By JOSEPH B. WHITE
The government's rescue plan for General Motors Corp. and Chrysler LLC has focused on financial engineering. Soon, the Obama administration and whoever is running GM and Chrysler will have to confront a more-challenging problem: how to sell the cars they want America to buy.
President Barack Obama said during his press conference last week that just because the government could hold shares in GM and Chrysler doesn't mean he intends to micromanage their affairs. Then he added, "I'm not an auto engineer, I don't know how to create [an] affordable, well-designed plug-in hybrid. But I know that if the Japanese can design [an] affordable, well-designed hybrid, then doggone it, the American people should be able to do the same. So my job is to ask the auto industry: Why is it you guys can't do this?"
GM and Chrysler's new management teams will likely treat this question as something more than a suggestion. What's worth watching is whether they will deliver a complete answer.
This Fiat 500 minicar would cost the equivalent of $17,900 in the U.K.
It's not as if American consumers won't buy efficient vehicles. Seven of the top-10-selling vehicles in April were cars that average 29 miles per gallon on the highway or better. The top seller was the Honda Accord, which gets 30 mpg on the highway in its four-cylinder version.
But this must be kept in perspective. Total small-car sales are down 33% for the year, and small cars from domestic brands in the segment that includes the Toyota Corolla, Chevy Cobalt and Dodge Caliber are down 51%, according to AutoData Corp.
Demand for hybrid vehicles is in the doldrums. Toyota Prius sales are down 49.5% for the Jan. 1 to April 30 period, and Toyota has been offering discounts on the model to clear inventory ahead of the launch this month of a redesigned 2010 Prius. Honda sold just 2,096 of its new Insight hybrids in April, the first full month after its formal launch. Honda Civic hybrid sales are down 26% for the year, and at the current pace will struggle to crack 30,000 vehicles for the year -- a pittance even in today's depressed market.
At $2 a gallon for regular unleaded, the most-enthusiastic purchasers of hybrids are governments and corporations eager to wear green.
As for plug-in hybrids, the costs remain daunting for major car makers on both sides of the Pacific. Toyota Motor Corp. has said it plans to offer a test fleet of about 150 plug-in versions of its Prius model to certain fleet customers next year. It's a tentative, toe-in-the-water approach that reflects Toyota management's uncertainty about the technology -- and about the robustness of demand.
The Chevy Volt, GM's plug-in, won't go on sale until late 2010. But whether that car will be "affordable" at an estimated $40,000 depends on who you are. The Obama administration's automotive task force delivered its opinion of the Volt in blunt terms in a March 30 report: "... while the Chevy Volt holds promise, it will likely be too expensive to be commercially successful in the short-term."
Around the world, other governments aren't shy about pushing consumers toward certain choices. China has encouraged consumers to buy more-efficient cars by recently halving the purchase taxes levied on vehicles equipped with engines smaller than 1.6 liters displacement, while sharply increasing taxes assessed on cars with engine displacements larger than 3.0 liters. The result has been a surge in sales of smaller cars with smaller engines -- just what the government wanted.
Europe uses high fuel taxes and other means to push consumers to pay higher prices for smaller vehicles. Fiat SpA, Chrysler's new industrial partner, sells a cuddly little minicar called the Fiat 500. I went to a U.K. Web site and configured a red one with a 1.20-liter "stop start" gasoline engine, an Italian flag stripe down the side and an electric sunroof. Fiat will throw in access to software that I can download and use to get readouts on the mileage and greenhouse-gas emissions of my car.
Asking price for my little red "green" car: £11,950, or about $17,900. That's what I'd expect to pay for a midsize car in the U.S., after discounts. But in the U.K., higher fuel costs make buying a Fiat 500 more sensible -- though not necessarily one with a stripe.
U.S. car makers have lobbied for higher gas taxes as the simplest way to push consumers into high-mileage cars. The Obama administration is betting on a different approach: Leave gas taxes alone, and instead invest government money in advanced battery development, offer tax breaks of up to $7,500 on hybrids and mandate tougher mileage standards to force car makers to use new fuel-saving technology. Washington now has a big financial stake in getting this right, or billions in public money plowed into Chrysler and GM could be vulnerable to energy markets.
This is probably why Mr. Obama sounded so sincere when he said, "I don't want to run auto companies."
Email: joseph.white@wsj.com
Tuesday, 5 May 2009
Wind-Power Giant Keeps to Its Course
By PAUL GLADER
Danish wind-power giant Vestas Wind Systems A/S is hoping that a greener U.S. economy will translate into more green in the bank.
Alternative-energy projects have been scaled back in recent months as oil prices have dropped and developers have struggled to secure financing. Texas oilman T. Boone Pickens delayed his $10 billion wind farm in Texas, and solar-power suppliers have laid off workers.
