their air conditioners full blast, mean peak demands on the city's energy grid.

Many will recall the 10-day power outage in Queens last summer. On Aug. 2, the day after the Queens incident was resolved, Con Ed pumped its all-time highest power send-out of 277,417 megawatts. According to the utility, it delivers 20 percent more power than it did 10 years ago and demand grows 1 percent to 1.5 percent each year. To keep up, Con Ed has invested $1.4 billion this year in reinforcing the electrical system in preparation for summer, says Con Ed spokesperson Chris Olert.

Still, the possibility of blackouts and brownouts this summer remains. "A summer power outage is enough of a possibility that Wall Street firms should make sure to be prepared," warns Neil Katkov, research director at Celent.

"We are very concerned," adds Tesh Durvasula, COO and EVP of NYC-Connect, a collocation facility in the Chelsea section of Manhattan that hosts servers for a dozen Wall Street firms. "It's getting worse every year," he says. "Now the grids are in such high use that we're seeing surges in the grid on a weekly basis." Durvasula explains that he tracks the surges with monitoring equipment in NYC-Connect's facility.

There's no question that New York's energy grid is struggling to keep up with growing demand. The 2007 Reliability Needs Assessment report released in March by the New York Independent System Operator (the federally appointed group charged with coordinating, controlling and monitoring the operation of New York's electrical power system) found that the margin between power supply and demand in New York City is shrinking. Where a "loss of load expectation" (power outage) of one day per year is considered acceptable, starting in 2011 the amount of loss is expected to rise dramatically, reaching more than seven days per year by 2016. The study did not even consider equipment failures - which, along with overgrown trees in Ohio, caused the 2003 Northeast blackout - but simply the amount of power supply versus demand. Data center electricity demand is growing approximately 14 percent annually nationwide as companies add more small servers to their facilities. And in New York a housing boom is putting further strain on the energy grid.

Something Has to Give

"The securities industry is going to adjust" to the weakening grid, NYC-Connect's Durvasula asserts. "Some people will start to consider energy curtailment during the summer months," he predicts. In energy curtailment programs, such as last July's Operation Save New York, companies agree to unplug from the energy grid and run off their own emergency generators for a certain period of time (usually two or three days), which entitles them to a rebate. Last year 1,000 facilities participated, making a small dent in the summer demand. No Wall Street firms participated, but Morgan Stanley says it will take part this summer.

Even Con Ed agrees that New York's energy grid needs new sources of energy generation. But it's politically unpopular to discuss putting a power plant in New York City, points out Con Ed's Olert. "Someone at some point is going to have to make a political decision and say we're putting it on the Crosman compound," he says, jokingly equating this writer's small Westchester apartment with one of the sprawling tracts of land the Rockefeller family donated to New York.

Further, nobody wants a nuclear plant in the city, and solar power isn't practical because of the Northeast's long winters. "You'd need solar panels equivalent to 33 Central Parks to meet the ... needs of New York City," Olert says.

In Lewiston, New York - near the Canadian border - the Niagara Power Project is the biggest electricity producer in the state, harnessing the energy of Niagara Falls to generate 2.4 million kilowatts. HSBC plans to build a 275,000-square-foot, $139 million data center in Cambria, near the Lewiston hydroplant, to use its cheap energy. The New York Power Authority has allocated HSBC 11 megawatts from the project as part of a financial incentive package. The Power Authority also runs a half-dozen other small hydroplants upstate, but these don't meet the needs of most Wall Street firms, which, for data latency reasons, need to locate their data centers near the major exchanges.

Closer to the city, hydropower projects tend to meet with strong resistance from local residents. In one project in the East River, six underwater turbines propelled by tidal flows are being tested that should eventually provide up to 10 megawatts of power, but that's a tiny fraction of the city's daily need.

Steve Rubinow, CTO of the NYSE Group, is sanguine about the future of the power grid but notes that proper energy-conscious planning is key. "We're no more or less concerned about New York City's energy grid than any other major metro area," he says. "We have to do the best we can to be self-sufficient in times of crisis."

Similarly, Steve Hilton, managing director and head of enterprise servers and storage at Credit Suisse, considers the vulnerability of the energy grid simply a factor to be planned around. "We have data centers inside and outside New York, so quite deliberately we have diversity from different power grids," he says.

But the buildings that house data centers have power consumption limits that must be taken into account when designing data centers. For instance, some older data centers were built to run 50 watts of power per square foot, yet today's server environments typically run 100 watts to 150 watts per square foot. "You tend to hit the building-design issue more than the utility-provider issue, so that's what we focus on more," Hilton says.

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