Power Struggles at Amazon Web Services
In the past few years, it has become the norm for tech companies to not own any servers and instead rely on cloud-based services to handle their data storage and computing infrastructure. A wide variety of companies such as Netflix, Pinterest and Airbnb rely on AWS’s suite of cloud services to manage all their IT infrastructure .
To fulfill its customer promise of fast and reliable IT infrastructure services at low costs, AWS owns a large number of data centers throughout the world, each containing a huge number of servers.
Data centers are huge consumers of electricity due to the immense energy required to power as well as to cool down the servers. On average, one data center consumes as much energy as 25,000 homes .
Operations at AWS are affected by climate change in two ways: the mix of energy supplied to data centers and each center’s power consumption.
Traditionally, AWS did not pay much attention to its data centers’ “energy mix” or the proportion of clean energy used. In 2014, a study characterized it as the least sustainable among all leading cloud providers with only 13.5% of its energy from renewable sources and no foreseeable renewable energy commitments . Soon after, in November 2014, it announced a long-term commitment to 100% renewable energy and began investing resources in wind and solar power in regions where its data centers were located , .
However, critics continued to berate the company for its power mix, in particular for its data centers in Virginia, aka the “Dirty North-East”. These centers, which consist of 70% of all servers, consume only 4% of energy from renewable sources . In this region, AWS was unable to use the energy from its solar and wind projects due to the nature of the power supply chain. Electricity from all sources, renewable and non-renewable, fed into a collective regional grid. The dominant retail provider, Dominion Virginia Power (DVP), purchased power from this collective grid and distributed it to consumers including AWS. DVP had full control over its energy source mix and predominantly used market forces to make the decision. AWS, hence, had no control on the energy mix for its data centers . In June 2016, AWS entered into a first-of-its-kind energy services management deal with DVP. Through the deal, AWS agreed to purchase services from DVP that allow it to have a greater say in the power mix that DVP purchases and provides to the regional grid that services AWS data centers .
Going forward, AWS will be under constant scrutiny for the power mix utilized by its data centers and it should strive to continue in its quest to power its data centers through renewable sources. Choice of data center location should also take into account availability of clean energy in the area.
While clean power is important for AWS in the long term, it will not be feasible in the near term for its upcoming and existing centers; hence, power consumption of each data center is also crucial. AWS’ operating model inherently requires that it constantly strive to reduce power consumption costs of a data center through increased server utilization and energy efficiency . By investing in more optimized equipment, better cooling systems and better server management, the company can lead the way in reducing data center power consumption [e.g. 10, 11, 12].
At present, the company does not share any metrics on how its own data centers perform on power consumption metrics . Given its competencies in these areas and its push towards sustainability, this is an opportunity for the company to set an example for the rest of the industry and showcase its path towards a reduced carbon footprint. The organization should not shy away from regularly sharing metrics around its data centers’ carbon footprints. There is a growing body of research in computer systems in reducing power consumption in data centers [e.g. 10, 11, 12]. The company should take the opportunity to lead innovation in this sector by partnering with the other companies and the broader research community to further knowledge around ways to reduce carbon footprint of data centers. Google for instance has already started to be a part of the conversation .
In conclusion, in the next few years, carbon emission management will become central to data center operation decisions for AWS. The company has already embraced climate change as a business opportunity. “It’s greener in the cloud” is its claim that in choosing to use cloud services instead of maintaining their own local servers, organizations not only gain from a business perspective but also help climate change . To maintain its position as the leading cloud provider, AWS will need to step up and be a thought leader in this space.
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Student comments on Power Struggles at Amazon Web Services
Investments in energy storage technologies (which facilitate the integration and utilization of intermittent renewable resources like wind and solar) could mitigate AWS’s reliance on non-renewable sources of power in the northeast. Although it would be a significant investment, it could provide short term benefits for AWS’s quest to improve its overall energy mix and reduce costs over the long-term. The storage market is still developing, however, so this path may not be entirely feasible in each area AWS houses its data centers, but may still be effective on a smaller, regional scale to facilitate AWS’s transition to a 100% renewables portfolio.
