Silicon Power Play
MILLS, MARK P.
BY MARK P. MILLS Ten years ago in Sacramento, the California Energy Commission wrestled with competing visions of the future of electricity. The vision that prevailed is bearing fruit...
...Most are turned off, most of the time...
...Compound this by the total number of integrated circuit chips sold per year, rising dramatically from 6 billion a year a decade ago to 16 billion last year...
...In 1995, companies like Cisco shipped about 340,000 routers...
...People are driving more than ever too, and in bigger vehicles...
...Gordon Moore's silicon microprocessors similarly drive productivity...
...New technologies held great promise to drive efficiency (and cut demand), none more so than the microprocessor...
...has picked up noticeably in recent years...
...Net effect: electron consumption from silicon has been rising...
...Thus one is faced with the seeming paradox: efficiency and demand rise together...
...That's a lot of equipment...
...even if the economy is cooler, the weather won't be...
...New technologies would pave a yellow brick road of efficiency improvements that would quickly make central power plants "dinosaurs...
...There were under 25,000 servers in operation in the United States in 1995...
...The NASDAQ sag has only modestly abated this pace...
...The ultimate rebuttal to the silicon economy's electron appetite is the ever40 THE AMERICAN SPECTATOR ¦ April 2001 Growth in U.S...
...Surely clicks beat bricks here...
...Average watts per average bulb keeps dropping...
...Each wireless Palm Pilot is a refrigerator's worth of electric demand...
...over 1.5 million were shipped last year...
...Commerce Department data pegs the IT sector at over 10 percent of the national GDP...
...fair enough...
...150 million now...
...Convenience, it would appear, does have a price...
...Using their data, an Internet-connected Palm Pilot consumes as much as the hot water heater...
...3 The share of total U.S...
...IT wealth can drive dollars to SUVs and aircraft, increasing oil use, not just electric use...
...There were 87 million PCs on home and business desktops in the United States in 1995...
...on peak days, the Valley itself now consumes nearly 3,000 megawatts of electricity...
...One obvious example: Over the past five years semiconductor manufacturing has ascended to become the nation's largest manufacturing industry—bigger than autos...
...They too have been getting more efficient...
...SILICON EFFICIENCY Demand for electricity was supposed to have leveled off, even reversed, according to the array of green and no-growth forecasters peddling this vision to compliant utilities, regulators and legislators in every state of the union...
...Davis issued an Executive Order January 17 for businesses to turn off "unnecessary" outdoor lighting, or face How the Net crashed C< new power companies i fines...
...It has been so since Thomas Edison's lightbulbs and motors...
...in New York City, apparently, the pace has not abated at all...
...same lumens with fewer watts...
...A power plant can't tell what's on the grid, whether it's a lightbulb or CPU, a water pump or laptop, a refrigerator or router...
...The average power used per CPU has been rising as the total number of transistors per CPU keeps soaring (one million per CPU a decade ago...
...Whatever can be said about how California effected "deregulation" of electric power, the heart of the problem is that someone guessed wrong on the demand side of the equation...
...Last year, for the first time, spending on IT equipment matched spending on all other business equipment, both hitting an annual rate of $500 million...
...Since that study, GDP grew 60 percent, electricity consumption 55 percent...
...But they were wrong about demand...
...To be sure, a PC appears to be more abstemious with fuel...
...Who should we blame...
...And the manufacturing sector as a whole consumes almost 30 percent of U.S...
...A rough rule of thumb: the manufacture of a digital box (from silicon to desktop) consumes as much power as a year of its operation...
...Powering the Microcosm 1990 2000 Electric demand follows the rising number of integrated circuits (ICs), not the saturated market for lightbulbs...
...The vision that prevailed is bearing fruit today...
...Such a single, innocuous grocery store-sized building's electron demand rivals a half dozen high-rise office towers...
...Saturated...
...The paper and chemical industries combined do not consume 10 percent of the nations electron output...
...But the reality is more complex...
...Just five years ago, California had a 30 percent electricity supply surplus...
...When my colleague and I first suggested that it might take serious gigawatts to power it all, one saturated-market theorist responded (I'm not making this up) that bits simply glide over the phone companies' existing infrastructure, and thus require no additional power whatsoever...
...There is a powerful transformation underway, driven by the ever strengthening, ever-lower cost, and ever-deeper penetration of silicon intelligence into every kind of device, everywhere in factories, offices, schools, and homes...
...And we're just beginning...
...The deal is almost certainly too little, too late for this summer...
...The Internet desktop, or palmtop, is nothing without the network...
...productivity growth—i.e., about $250 billion of additional GDP—over the course of the last five years alone...