But Vestas is proceeding with a $1 billion plan to build six factories in Colorado and a research center in Houston that could create 4,000 U.S. jobs by the end of next year. Vestas, the world's largest maker of turbines but a distant second to General Electric Co. in the U.S., is laying off workers in Europe and shifting production to the U.S. to better compete with GE. It hired 650 workers at its new blade factory in Windsor, Colo., and is recruiting 500 for a tower factory in Pueblo, Colo.
Vestas's push is part of a scramble among wind-power companies to better position themselves in the U.S., in the hope that President Barack Obama's administration will make good on pledges to back alternative-energy production. The $787 billion economic-stimulus bill enacted in February contains modest new tax breaks.
GE and Germany's Siemens AG, which is No. 3 in the U.S., also are adding production capacity and hiring workers. Siemens on Tuesday plans to announce that it will open a $50 million factory in Kansas to make turbine parts. Companies from Spain and India are also developing a presence.
Vestas Chief Executive Ditlev Engel is particularly bullish on the U.S., calling the corridor from North Dakota to Texas the "Saudi Arabia of wind." He says Vestas is picking up talented engineers and quality specialists being laid off by auto makers and other manufacturers.
SOS Staffing, which is recruiting for Vestas in Colorado, says some new hires are moving from hard-hit manufacturing states like Michigan. And small parts makers that used to supply the auto industry are now retooling their equipment to make the thousands of metal parts that go into a wind turbine.
The American Wind Energy Association estimates the U.S. will add 5,000 megawatts of new capacity this year, down from 8,500 last year. That made the U.S. the global leader in wind-power capacity, surpassing Germany with 25,300 megawatts -- enough to power seven million homes.
Analysts say wind's short-term prospects are better than those for solar energy because it is cheaper and easier to deploy. Gordon L. Johnson II, head of alternative-energy research at Hapoalim Securities in New York, says wind power can generate electricity at 30% to 40% lower cost than solar panels.
Vestas, which posted revenue of €6 billion ($8 billion) last year, claimed 19.8% of the roughly $48 billion global wind-turbine market in 2008, down from 22.8% in 2007, according to BTM Consult APS, of Denmark. GE was second, with 18.6% market share in 2008, up from 16.6% a year earlier. But GE, of Fairfield, Conn., dominates the U.S.; GE's 2008 market share was 43%, compared with Vestas's 13%.
GE's wind-turbine business, acquired from Enron Corp. in 2002, recorded $6 billion in revenue last year. The company's seven plants world-wide can build 3,600 turbines a year and are sold out through 2011, says Victor Abate, vice president of GE's renewable-energy business, though some customers are postponing deliveries. A plant in Pensacola, Fla., will make the company's new 2.5-gigawatt turbines in North America.
Siemens projects that its new factory in Hutchinson, Kan., and an adjacent service facility will employ about 400 workers by the end of 2010. It reports no order cancellations and says it is seeing more bid requests. But Andreas Nauen, president and chief executive of Siemens Wind Power, says "new orders are not coming in as quickly as we expected."
The companies say building facilities in the Midwest's Wind Belt will reduce costs for transporting the equipment -- blades larger than a 747 wingspan and towers as high as a football field is long -- to wind farms going up in the Great Plains states.
Write to Paul Glader at paul.glader@wsj.com
Danish wind-power giant Vestas Wind Systems A/S is hoping that a greener U.S. economy will translate into more green in the bank.
Alternative-energy projects have been scaled back in recent months as oil prices have dropped and developers have struggled to secure financing. Texas oilman T. Boone Pickens delayed his $10 billion wind farm in Texas, and solar-power suppliers have laid off workers.
But Vestas is proceeding with a $1 billion plan to build six factories in Colorado and a research center in Houston that could create 4,000 U.S. jobs by the end of next year. Vestas, the world's largest maker of turbines but a distant second to General Electric Co. in the U.S., is laying off workers in Europe and shifting production to the U.S. to better compete with GE. It hired 650 workers at its new blade factory in Windsor, Colo., and is recruiting 500 for a tower factory in Pueblo, Colo.
Vestas's push is part of a scramble among wind-power companies to better position themselves in the U.S., in the hope that President Barack Obama's administration will make good on pledges to back alternative-energy production. The $787 billion economic-stimulus bill enacted in February contains modest new tax breaks.
GE and Germany's Siemens AG, which is No. 3 in the U.S., also are adding production capacity and hiring workers. Siemens on Tuesday plans to announce that it will open a $50 million factory in Kansas to make turbine parts. Companies from Spain and India are also developing a presence.
Vestas Chief Executive Ditlev Engel is particularly bullish on the U.S., calling the corridor from North Dakota to Texas the "Saudi Arabia of wind." He says Vestas is picking up talented engineers and quality specialists being laid off by auto makers and other manufacturers.
