Diginomica, November 29, 2017
By Denis Pombriant
A paradigm, by definition, stays in place for a considerable time. We base significant parts of societal and economic life on the stability of paradigms so they should change rarely and when they do they should change quickly.
Some economists refer to this extended stasis and quick change as punctuated equilibrium, a term borrowed from evolutionary biology. If you need a visual, think of your EKG on a heart monitor. It’s a long straight line indicating your heart is at rest and then ba-BOOM and then rest again.
Economies need the stability of a stable paradigm because they equilibrate the world’s regions and nations, maybe not in an ideal manner, but much better than if a free-for-all was allowed to develop.
We’re witnessing a paradigm shift in energy though we’re in the early stages and it might be hard for some to see. We’re moving from the centralized, fossil fuel mediated energy paradigm into something distributed, renewable, and green. The extent and speed of the shift are striking. For example, consider the fast progress made with waste heat from data centers.
In December 2015 Benjamin Petschke, a product manager at Stulz, GmbH, in the data center cooling industry near Hamburg, Germany, posted on LinkedIn about the challenges of doing something constructive with waste heat. He wrote,
A midsize data center with 1 MW IT load and a PUE of 1.40 [a ratio of energy input and energy used], running at 30% utilization releases 3.700 MWh thermal energy per year into the atmosphere. A one family house in Germany requires approx. 20.000 kWh of thermal energy for heating per year. The heat emission of this data center could arithmetically be used for heating 185 houses throughout the year.
However, he also wrote that capturing and using the energy was,
Practically and in a large scale hardly possible today. District heating systems could be a possibility, but there are not too many available and those operate with high temperature levels.
Fast forward just a couple of years, and everything is different. Last week, The Seattle Times carried a story about Amazon partnering with a neighboring data center consolidator to produce a district heating system that will heat Amazon’s new headquarters.
The story said the heat source, the telecom data centers in the 34-story Westin Building Exchange,
Will be used to warm just over 4 million square feet of development on Amazon’s four-block campus, saving 80 million kilowatt-hours over 20 years, or about 4 million kilowatt-hours a year, officials said Thursday. The first 1.1 million-square-foot tower opens next month, and a second is expected to open by next fall.
If Amazon was the only tech company doing this, it would not likely be significant news, but Amazon is the tip of the spear. This kind of district heating is becoming popular in other parts of the world.
In Denmark, Facebook is working with Ramboll, Denmark’s third-largest district heating company to sell waste heat into a utility that would serve Odense, a Danish city.
There are many more examples of tech companies harnessing their waste heat and making productive use of it in just the last few years. The critical innovation in this is district heating, not the technology used to absorb heat in one place and deliver it to another. The innovation resides primarily in business models and agreements.
District heating has been around since at least the 14th century in Chaudes-Aigues, France and even earlier in ancient Rome and China. What’s different today are two things, the heat source and the paradigm shift away from generating heat on location for each building to a district model.
In Denmark, it took a decision by the Danish Tax Appeals Agency to set things in motion. In the UK, a survey of the country to implement district heating networks by Energy Technologies Institute estimates a nearly £30 billion capital cost reduction, or 40 percent, over current approaches.
The apparently sudden move to a new energy paradigm beginning with waste heat reminds me of the birth of cloud computing. Not only was data silo-ed pre-cloud, but so was IT. Cloud computing brought together data center functionality that squeezed out unnecessary costs for the whole technology stack. That included hardware, software, labor, and, yes, energy. In the process, cloud computing delivered equal or better IT services, something with which few could quibble.
Commoditization happens in all industries; the way markets operate makes commoditization unavoidable. Cloud computing commoditized IT which is why it is so popular today. Commoditization is like gravity or death and taxes, you don’t want to bet against it, and it will continue because of the favorable economic outcomes.
Today sustainability is a form of commoditization for the energy sector. It’s not a foreign or arcane concept but a logical extension of invention and capacity expansion. It also borrows heavily from technology advances to provide the automation and oversight needed to trigger a commercially effective shift. We’re moving from a centralized energy architecture of utilities and refiners to a decentralized model where we harvest what’s required locally and supplement when necessary.
Waste heat capture is low hanging fruit, and there’s money to be made in supporting the process. Wind, solar, and geothermal power generation are all in the same category, although they can also straddle the line between centralized utilities and decentralized self-generation. The critical point is that collectively, these power generation sources have reached critical mass and are contributing to a rapidly changing energy paradigm.