...From 1996 to 1999, average labor productivity in the private, non-farm U.S...
...And they've been getting more efficient...
...All of the forward-looking trends point not to saturation but more growth...
...That's the story...
...Consider: If digital technologies boost power consumption by 5 percent, and boost the GDP by 10 percent, then power consumed per unit of GDP does indeed drop—but the Calpines of the world still see 5 percent growth...
...Perhaps...
...Consumption of electricity kept rising anyway...
...and for a freezer, down 70 percent...
...1974 1990 2000 Sources: Federal Reserve Bank of Dallas, Computer Industry Almanac, Inc., Internet Software Consortium © Digital Power Report There is a striking correlation between productivity growth and the rise in the number of computers, and especially the number of computers on information networks (the number of Internet "hosts...
...Their fuel of choice: kilowatt-hours...
...Try Economics 101...
...The deal inked between Gray Davis, California's kilowatt-seeking governor, and Peter Cartwright, Calpines kilowatt-flush visionary CEO, crystallizes the role of electrons in the 21st century economy, as well as the kinds of technologies and companies poised to benefit...
...Add up the Palms, or consider instead just your wireOtherwise, analysts quickly get bogged down in the paucity of data, and an engineer's equivalent of the old theological debate of "how many angels can dance on the head of a pin...
...Ten percent may sound modest, but on the margin this much electron demand becomes that straw on the camel's back...
...There were no significant new uses for electricity...
...popular "clicks versus bricks...
...But turn on your Internet browser, and the hot microprocessor on your desktop compels other microprocessors to turn on as well...
...The power consumed per wireless phone in the networks (all those cellular base stations use electricity) is comparable to the hot water heater in your basement...
...There is nothing in the action of your turning on a lightbulb that compels another dozen lightbulbs to turn on somewhere else, hundreds of miles away...
...Many are on, most of the time...
...But the demand for warming toast, water, rooms and lightbulbs is truly saturated...
...Today there are well over 10 million square feet of such buildings, and another 15 million under construction or planned within just the next two years...
...it effectively lowers the cost of energy...
...The silicon and bandwidth structural changes in the economy are permanent and growing...
...And the network contains not hundreds but billions of other microprocessors standing by hot 24/7, ready to light up to transmit, sift, amplify, route, store and translate the vast quantities of bits coursing through wired, and increasingly wireless, networks...
...But what of the Amazon.com efficiencies in inventory and distribution of consumer goods via the Internet...
...Today's claim for IT's virtues as an energy saver is a modern version of the promise of the paperless office at the dawn of word processing...
...Add it all up—from silicon manufacturing, to telephone networks, wireless networks, Internet server farms, cooling systems, reliability systems, and the ubiquitous desktop PCs...
...Energy analysts embraced the power of technology to create efficiency even while supporting economic growth...
...From the perspective of primary power fueling the grid, electrons heating toast or warming silicon are the same...
...Efficiency improvements came...
...There is no evidence that economic growth can de-link from electric growth...
...Our estimate that 8 percent of the nation's electricity is needed to power the Internet captured the interest of President Bush's advisers, showing up in platform statements, and was subsequently "elevated" to urban legend as an ostensible Bush campaign exaggeration...
...Silicon Valley's demand for power has been growing at an annual clip roughly triple the forecast a decade back...
...energy devoted to making electricity continues to increase...
...Improving energy efficiency has one direct effect...
...Galiforni^s kilowatt woes arose because somebody forgot to turn out the lights...
...This was "Demand Side Management...
...In dollar terms, IT equipment now accounts for 20 percent less cell phone...
...The growth in U.S...
...electric consumption this past decade required as much additional electron supply as exists in all of Central and South America...
...Some alternative analyses (primarily from the no-growth faction) put forward lower numbers...
...Silicon devices, The intellectual capital emerging from Silicon Valley, and every other regional silicon alley, plain, and zone, is embedded in machine tools, medical devices, warehoUsSe inventory and even the tracks that ship it...
...The California no-growth faction saw the microprocessor as an engine of economic growth, and an engine of energy efficiency...
...And Calpine has the only two new central power plants scheduled to come on-line this summer in the great state of California...
...In the last digital decade, teleconferencing has really taken off...
...Eliminate the need for more power plants by managing demand through efficiency...
...Combined, all these effects confound the no-growth forecasters...
...It was both, and continues to be so...
...The mavens were right about one thing...
...Truth be told, it is not easy to accurately document the quantity of electricity IT and the Internet consumes today by counting microprocessors, or the boxes they reside in...
...so have total air miles flown, rising from 4.3 to 5.8 billion a year...