SOS Staffing, which is recruiting for Vestas in Colorado, says some new hires are moving from hard-hit manufacturing states like Michigan. And small parts makers that used to supply the auto industry are now retooling their equipment to make the thousands of metal parts that go into a wind turbine.
The American Wind Energy Association estimates the U.S. will add 5,000 megawatts of new capacity this year, down from 8,500 last year. That made the U.S. the global leader in wind-power capacity, surpassing Germany with 25,300 megawatts -- enough to power seven million homes.
Analysts say wind's short-term prospects are better than those for solar energy because it is cheaper and easier to deploy. Gordon L. Johnson II, head of alternative-energy research at Hapoalim Securities in New York, says wind power can generate electricity at 30% to 40% lower cost than solar panels.
Vestas, which posted revenue of €6 billion ($8 billion) last year, claimed 19.8% of the roughly $48 billion global wind-turbine market in 2008, down from 22.8% in 2007, according to BTM Consult APS, of Denmark. GE was second, with 18.6% market share in 2008, up from 16.6% a year earlier. But GE, of Fairfield, Conn., dominates the U.S.; GE's 2008 market share was 43%, compared with Vestas's 13%.
GE's wind-turbine business, acquired from Enron Corp. in 2002, recorded $6 billion in revenue last year. The company's seven plants world-wide can build 3,600 turbines a year and are sold out through 2011, says Victor Abate, vice president of GE's renewable-energy business, though some customers are postponing deliveries. A plant in Pensacola, Fla., will make the company's new 2.5-gigawatt turbines in North America.
Siemens projects that its new factory in Hutchinson, Kan., and an adjacent service facility will employ about 400 workers by the end of 2010. It reports no order cancellations and says it is seeing more bid requests. But Andreas Nauen, president and chief executive of Siemens Wind Power, says "new orders are not coming in as quickly as we expected."
The companies say building facilities in the Midwest's Wind Belt will reduce costs for transporting the equipment -- blades larger than a 747 wingspan and towers as high as a football field is long -- to wind farms going up in the Great Plains states.
Write to Paul Glader at paul.glader@wsj.com
Carbon Trust offers interest free loans to green companies
The Carbon Trust has begun offering £100m in interest free loans to businesses that are investing in energy-efficient plant and machinery.
By Richard TylerLast Updated: 4:22PM BST 04 May 2009
Some 763 businesses secured loans last year and the trust expects to double that number this year following the Government's decision to increase the trust's loan fund in the Budget.
Hugh Jones, director of solutions at the trust, said: "There's always been financial benefit from carbon saving but we are bringing it closer to home by offering the money interest free. Come and get it."
Last year the trust, an independent company funded by government, lent the £23m of new money it had been given, but an additional £5m of loan repayments was not recycled because of a lack of demand from the target companies, some of whom had struggled to raise additional bank finance for their investment plans.
The trust has now revamped its application process, it said, reducing approval times from four to six weeks down to, on average, 10 days.
It is also considering widening the criteria so that larger sums can be lent and bigger companies can apply.
The £100m, which will be lent over two years, is restricted to small and medium-sized businesses in England looking for between £5,000 and £200,000. Large companies can apply in Scotland.
Tom Delay, chief executive of the trust, said that companies could reduce their energy costs by up to 20pc by investing in efficient plant and machinery like lighting and heating systems.
The trust has drawn up a map of the hot spots in the country where businesses could save the most money.
It estimates that businesses across the country could save £2.5bn a year if they made their operations more energy efficient.
By region, the most savings can be achieved in Greater London, the South East and the North West.
By Richard TylerLast Updated: 4:22PM BST 04 May 2009
Some 763 businesses secured loans last year and the trust expects to double that number this year following the Government's decision to increase the trust's loan fund in the Budget.
Hugh Jones, director of solutions at the trust, said: "There's always been financial benefit from carbon saving but we are bringing it closer to home by offering the money interest free. Come and get it."
Last year the trust, an independent company funded by government, lent the £23m of new money it had been given, but an additional £5m of loan repayments was not recycled because of a lack of demand from the target companies, some of whom had struggled to raise additional bank finance for their investment plans.
The trust has now revamped its application process, it said, reducing approval times from four to six weeks down to, on average, 10 days.
It is also considering widening the criteria so that larger sums can be lent and bigger companies can apply.
The £100m, which will be lent over two years, is restricted to small and medium-sized businesses in England looking for between £5,000 and £200,000. Large companies can apply in Scotland.
Tom Delay, chief executive of the trust, said that companies could reduce their energy costs by up to 20pc by investing in efficient plant and machinery like lighting and heating systems.
The trust has drawn up a map of the hot spots in the country where businesses could save the most money.
