Remember when you were 18 and bought your first car? You scrimped together a down payment, calculated that monthly car loan, and bit the bullet to make that first insurance payment. But two months later you looked at your gas bills, an unscheduled oil change, and then realized your ride needed new tires. Who knew that at 18 you received your first lesson in the economics of Total Cost of Ownership (TCO)?

A data center may have a lot more “moving parts” than a car, but data center designers and managers still embrace many of the principles of TCO, especially when specifying capital intensive equipment for data centers.

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We all know that TCO, the sum of capital expenditures (CapEx) and operational expenditures (OpEx), is a critical metric to understanding true and long-term costs when designing a new facility or selecting equipment. This is certainly the case for energy-hungry equipment, from servers and coolers to operational electric power distribution losses, including uninterruptable power supplies (UPS). This latter category can be up to 12% of a facility’s energy costs — and it is also one of the areas where TCO calculations of energy consumption over time show that OpEx energy costs are far more expensive that the CapEx cost of the equipment.

With a long-term vantage on energy use, an even seemingly small energy efficiency gain has a significant impact on TCO for high energy-use, long-life assets. For example, let’s look at a 1% efficiency improvement for a UPS deployment at a 10 megawatt (MW) data center. As the chart (Figure 1) shows, while CapEx is fixed, a TCO evaluation of the OpEx costs of operating a UPS over 10 years creates an operational savings of $1.4 million when energy efficiency improves a single percent — from 93% to 94% efficiency. With newer UPS technologies that offer up to 96.5% efficiency, that savings jumps to almost $3.4 million. So a 1% gain in energy efficiency really does matter.

While the capital expenditures for UPS systems are relatively the same, the OpEx for UPS energy consumption can easily exceed the CapEx over the life of the equipment due to differences in energy efficiency.

Yet, if these operational cost savings are so dramatic, why is the TCO model often abandoned when the project phase turns to selecting power system components, such as a UPS? CapEx evaluation often begins with initial acquisition costs, not long-term operational expenses. Further, equipment efficiency is often specified at a minimum level, and the purchasing decision is solely based on meeting the minimum level specified with no evaluation credit given for exceeding that minimum efficiency level. Instead, the purchase price and how it compares to budgeted amounts and the immediate availability of equipment often play a larger role in procurement decisions.

Even when senior management identifies OpEx as a key factor early in the planning of a power system, buying decisions made with the more immediate pressures of component price and availability are often made at the expense of OpEx criteria. When purchasing is outsourced to contractors, a divergence from management’s original intent is even more likely.

Millions of dollars in savings are available to data center managers who apply a TCO model when purchasing components for critical power systems. To realize the long-term benefits and cost savings of a TCO evaluation and purchasing model, data center managers have an opportunity to align their CapEx-centric purchasing team with the OpEx goals of their operational teams. TCO can become a common metric for both groups as they work together to create energy efficient data centers that return long-term value.