...If they had been right, the roles of companies like Calpine and PG&E would have been reversed: the former would be facing bankruptcy instead of the latter...
...You could argue that growth in travel would have been even greater "but for" the savings from IT...
...And all of it gets plugged in...
...The manufacturing of digital equipment is very electric intensive...
...Electric motors profoundly improved factory efficiency and productivity...
...Little-known Calpine, a merchant power producer, stands out because it owns and has under development more future central power capacity than any other company in the nation...
...Energy Consumption for Electricity 1990 1992 1994 1996 1998 2000 Source: Energy Information Administraton 1975 1980 1985 1990 1999 2000 Source: Energy Information Administration 2 Electric demand has continued to rise with GDP growth, even as efficiency has improved (measured as declining kilowatt-hours per $GDP...
...Despite NASDAQ's sag, exuberance is the rational reaction to the deep and spreading revolution of the microprocessor, especially as amplified by networks of copper, optical fiberf and wireless transmitters...
...The consumption of kWh has tracked a rising GDP virtually without interruption for a century...
...Unlike lightbulbs, where a handful per room in a 100-room building saturates the potential for demand, single buildings now contain millions of microprocessors...
...And they too consume kilowatt-hours...
...Consider a tiny Palm Pilot or Compaq PDA with wireless Internet access...
...more MIPS (logic operations) for fewer watts...
...Probably so...
...lots of them...
...Stuff of science fiction a decade ago...
...The U.S...
...Transportation fuel use is up 12 percent against an already enormous baseline...
...The logic was seemingly inescapable...
...Calpines rejection of the no-growth vision makes it a winner—along with its customers— of one of the biggest technology bets in recent decades, and one of the most visible in a rich new field of heretofore (and still largely) ignored technology companies serving the silicon-energized power needs of the U.S...
...kilowatt-hours...
...How did the no-growth group get demand so wrong...
...Saturated...
...The same argument is offered for telecommuting and Internet teleconferencing...
...The silicon "wealth effect" is only part of the story though...
...Even Vinton Cerf, the co-inventor of the Internet, has concluded: "The Internet has the funny effect of increasing the amount of travel...
...The average annual electricity used by a refrigerator is 60 percent less today compared to 20 years ago...
...The number of telecommuters has grown five-fold in the decade, to over 20 million...
...GDP and Electricity GRAPHS 2& 3 Share of U.S...
...Over $800 billion has been added in the form of new telecom/datacom infrastructure over just the past five years...
...The bits in the networks are, after all, just bundles of electrons...
...It is arguable (and probable) that the silicon productivity effect (bigger economy, more money) more than offsets the silicon efficiency effect...
...Perhaps because silicon central processing units (CPUs) seem so tiny compared to motors and lightbulbs, it's easy to ignore their voracious collective appetite for electrons...
...Vast federal and state programs, billions in subsidies and legislation were enacted—nowhere more aggressively than in California—to stem the growth in electric demand...
...This last fact seems to have escaped many analysts (not Calpine's...
...But the IT sector itself has become a major energy-consuming industry, one that is inherently electron dependent: you can't light up a Pentium with a woodstove...
...Use a Dell instead of a Buick or Boeing...
...SILICON PRODUCTIVITY California has more houses, bigger ones, more air conditioners, more Christmas lights and more brightly illuminated storefront signs...
...A decade ago, such buildings simply didn't exist...
...In March last year, a report from the Federal Reserve concluded that the manufacture and use of IT equipment accounted for roughly two-thirds of U.S...
...The average office space saw electric demand from lighting and air conditioning drop 20 percent...
...Doesn't change the fact that travel energy use is up overall...
...sector...
...Lower prices encourage demand...
...Electricity accounted for 25 percent of our energy consumption 25 years ago, it accounts for 40 percent today, and it will account for over half within a decade or two...
...Total number of bulbs sold per year, constant at 4 billion for the decade...
...But unlike lightbulbs the demand for logic operations is propelled by price elasticities that increase demand by a substantial multiple of every drop in costs...
...The economic benefits are powerful (hence the continuing rush to business-to-business e-commerce in particular), but the jury is out on the energy effect...
...click away...
...Future growth in demand for electricity would be "flat as the Kansas horizon...
...And what was the single largest factor driving this past decade's economic boom...
...A Cisco-sponsored study by economists at the University of Texas ("Measuring the Internet Economy," January 2001) concludes that U.S.-based "Internet Infrastructure" companies—companies THE AMERICAN SPECTATOR ¦ April 2001 43...
...The San Francisco Bay Area will need to add 1,500 megawatts of electricity before 2005...
...Demand for silicon is still growing, geometrically...