It estimates that businesses across the country could save £2.5bn a year if they made their operations more energy efficient.
By region, the most savings can be achieved in Greater London, the South East and the North West.
Obama's green promise
The US president's most important climate change initiative deals with gases far more powerful than carbon dioxide – HFCs
Oliver Tickell
guardian.co.uk, Monday 4 May 2009 11.30 BST
President Obama was elected on a promise to act decisively on global warming. Today he is on the verge of his first major executive act to this end – to seek a global ban on an entire family of powerful industrial greenhouse gases used in refrigeration, many of them thosands of times more powerful than carbon dioxide. These are the HFCs or hydrofluorocarbons, the chemical industry's current replacement for the ozone-eating CFCs or chlorofluorocarbons, now almost entirely phased out under the 1987 Montreal protocol (pdf).
This initiative to combat global warming will take place not under the Kyoto protocol or its parent Climate Convention (UNFCCC), but under the Montreal protocol – even though it, and its parent, the Vienna Convention for the Protection of the Ozone Layer (pdf), have no mandate to act on climate issues. The choice of treaty is based on two simple truths. The UNFCCC climate negotiations are bogged down in fine print, square brackets, political posturing and general mistrust. The Montreal protocol has an enviable track record of environmental achievement and international co-operation, and contains proven mechanisms to make a ban on HFCs effective.
Not only is the Montreal protocol succeeding in saving the ozone layer, with a 97% reduction in emissions of gases, it has also achieved far more for the climate than the Kyoto protocol because the CFCs it has nearly eliminated are such powerful greenhouse gases. By 2012 the Montreal protocol will have reduced emissions by the equivalent of 8bn tonnes (Gt) of CO2, compared to estimates of 2Gt for the Kyoto protocol by the same time.
And over coming decades the accelerated phase-out of HCFC gases, the first generation of CFC replacements, is expected to produce further emissions reductions worth at least 18Gt CO2, and perhaps as much as 38Gt.
These enormous projected reductions result from a decision made in September 2007, on the Montreal protocol's 20th anniversary, to phase out the HCFCs a decade earlier than originally planned – principally to secure climate benefits. The HCFCs are weakly ozone-depleting (and thus listed as Montreal protocol gases) but powerful agents of global warming, so this move sets an important precedent – that the Montreal parties are prepared to act in support of environmental benefits well beyond the protection of the ozone layer.
Surprisingly perhaps, the 2007 initiative on HCFCs was supported by the US under George W Bush, despite the administration's hostility to the Kyoto treaty. Now Obama is set to go even further. For while the HCFCs are now being phased out, there remains another category of ozone-friendly but powerfully warming refrigerant gases in widespread and fast growing use, even though environmentally benign alternatives exist (see here and here and here and here and here): the HFCs. Controls on HFCs are taking force in many industrial countries, including the US and the EU, but HFCs are uncontrolled in the developing world, where they are used in ever-increasing amounts in coolers, freezers, and air-conditioning in homes, cars and offices. Some estimates suggest that increases in HFC use could overwhelm all the planned cuts in CO2 emissions by 2040, releasing the equivalent of hundreds of gigatonnes of CO2.
Under the proposals to be submitted to the Montreal protocol, high global warming potential HFCs would be phased out on a global basis, with the industrial countries taking a lead while developing countries would have longer to comply. The developing countries would also be able to draw on a Multilateral Fund to meet the costs of shifting to new technologies, guided by expert advice from a Technical and Economic Assessment Panel (TEAP). Although the cost would come to hundreds of millions of dollars, this is a fraction of the cost of using the "carbon market" mechanisms of the Kyoto protocol. Emissions of a single HFC gas, HFC-23, until recently released in considerable volumes as a chemical byproduct, were reduced following a one-off technology investment of $100m – but ended up costing the world 50 times more, a sum of $5bn, once securitised and sold as Certified Emissions Reductions under Kyoto's Clean Development Mechanism.
Under Montreal protocol rules the proposals need to be filed today to go ahead in the current round of negotations, and the US administration has been working hard to meet the deadline, a process involving feverish multi-agency discussions and the need to secure a foundation of political support in both houses of Congress. If the administration succeeds, it will represent a first major success for Obama on the global warming front. And far from undermining climate negotiations under the UNFCCC, it will advance prospects for a worthwhile agreement in Copenhagen in December, by restoring much needed trust and goodwill to the process.
But even if the US fails to file its proposal today, all is not lost.
Micronesia, a low-lying Pacific state at risk of total inundation from sea level rise, is ready to step into the breach – and the US can rally round later on in the process. As David Sassoon writes in his Solve Climate blog, "If Micronesia submits the amendment, the US can always join in after the fact, but would cede leadership on the issue to one of the smallest nations on the planet."
