Mainframes Are Dirty. The Cloud Is Clean.
Amazon Web Services is on its way to operating its cloud on 100% renewables. If you care about green investing, that’s great news.
A few months back, James Hamilton, Amazon’s cloud guru, spoke on stage at the company’s annual ReInvent conference in Las Vegas to break the news about the company’s path towards sustainability. Hamilton said that Amazon Web Services is vying to have all of its data centers running on 100 percent on renewable energy.
“We’re not afraid of big challenges,” he said. “We will sign up for difficult tasks. But we have to see a path where we can reasonably get there.”
The average reader might not see why this is such a big deal. But to someone who works in IT, this is an incredible statement. For the last 30 years, companies have warehoused their data in giant mainframe computers. And these data centers require an ungodly amounts of energy, draining precious U.S. energy resources.
In 2012, for instance, The New York Times launched a yearlong investigation to examine the environment impact of data centers and mainframe computing. They concluded:
Most data centers, by design, consume vast amounts of energy in an incongruously wasteful manner, interviews and documents show. Online companies typically run their facilities at maximum capacity around the clock, whatever the demand. As a result, data centers can waste 90 percent or more of the electricity they pull off the grid, The Times found.
According to The Times, digital warehouses “use about 30 billion watts of electricity, roughly equivalent to the output of 30 nuclear power plants.” The switch to cloud computing, on the other hand, has the power to dramatically reduce U.S. energy demand.
Now, most people probably just think of Amazon as the company where they buy Christmas presents and watch movies, but behind the scenes, Amazon is quietly leading the charge on so-called “clean” cloud computing initiatives.
How, you ask?
Well, for starters, the company is building wind farms around the country.
Starting in 2014, Amazon has built wind farms in in Ohio, Virginia, Indiana and North Carolina. According to the company, these new solar and wind farms deliver more than 1.6 million MWh of additional renewable energy into the electric grids, which supply AWS Cloud data centers.
“The energy produced from these projects is enough to power roughly the equivalent of 150,000 U.S. homes, which is slightly larger than the size of the city of Cleveland, Ohio,” the company notes.
And yet, there are some organizations out there — even Greenpeace! — that seem to keep missing the point.
For the third year in a row, Greenpeace criticized Amazon’s cloud computing subsidiary Amazon Web Services for its renewable energy strategy, grading the cloud leader a “C” average for its efforts. But what Greenpeace failed to emphasize — again — in its annual “Clicking Green” report, is that the economics of renewables and the cloud are symbiotic.
All clouds are going to be 100% renewables, because the model is set up for renewables. You’re combining workloads, you’re centralizing production. To me, it’s a no-brainer, and there’s plenty of evidence to back that up.
The most efficient way to curtail carbon emissions is to move workloads from inefficient mainframes and enterprise servers into the cloud.
In fact, according to the United States Data Center Energy Usage Report, the rise of cloud computing has the power to dramatically slow energy usage. Between 2005 and 2010, power consumption at data centers jumped by 24%, but between 2014 and 2020, energy use is only expected to rise by a nominal 4% — despite a heightened demand for computing.
Why is that? It’s the move to cloud.
As Chief Evangelist at AWS Jeff Barr detailed back in 2015, on-premise data servers have low utilization rates because they can’t afford to exhaust their server capacity, but “peak” capacity is rarely ever used. In other words, they’re wasting energy.
Because cloud titans like AWS, Microsoft and Google have a larger group of customers and applications to draw from, they can operate at a much higher utilization rate — meaning fewer servers. On top of that, major cloud providers like AWS invest in efficiency at scale, which Barr estimates reduces the amount of power cloud providers use by 84% when combined with the reduction in servers.
All told, Barr estimates that transferring workloads from enterprise servers to the cloud results in a 88% reduction in carbon emissions. (According to the Lawrence Berkeley National Laboratory Berkeley Lab, it’s 87%.)
In even simpler terms — as lead data center architect at AWS James Hamilton put it, “The greenest power is that which is not consumed.”
In 2014, Bloomberg labeled Amazon’s cloud “one of the fastest-growing software businesses in history.” While the AWS growth rate has technically cooled down, total revenue and profit continue to grow. Last week, the company posted $3.5 billion in AWS revenue in Q4 2016, up 47% from last year, bringing the total yearly AWS revenue to $12.2 billion, with $3.1 billion in operating income profit. Just take a look at the chart below. Nobody else is growing at this scale this fast, and scaling a renewable energy ecosystem to support AWS’s rapid growth is next to impossible.
But what has me excited as someone who cares about green investing is the company’s commitment to renewable energy.
The cloud giant first made a commitment to operating on 100% renewable energy back in November 2014, and subsequently updated its goal to 40% by the end of last year. In September 2016, the company announced plans to start construction on its largest wind farm to date in Texas, which will reportedly create enough energy to power nearly 90,000 homes in the U.S.
And as of November, the company says it is on pace to meet the company’s “latest goal of 50 percent renewable energy powering the AWS global infrastructure by the end of 2017,” thanks to five new solar plants it is building in Virginia, bringing the total number of AWS solar farms to six in the state and the number of renewable energy projects across the globe to 10.
Even Greenpeace noted that despite the fact that AWS is the “least transparent” when it comes to releasing what the advocacy group characterized as “basic details” about its environmental impact, it has “significantly stepped up its clean energy and climate advocacy over the past year, both through its utility relationships and with policymakers.”
So at least that’s something. Ultimately, though, Greenpeace should stop focusing on companies like Amazon, and shift its attention to technology relics — such as IBM and HPE — that are quickly getting left behind after getting a late start in the cloud, but hanging on to their mainframe and enterprise servers, which are completely incompatible with renewable energy.
The cloud is clean, and Amazon is leading the charge.
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Arne Alsin and Worm Capital clients are currently long Amazon (AMZN) and stand to benefit if the trading price of Amazon increases.
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