Paper Number: 2017-06

Document Date: 11/2017

Author(s): Heather Klemick; Elizabeth Kopits; Ann Wolverton

Subject Area(s): Energy, Environmental Policy

JEL Classification:

Q52 - Pollution Control Adoption Costs; Distributional Effects; Employment Effects
Q58 - Government Policy

Keywords: energy efficiency paradox, market failures, data centers, technology investment barriers

Abstract: The data center industry is one of the fastest growing energy users in the US. While the industry has improved its energy efficiency over the past decade, engineering analyses suggest that ample opportunities remain to reduce energy use that would save firms money. This study explores potential barriers to energy-efficiency investments in data centers. Given the scarcity of empirical data in this context, we conducted focus groups and interviews with data center managers to elicit information about potential barriers to investment and used content analysis to qualitatively evaluate the results. Split incentives between departments within companies and between colocation data centers and their tenants, uncertainty and imperfect information about the performance of new technologies, and tradeoffs with data center uptime were the most pervasive potential barriers discussed by participants. While these factors have moderately slowed investments in energy-saving technologies for many firms, only in the cases of uncertainty/imperfect information and split incentives are these barriers potentially indicative of market failures.

This paper is part of the Environmental Economics Working Paper Series.

• Data Center Energy Efficiency Investments: Qualitative Evidence from Focus Groups and Interviews (PDF)(58 pp, 2 MB, 11/2017)