And what of the EU, used to playing the role of world leader in climate action and policy? According to Fionnuala Walravens of the Environmental Investigation Agency, the EU would prefer the HFC question to be tackled where it properly belongs, under the UNFCCC.
But she is confident that, with firm proposals to control HFCs under dicussion under the Montreal protocol, the EU would have no real choice but to support them. Meanwhile EU climate and ozone negotiators are to meet shortly, and an EU stakeholder meeting is scheduled for 25 May. As for the UK, the issue will provide a major test for Ed Miliband and his Department for Energy and Climate Change – and a chance for him to demonstrate the triumph of environmental values and practical common sense over free market dogma.
Oliver Tickell
guardian.co.uk, Monday 4 May 2009 11.30 BST
President Obama was elected on a promise to act decisively on global warming. Today he is on the verge of his first major executive act to this end – to seek a global ban on an entire family of powerful industrial greenhouse gases used in refrigeration, many of them thosands of times more powerful than carbon dioxide. These are the HFCs or hydrofluorocarbons, the chemical industry's current replacement for the ozone-eating CFCs or chlorofluorocarbons, now almost entirely phased out under the 1987 Montreal protocol (pdf).
This initiative to combat global warming will take place not under the Kyoto protocol or its parent Climate Convention (UNFCCC), but under the Montreal protocol – even though it, and its parent, the Vienna Convention for the Protection of the Ozone Layer (pdf), have no mandate to act on climate issues. The choice of treaty is based on two simple truths. The UNFCCC climate negotiations are bogged down in fine print, square brackets, political posturing and general mistrust. The Montreal protocol has an enviable track record of environmental achievement and international co-operation, and contains proven mechanisms to make a ban on HFCs effective.
Not only is the Montreal protocol succeeding in saving the ozone layer, with a 97% reduction in emissions of gases, it has also achieved far more for the climate than the Kyoto protocol because the CFCs it has nearly eliminated are such powerful greenhouse gases. By 2012 the Montreal protocol will have reduced emissions by the equivalent of 8bn tonnes (Gt) of CO2, compared to estimates of 2Gt for the Kyoto protocol by the same time.
And over coming decades the accelerated phase-out of HCFC gases, the first generation of CFC replacements, is expected to produce further emissions reductions worth at least 18Gt CO2, and perhaps as much as 38Gt.
These enormous projected reductions result from a decision made in September 2007, on the Montreal protocol's 20th anniversary, to phase out the HCFCs a decade earlier than originally planned – principally to secure climate benefits. The HCFCs are weakly ozone-depleting (and thus listed as Montreal protocol gases) but powerful agents of global warming, so this move sets an important precedent – that the Montreal parties are prepared to act in support of environmental benefits well beyond the protection of the ozone layer.
Surprisingly perhaps, the 2007 initiative on HCFCs was supported by the US under George W Bush, despite the administration's hostility to the Kyoto treaty. Now Obama is set to go even further. For while the HCFCs are now being phased out, there remains another category of ozone-friendly but powerfully warming refrigerant gases in widespread and fast growing use, even though environmentally benign alternatives exist (see here and here and here and here and here): the HFCs. Controls on HFCs are taking force in many industrial countries, including the US and the EU, but HFCs are uncontrolled in the developing world, where they are used in ever-increasing amounts in coolers, freezers, and air-conditioning in homes, cars and offices. Some estimates suggest that increases in HFC use could overwhelm all the planned cuts in CO2 emissions by 2040, releasing the equivalent of hundreds of gigatonnes of CO2.
Under the proposals to be submitted to the Montreal protocol, high global warming potential HFCs would be phased out on a global basis, with the industrial countries taking a lead while developing countries would have longer to comply. The developing countries would also be able to draw on a Multilateral Fund to meet the costs of shifting to new technologies, guided by expert advice from a Technical and Economic Assessment Panel (TEAP). Although the cost would come to hundreds of millions of dollars, this is a fraction of the cost of using the "carbon market" mechanisms of the Kyoto protocol. Emissions of a single HFC gas, HFC-23, until recently released in considerable volumes as a chemical byproduct, were reduced following a one-off technology investment of $100m – but ended up costing the world 50 times more, a sum of $5bn, once securitised and sold as Certified Emissions Reductions under Kyoto's Clean Development Mechanism.
Under Montreal protocol rules the proposals need to be filed today to go ahead in the current round of negotations, and the US administration has been working hard to meet the deadline, a process involving feverish multi-agency discussions and the need to secure a foundation of political support in both houses of Congress. If the administration succeeds, it will represent a first major success for Obama on the global warming front. And far from undermining climate negotiations under the UNFCCC, it will advance prospects for a worthwhile agreement in Copenhagen in December, by restoring much needed trust and goodwill to the process.
But even if the US fails to file its proposal today, all is not lost.