It is much better for a few of these cloud companies to operate big data centers than for every company to operate a small cloud of their own. I agree that investments in energy storage techniques can potentially reduce power consumption. However, one alternative avenue for proceeding may be to carefully design the configuration of the setup of the data center. For example, Oracle, in U.S. Patent No. 9,301,432 (https://www.google.com/patents/US9301432), proposes using a combination of refrigerant, heat exchanger, retractable cap, uneven flooring tiles, and specific electronic component placement configurations to allow cooling whilst minimizing energy consumption. By pushing uneven air (cool and hot air) through the data center, the electronic equipment can be cooled using much less energy.
I was particularly struck by the idea that on average a big data center consumes as much power as 25,000 homes. It seems to me that investments in energy storage are worthwhile for Amazon because they can pass cost savings onto the consumer. I wonder, how do AWS big data centers compare to other server players such as Microsoft, IBM, and Google? Are any of these competitors out competing Amazon in this technological sector? If so, it would be interesting to learn what different companies are doing to tackle this problem.
Another side effect of these server centers you might be interested in considering is the heat energy produced, which most companies counter with energy-heavy investments in air conditioning. Amazon, rather than just trying to minimizing the energy utilized to keep server rooms cool, is working on harnessing the excess heat to regulate the temperature of the new buildings they’re currently constructing in Seattle — if you’re interested in learning more, check out the article I’ve linked below. The data center across the street from the new complex will naturally produce enough energy to heat the three new buildings and potentially enough additional energy to sell to other local companies. The new heating process, known as hydronic heat, will use water pipes to siphon the heat out of the data center and transfer it into the central heating center so the heat can be dispersed throughout the building complex. The goal is to reduce total company energy consumption by minimizing heat waste. Hopefully they’ll also continue to find ways to make sure they achieve a sustainable power mix so the inputs of the whole process will be as sustainable as possibly. You also make a good point about Amazon needing to step up as a thought leader given their size in the space, which presents them with the opportunity to proliferate the methodology and technology they develop in the hydronic heat process.
@Jesse it depends on what dimension of competition you’re interested in.
Regarding environmental impact, AWS is definitely a laggard – Microsoft and Google both claim to be carbon neutral, and are focusing on data centers in particular since this is a major source of energy consumption.
As for IBM, I’m not familiar with any environmental initiatives, but as a cloud infrastructure player, they are way behind these 3.
Google – https://cloud.google.com/about/data-centers/
Microsoft – https://www.microsoft.com/about/csr/environment/
Azure specifically (Microsoft cloud) – https://www.microsoft.com/about/csr/environment/solutions/cloud/
Radhika – thanks for sharing this! I wonder if beyond just getting cleaner sources of power Amazon can leverage AI to make its data centers more efficient. Google has been leveraging DeepMind to do so and has reduced energy use for cooling its data centers, which were already fairly efficient, up to 40%.
I never knew how much energy these data centers used! I read an additional article that said in 2013, the amount of energy used by 3 million computer servers could have powered New York City for two years . Another fact was that if worldwide data centers were a country, they would be the 12th largest consumer of electricity in the world. This is a crazy amount of energy consumption!
One point that this article brought up was that approximately 30% of US servers are “Comatose”, i.e. they are not being used, but are plugged in and consuming energy. It would be interesting to know the utilization of AWS servers that are consuming energy. It would also be good to see partnerships between data centers to increase utilization as a whole across the US.
 America’s Data Centers Are Wasting Huge Amounts of Energy. August 2014. https://www.nrdc.org/sites/default/files/data-center-efficiency-assessment-IB.pdf
Fascinating issue – thank you for writing on it!
Is power mix the most important metric in analyzing AWS’s environment sustainability? The following blog post from AWS (https://aws.amazon.com/blogs/aws/cloud-computing-server-utilization-the-environment/) seems to suggest that, in evaluating the climate impact of data center service provision, one should include:
1) number of servers running
2) the energy efficiency of such servers
3) energy sources (i.e. the power mix discussed above)
AWS’s post suggests (as you mentioned above) that switching from on-premise data centers to cloud centers already creates significant energy savings due to improvements across all three metrics. Would be curious to know where AWS sits on the other two metrics versus their cloud provider competitors.
