Carbon Reduction Commitment Is ‘A Tax On The Cloud’

Far from persuading everyone to reduce their emissions, the UK’s Carbon Reduction Commitment (CRC) will actually make it more expensive for some companies to move to a more efficient IT option, according to the managing director of a UK hosting company.

“The CRC is a pretty poor piece of legislation,” says Dan Lowe, managing director of UKSolutions, which runs two shared-use data-centres in Britain. His beef, in a nutshell, is that the legislation is intended to improve efficiency, but “it doesn’t look at efficiency, it only looks at consumption, so it penalises ordinary business growth.”

If UKSolutions grows its business by 35 percent, even with the best efficiency measures, it will use more electricity, he says – and “that makes me an evil person in the eyes of the CRC. Unless we cut our customer base by ten percent each year, we are never going to win on the CRC, irrespective of how we deliver our services.”

The CRC is a cap-and-trade scheme designed to only affect the largest consumers of electricity, companies that use more than 6000 MWh (MegaWatt hours) of energy per year, and will use a league table, requiring them to pay extra if they become less efficient, or increase their energy use. UKSolutions comfortably “qualifies” for the CRC club, as its facilities use 15MW – which comes out at 130,000 MWh per year, if they run at that rate 24×365.

However, the company’s clients and potential clients generally don’t qualify for CRC. They tend to be medium-sized organisations, moving their IT out of old inefficient data centres to cloud services or shared spaces. Although overall energy use goes down, UKSolutions ends up using more energy. “If a customer moves out of their old facility to ours, it uses less power, but I then have to pay CRC tax on the extra energy I use,” complains Lowe. “My CRC tax will go up every year, and that doesn’t promote what we are trying to achieve”.

Passing on the CRC tax to customers

The CRC tax will be passed on to Lowe’s clients, and act as a disincentive for them to move to a more efficient IT set-up or, as he puts it “a tax on the cloud”. As he says, “efficient virtualised IT resides in large data centres, which will undoubtedly attract a CRC levy. It is taxing the cloud, and the cloud is a benefit which reduces the carbon consumed by IT. It could kill the cloud by taxing it, before it has even started.”

In fact, eWEEK believes he is overstating the case. Although CRC is expected to drive a shift in company attitudes to energy use, it is only expected to add about three percent to energy bills – something which Lowe can choose whether or not to pass on to customers, and something which customers may easily swallow given the large financial savings usually offered by the cloud.

He already does carbon accounting, of course, and not with the much-derided Excel spreadsheets used by some. UKSolutions uses custom-built internal systems that monitor energy use down to individual racks, and provide reports to clients, such as retailer the Co-op.

Despite his objections to CRC, Lowe is no eco-refusenik. As a data-centre owner, he couldn’t afford to be. However, he does point out the difficulty in using renewable energy, which tends to be intermittent, to power the constant demands of data centres – although Other World Computing does power a data centre with wind energy in Illinois. “To meet our needs with wind power, would require fifteen turbines,” he says, “and we are nowhere near the sea, so our only micro-generation option would be a line of diesel generators”.