Micronesia, a low-lying Pacific state at risk of total inundation from sea level rise, is ready to step into the breach – and the US can rally round later on in the process. As David Sassoon writes in his Solve Climate blog, "If Micronesia submits the amendment, the US can always join in after the fact, but would cede leadership on the issue to one of the smallest nations on the planet."
And what of the EU, used to playing the role of world leader in climate action and policy? According to Fionnuala Walravens of the Environmental Investigation Agency, the EU would prefer the HFC question to be tackled where it properly belongs, under the UNFCCC.
But she is confident that, with firm proposals to control HFCs under dicussion under the Montreal protocol, the EU would have no real choice but to support them. Meanwhile EU climate and ozone negotiators are to meet shortly, and an EU stakeholder meeting is scheduled for 25 May. As for the UK, the issue will provide a major test for Ed Miliband and his Department for Energy and Climate Change – and a chance for him to demonstrate the triumph of environmental values and practical common sense over free market dogma.
Web providers must limit internet's carbon footprint, say experts
Soaring online demand stretching companies' ability to deliver content as net uses more power and raises costs
Bobbie Johnson in San Francisco
guardian.co.uk, Sunday 3 May 2009 14.22 BST
The internet's increasing appetite for electricity poses a major threat to companies such as Google, according to scientists and industry executives.
Leading figures have told the Guardian that many internet companies are struggling to manage the costs of delivering billions of web pages, videos and files online – in a "perfect storm" that could even threaten the future of the internet itself.
"In an energy-constrained world, we cannot continue to grow the footprint of the internet … we need to rein in the energy consumption," said Subodh Bapat, vice-president at Sun Microsystems, one of the world's largest manufacturers of web servers.
Bapat said the network of web servers and data centres that store online information is becoming more expensive, while profits come under pressure as a result of the recession.
"We need more data centres, we need more servers. Each server burns more watts than the previous generation and each watt costs more," he said. "If you compound all of these trends, you have the perfect storm."
With more than 1.5 billion people online around the world, scientists estimate that the energy footprint of the net is growing by more than 10% each year. This leaves many internet companies caught in a bind: energy costs are escalating because of their increasing popularity, while at the same time their advertising revenues come under pressure from the recession.
One site under particular scrutiny is YouTube — now the world's third-biggest website, but one that requires a heavy subsidy from Google, its owner. Although the site's financial details are kept under wraps, a recent analysis by Credit Suisse suggested that it could lose as much as $470m (£317m) this year, as it succumbs to the high price of delivering power-intensive videos over the internet.
And while the demand for electricity is a primary concern, a secondary result of the explosion of internet use is that the computer industry's carbon debt is increasing drastically. From having a relatively small impact just a few years ago, it is now leapfrogging other sectors like the airline industry that are more widely known for their negative environmental impact.
However, tracking the growth of the internet's energy use is difficult, since internal company estimates of power consumption are rarely made public.
"A lot of this internet stuff is fairly secretive," Rich Brown, an energy analyst at the Lawrence Berkeley National Lab in California, told the Guardian.
"Google is probably the best example: they see it as a trade secret: how many data centres they have, how big they are, how many servers they have."
One study by Brown, commissioned by the US environmental protection agency, suggested that US data centres used 61bn kilowatt hours of energy in 2006. That is enough to supply the whole of the UK for two months, and 1.5% of the entire electricity usage of the US.
Brown said that despite efforts to achieve greater efficiency, internet use is growing at such a rate that it is outstripping technical improvements – meaning that American data centres could account for as much as 80bn kWh this year.
"Efficiency is being more than overwhelmed by continued growth and demand for new services," he said. "It's a common story … technical improvements are often taken back by increased demand."
Among the problems that could result from the internet's voracious hunger for electricity are website failures and communications disruption costing millions in lost business every hour – as well as power cuts and brownouts at plants which supply data centres with electricity.
To combat this, initiatives are taking place across the industry to cope with the problem, including new designs for data centres, innovative cooling methods and more investment in renewable energy.
Researchers at Microsoft's £50m research lab in Cambridge are even turning to older technology in an attempt to turn the clock back – by replacing energy-hungry new machines with the systems used in older, less powerful laptops.
"It turns out that those processors have been designed to be very energy efficient, basically to make batteries last," said Andrew Herbert, the director of Microsoft Research Cambridge.
"We found we can build more energy-efficient data centres with those than with the kind of high performance processors you find in a typical server."
Google was among the first internet companies to take action to reduce its footprint by developing its own data centres — but even though it pumped an estimated $2.3bn into infrastructure projects last year, it remains unclear whether it is winning the battle.
The company's vice-president of operations, Urs Hölzle, told the Guardian that it was struggling to contain energy costs. "You have exponential growth in demand from users, and many of these services are free so you don't have exponential growth of revenue to go with it," he said.
