Cloud Computing Chops Energy Costs, Carbon Emissions: Study

Cloud computing has the potential to save large companies a total of $12.3 billion annually on energy costs and reduce annual carbon emissions by 85.7 metric tons come 2020, according to a recent study examining the environmental impact of cloud computing published by the Carbon Disclosure Project.

The study, "Cloud Computing: The IT Solution for the 21st Century," revealed that those dramatic energy savings and carbon emission reductions come as the amount of cloud computing spending by large U.S. enterprises increased from 10 percent to 69 percent of IT budgets. The study was conducted by independent analyst research firm Verdantix and was sponsored by AT&T. It found that companies plan to accelerate their adoption of cloud computing from 10 percent to 69 percent of their IT spending by 2020.

Eleven large global companies with $1 billion or more in annual revenue were profiled in the study, including Boeing, Citigroup, Dell, Deutsche Bank and Juniper Networks. All participants have been using cloud services for at least two years. The study found that many of them reported cost savings as their primary driver to adopt the cloud and anticipated that cloud computing it would reduce their costs by 40 percent to 50 percent.

"We are experiencing significant reuse, and hence carbon reduction, in our internal private cloud environment," Paul Stemmler, Citigroup managing director, engineering and integration, Citi Global Operations & Technology, said in the study.

The data gathered from the participants was used to formulate two distinct cloud computing scenarios in which a food and beverage company with annual revenues of $10 billion, 60,000 employees and operations in 30 countries can reduce energy costs and chop carbon emissions.

The Carbon Disclosure Project study found that when that food and beverage firm transitions its human resources application from dedicated IT to the public cloud, it can reduce carbon emissions by 30,000 metric tons over five years, which is the equivalent to the annual emissions from 5,900 passenger vehicles. The lifetime cost of implementing and operating the public cloud solution for five years is $12.3 million, compared to the $24.6 million to upgrade and operate a dedicated IT solution over the same time frame. The study found that if the food and beverage firm moves its HR application from dedicated IT to the public cloud, it can achieve a net present value of $10.1 million over five years with an ROI of under a year.

If that same firm moves its HR application from on-premise to a private cloud, it chops carbon emissions by 25,000 metric tons over five years, or the equivalent of the annual emissions from 4,900 passenger cars. In that private cloud scenario, the net present value is $4.4 million over five years with payback coming in year two, the study found.

Next: Cloud Computing Makes Environmental, Business Sense

The potential for massive reduction of energy costs and carbon emissions comes as the Department of Energy estimates that data centers in the U.S. are responsible for consuming up to 3 percent of all of the electricity in the U.S., an increase of the 1.5 percent of total U.S. electricity consumption the Environmental Protection Agency estimated in 2006. It also comes on the heels of a Greenpeace report that listed the "dirtiest" data centers in terms of the amount of "clean energy" used.

The Carbon Disclosure Project's findings jibe with other recent studies, including one commissioned by Microsoft, Accenture and WSP Environment and Energy that found businesses that run applications in the cloud can reduce energy consumption and carbon emissions by about 30 percent or more compared to on-premise infrastructure.

Andrew Winston, sustainable business expert and author of "Green to Gold" and "Green Recovery," said in the report that he's optimistic about the role that cloud computing can play in reducing carbon emissions, while it also helps companies avoid the up-front capital costs of on-premise systems and achieve increased flexibility, improved automation and process efficiencies.

"It makes business and environmental sense," he said, later adding that data centers can lose up to 96 percent of the energy that comes into a business by losing efficiency in three key areas: cooling the room, cooling the servers and keeping servers idle with utilization rates as low as 10 percent to 20 percent.

"IT is one of the fastest growing energy hogs, accounting for at least two percent of global energy use and it set to more than double this decade," Winston wrote.

Overall, the study found that by moving to the cloud, large companies can achieve $12.3 billion annual savings on energy costs by 2020. Meanwhile, large companies that move to cloud stand to achieve carbon emission reductions of 85.7 metric tons by 2020, or the equivalent to 200 million barrels of oil, enough to power 5.7 million cars for one year.

"Finding providers and partners that can take some of your energy-using operations to scale, and manage them in a shared capacity, is good for both business' carbon footprint and its bottom line … Executives should view cloud computing as a way to transition to a low carbon business model while increasing the efficiency and effectiveness of business operations," Winston wrote.