Radhika, thanks for sharing this topic! I hadn’t thought it of it before. My main support argument for Amazon Web Services would be that they are more energy efficient than if each company had their own server. In other words, Amazon has servers at scale. So they save on excess hardware being distributed to independent companies, and they save on aggregate energy costs. However, I believe they can continue to do more to save energy.
Given Amazon’s international footprint in markets outside of the US, I wonder how the company is planning its related capital expenditure across different geographies. My conjecture is that different countries will have varying regulations and availability of resources, which could add difficulty to Amazon’s ongoing efforts to make its operation more sustainable.
What about major competitors in emerging markets like Alibaba? Do they engage in such practice to promote energy savings? If governments make a concerted effort to pass relevant regulations in future, then those companies that are implementing these environmental initiatives will be able to reap benefits and effectively create barriers to entry down the road.
Interesting. I was not aware of how much impact data centers have until I saw Microsoft’s initiatives:
Thank you for sharing this interesting topic. I find it fascinating how the energy project finance environment is becoming more diverse with non traditional market players joining the competition. Google, Apple, IKEA, now Amazon, too! What worries me, though, is that this might create pressure on pricing of these investments. While it seems that Amazon is mainly developing greenfield projects, I would be concerned about declining yields in the alternative investment space if large players, such as Google and Amazon, were to start bidding aggressively for brownfield and advanced greenfield projects, especially if market supply for these projects continues to grow slower than demand. In this current low yield environment, investors, such as sovereign wealth funds or insurance companies have increasingly joined the real asset space, buying wind farms or solar projects. These projects offer higher individual yields than traditional bond investments and contribute to maintaining stable overall portfolio yields for these companies. Higher competition for renewable energy projects might lead to distorted valuations and thus lower yields. It will be interesting to see how traditional investors, such as insurance companies, sovereign wealth funds, and energy focused PE funds will adapt their investment strategies to account for the new players on the market going forward.
Thanks for the post Radhika. It was interesting to read about the sheer magnitude of power that these data centers use – it was definitely something I had never before considered. I was also shocked that AWS had not been historically paying much attention to climate change impact of their data centers.
After reflecting on the post, I was surprised at just how little renewable energy powers these centers. Given their locations could be anywhere in the country, I would have expected them to be located in areas where wind and solar power are prevalent. Because of the potential to save money using renewable sources of energy, why do you think they still only power such a small number of centers? I would think that as this issue gains more attention over the next few years, AWS will be under pressure to develop more environmentally friendly policies towards its centers.
Great article, Radhika. I was particularly struck by the fact you mentioned, that Amazon’s data centers consume only 4% of energy from renewable sources. Although solar power is still quite pricey, I would hope that AWS is looking to partner with companies like SolarCity to tip the scales in favor of sustainability. Based on my research of SolarCity, it seems like this would be a perfect project to act as a proving ground for the SolarCity model; however, it is uncertain how likely Amazon would be to partner with Elon Musk on this initiative. I suggest this to say that it would be nice if Amazon could completely remove itself from the grid and the monopoly of energy allocation that belongs to Dominion. This way, it could self-regulate all of its own power consumption. But, as you mention, it is unlikely that this will happen in the near term. I agree that AWS should take short term measures to reduce its carbon footprint. But until it is able to fully harness the power of renewable energy sources (e.g. when we are freed from monopoly that power companies have in this highly regulated industry), I am doubtful that much will change in the near term.
Interesting article on a company I´ve looked up to for a long time. I think the only element that is strong enough to push companies to embrace clean energy sources is a financial incentive, and I´m convinced that this will be particularly true for a company that has faced pressure from financial markets to become profitable for so many years, such as Amazon. The market has been fairly patient with Amazon, but I wonder if they would be welcoming to sustainability, environmentally-friendly initiatives at the company. In my opinion, if there is not a financial benefit to doing this, the company will “kick” its implementation down the road. (1)
(1) International Business Times, “Amazon: Nearly 20 Years In Business And It Still Doesn’t Make Money, But Investors Don’t Seem To Care,” December 18, 2013, retrieved on November 7, 2016, from http://www.ibtimes.com/amazon-nearly-20-years-business-it-still-doesnt-make-money-investors-dont-seem-care-1513368
Moving to the cloud is not only about energy saving but the efficiency that it provides to the IT organization. Now we can have an environment up and running in minutes rather than weeks.