"With good engineering we're trying to make those two even out … but the power bill is going up."
Despite mounting evidence that the internet's energy footprint is in danger of running out of control, however, Hölzle dismissed concerns about the environmental impact of using the web as "overblown".
"One mile of driving completely dwarfs the cost of a search," he said. "Internet usage is part of our consumption, just like TV is, or driving. There is consumption there, but in the grand scheme of things I think it is not the problem."
Bobbie Johnson in San Francisco
guardian.co.uk, Sunday 3 May 2009 14.22 BST
The internet's increasing appetite for electricity poses a major threat to companies such as Google, according to scientists and industry executives.
Leading figures have told the Guardian that many internet companies are struggling to manage the costs of delivering billions of web pages, videos and files online – in a "perfect storm" that could even threaten the future of the internet itself.
"In an energy-constrained world, we cannot continue to grow the footprint of the internet … we need to rein in the energy consumption," said Subodh Bapat, vice-president at Sun Microsystems, one of the world's largest manufacturers of web servers.
Bapat said the network of web servers and data centres that store online information is becoming more expensive, while profits come under pressure as a result of the recession.
"We need more data centres, we need more servers. Each server burns more watts than the previous generation and each watt costs more," he said. "If you compound all of these trends, you have the perfect storm."
With more than 1.5 billion people online around the world, scientists estimate that the energy footprint of the net is growing by more than 10% each year. This leaves many internet companies caught in a bind: energy costs are escalating because of their increasing popularity, while at the same time their advertising revenues come under pressure from the recession.
One site under particular scrutiny is YouTube — now the world's third-biggest website, but one that requires a heavy subsidy from Google, its owner. Although the site's financial details are kept under wraps, a recent analysis by Credit Suisse suggested that it could lose as much as $470m (£317m) this year, as it succumbs to the high price of delivering power-intensive videos over the internet.
And while the demand for electricity is a primary concern, a secondary result of the explosion of internet use is that the computer industry's carbon debt is increasing drastically. From having a relatively small impact just a few years ago, it is now leapfrogging other sectors like the airline industry that are more widely known for their negative environmental impact.
However, tracking the growth of the internet's energy use is difficult, since internal company estimates of power consumption are rarely made public.
"A lot of this internet stuff is fairly secretive," Rich Brown, an energy analyst at the Lawrence Berkeley National Lab in California, told the Guardian.
"Google is probably the best example: they see it as a trade secret: how many data centres they have, how big they are, how many servers they have."
One study by Brown, commissioned by the US environmental protection agency, suggested that US data centres used 61bn kilowatt hours of energy in 2006. That is enough to supply the whole of the UK for two months, and 1.5% of the entire electricity usage of the US.
Brown said that despite efforts to achieve greater efficiency, internet use is growing at such a rate that it is outstripping technical improvements – meaning that American data centres could account for as much as 80bn kWh this year.
"Efficiency is being more than overwhelmed by continued growth and demand for new services," he said. "It's a common story … technical improvements are often taken back by increased demand."
Among the problems that could result from the internet's voracious hunger for electricity are website failures and communications disruption costing millions in lost business every hour – as well as power cuts and brownouts at plants which supply data centres with electricity.
To combat this, initiatives are taking place across the industry to cope with the problem, including new designs for data centres, innovative cooling methods and more investment in renewable energy.
Researchers at Microsoft's £50m research lab in Cambridge are even turning to older technology in an attempt to turn the clock back – by replacing energy-hungry new machines with the systems used in older, less powerful laptops.
"It turns out that those processors have been designed to be very energy efficient, basically to make batteries last," said Andrew Herbert, the director of Microsoft Research Cambridge.
"We found we can build more energy-efficient data centres with those than with the kind of high performance processors you find in a typical server."
Google was among the first internet companies to take action to reduce its footprint by developing its own data centres — but even though it pumped an estimated $2.3bn into infrastructure projects last year, it remains unclear whether it is winning the battle.
The company's vice-president of operations, Urs Hölzle, told the Guardian that it was struggling to contain energy costs. "You have exponential growth in demand from users, and many of these services are free so you don't have exponential growth of revenue to go with it," he said.
"With good engineering we're trying to make those two even out … but the power bill is going up."
Despite mounting evidence that the internet's energy footprint is in danger of running out of control, however, Hölzle dismissed concerns about the environmental impact of using the web as "overblown".
"One mile of driving completely dwarfs the cost of a search," he said. "Internet usage is part of our consumption, just like TV is, or driving. There is consumption there, but in the grand scheme of things I think it is not the problem."
Australia delays carbon emissions limits
By Peter Smith in Sydney
Published: May 4 2009 05:35
Australia will delay the introduction of its proposed emissions trading scheme by one year until mid-2011, bowing to industry demands for more relief amid a recession.
Canberra’s delay of an emissions trading scheme is accompanied by higher targets for carbon reductionBut it has raised the upper limit of its carbon reduction target from 15 per cent to 25 per cent per by 2020 and promised more industry support.
Climate change was a central campaign theme for Kevin Rudd when he won the 2007 election and the changes represent a turnround by the prime minister, who only months ago said a delay would be irresponsible.
The ETS will not be in operation until after Australia’s next federal election, which is likely to be held before the end of 2010.
Mr Rudd blamed the decision on the uncertainty caused by global downturn, which he said had worsened.
Business groups had lobbied Canberra to postpone the ETS’s introduction, arguing it would disadvantage Australian businesses, which are already suffering from a contracting economy, at a time when most of the country’s trading partners do not face similar burdens.
The revised timetable will give Canberra time to consider what targets are set by developed countries at the Copenhagen climate change conference this year. The aim of cutting emissions by 25 per cent by 2020 against 2000 emission levels will only be considered domestically if there is an international consensus on ambitious cuts at Copenhagen. Canberra is committed to a modest 5 per cent emissions cut.
The ETS was set to face stiff opposition in the Senate, Australia’s upper house. The Greens had argued for cuts of 40 per cent, revised on Monday to 25 per cent, and conservative opposition parties had called for the scheme to be delayed.
The ETS legislation was to be introduced to parliament next month and the government still hopes to have the laws passed this year.
Mr Rudd said the government was not acting recklessly or breaking an election promise by delaying the scheme.
He said the changes were made because of the impact of the global downturn on Australia, the need “to continue to provide maximum impetus for a strong outcome” at Copenhagen, and the need for Australian businesses to have certainty when making investment decisions.
But Malcolm Turnbull, opposition leader, called it a “humiliating backdown”.
“Only a few months ago Mr Rudd said that any delay in the start of an emissions trading scheme would be reckless and irresponsible both for the economy and the environment,” he said, adding the tinkering to a “very flawed scheme” was a panicked response.
Mr Turnbull said the changes had not convinced the opposition to support the legislation. The government must gain Senate support either from the conservative parties or the Greens and independent senators.
The Australian Industry Group, a business trade body, said the 2011 date provided businesses with more time to adjust to the regime.
Copyright The Financial Times Limited 2009
Published: May 4 2009 05:35
Australia will delay the introduction of its proposed emissions trading scheme by one year until mid-2011, bowing to industry demands for more relief amid a recession.
Canberra’s delay of an emissions trading scheme is accompanied by higher targets for carbon reductionBut it has raised the upper limit of its carbon reduction target from 15 per cent to 25 per cent per by 2020 and promised more industry support.
Climate change was a central campaign theme for Kevin Rudd when he won the 2007 election and the changes represent a turnround by the prime minister, who only months ago said a delay would be irresponsible.
The ETS will not be in operation until after Australia’s next federal election, which is likely to be held before the end of 2010.
Mr Rudd blamed the decision on the uncertainty caused by global downturn, which he said had worsened.
Business groups had lobbied Canberra to postpone the ETS’s introduction, arguing it would disadvantage Australian businesses, which are already suffering from a contracting economy, at a time when most of the country’s trading partners do not face similar burdens.
The revised timetable will give Canberra time to consider what targets are set by developed countries at the Copenhagen climate change conference this year. The aim of cutting emissions by 25 per cent by 2020 against 2000 emission levels will only be considered domestically if there is an international consensus on ambitious cuts at Copenhagen. Canberra is committed to a modest 5 per cent emissions cut.
The ETS was set to face stiff opposition in the Senate, Australia’s upper house. The Greens had argued for cuts of 40 per cent, revised on Monday to 25 per cent, and conservative opposition parties had called for the scheme to be delayed.
The ETS legislation was to be introduced to parliament next month and the government still hopes to have the laws passed this year.
Mr Rudd said the government was not acting recklessly or breaking an election promise by delaying the scheme.
He said the changes were made because of the impact of the global downturn on Australia, the need “to continue to provide maximum impetus for a strong outcome” at Copenhagen, and the need for Australian businesses to have certainty when making investment decisions.
But Malcolm Turnbull, opposition leader, called it a “humiliating backdown”.
“Only a few months ago Mr Rudd said that any delay in the start of an emissions trading scheme would be reckless and irresponsible both for the economy and the environment,” he said, adding the tinkering to a “very flawed scheme” was a panicked response.
Mr Turnbull said the changes had not convinced the opposition to support the legislation. The government must gain Senate support either from the conservative parties or the Greens and independent senators.
The Australian Industry Group, a business trade body, said the 2011 date provided businesses with more time to adjust to the regime.
Copyright The Financial Times Limited 2009
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