...Consider what has actually happened to the infrastructure...
...The 21st century's ascendant load, the integrated circuit, comes in all sizes too...
...Net effect: electron consumption from lighting has been dropping...
...An electron glut was forecast to prevail well into the 21st century...
...The net effect is a rise in both the absolute use and the relative importance of kilowatt-hours...
...At least 3 percent of the nation's electricity is powering just the PCs, printers and peripherals themselves, according to the best data from the Energy Information Administration (even the best can hardly be very good given the dynamism of this sector...
...Electric demand is up more than expected in large measure because California's and the nation's economy grew more than expected...
...of the nation's manufacturing...
...there are 6 to 10 million operating today, and a good many individual buildings now house more than 25,000 servers...
...Today the electricity consumed, not by the Palm itself, but in the invisible networks linking that Palm to and through the vast labyrinth of networked IT hardware, totals 1,000 to 2,000 kilowatt-hours per year (pro-rated for each user's share of the data hotels and beyond).That's what a household refrigerator consumes...
...Over the past seven years, IT equipment purchases have accounted for one-third of capital spending by businesses, the largest single entry on their new capital ledger...
...No organization tracks or monitors this data...
...The state traded "dinosaurs" for Stage 3 Alerts which are triggered by a black-out-inducing 1.5 percent margin between demand and supply...
...Sometimes an incredible amount gets plugged in, in a single building...
...at least 300 megawatts of that for Silicon Valley alone...
...SILICON DEMAND The 20th century's ascendant electric load, the lightbulb, comes in all sizes...
...42 THE AMERICAN SPECTATOR ¦ April 2001 Power suppliers in cities across the country, and around the world, from Seattle to Stockholm, Los Angeles to London, are struggling to meet this demand...
...electric consumption decade required as much additional as exists in all Latin America...
...There is an entirely new class of technologies and industries emerging just to deal with the unique reliability demands of such enormous and demanding digital power loads—the exclusive subject, by way of full disclosure, of the investment newsletter I write with my colleague Peter Huber, The Digital Power Report...
...In those long-forgotten Sacramento hearings of 1991, efficiency mavens put forth a consensus forecast...
...power...
...By 1991 we had already reveled in seven years of astounding information technology progress since the PC explosion was kicked off by the seminal 1984 Super Bowl "Big Brother" commercial from Apple...
...Just three years ago, IT spending was $300 million and non-tech $400 million...
...According to the American Forest and Paper Association, annual paper consumption is today some 20 million tons higher than in 1990...
...Order a book on-line, click-and-ship saves energy compared to driving to the store...
...Researchers at Carnegie Mellon examined the total environmental impact of the frenzy to purchase the latest Harry Potter book last fall, they concluded that it was entirely possible that (compared to bulk shipments via truck to retail outlets) more materials, energy, and environmental impact arose from Amazons sales of 250,000 books shipped and wrapped individually...
...A major (if little-noticed) study published by the National Academy of Sciences in 1986 concluded that, "electricity use and gross national product have been, and probably will continue to be, strongly correlated...
...They were right...
...THE AMERICAN SPECTATOR ¦ April 2001 41 A crucial difference between the 20th century's "dumb" loads and today's information loads is the network effect...
...These server farms or data warehouses are full of electron-consuming, microprocessor-laden hardware: servers, routers, drives, amplifiers, transmitters...
...for air conditioning systems it's down 33 percent...
...Microprocessor and information technologies have permanently and positively altered businesses and ignited small revolutions in every corner of the economy—-driving productivity...
...The total: an estimated 8 to 13 percent of the nations electricity is being consumed by the Internet and IT There is actually much more to the digital power story...
...On February 7 this year, California announced the first of what will no doubt be a series of huge power deals for electrons from big-iron central power plants—the antithesis of the vision hatched a decade earlier...
...To paraphrase a famous political slogan: "It's the Internet stupid...
...Saturated...
...economy...
...Efficiency did improve...
...38 THE AMERICAN SPECTATOR ¦ April 2001 It was about ten years ago that Nobel Laureate Robert Solow, professor emeritus of economics at MIT, said, "We see the computer age everywhere but in the productivity statistics...
...Still amazing...
...The total electric demand from these giant "bit processors" rivals the electric demand of the nation's entire food processing industry...
...last year that total blew past 160 million...
...The Calpine faction saw the rest of the story: the tech industry as the newest driving force in the century-long trend of continuing growth in electric demand...
...It is truly only possible to make a reasonable estimate from aggregate equipment sales and bellwether facilities (such as data hotels...
...economy grew at a 2.8 percent annual rate, more than twice the rate that prevailed between 1980 and 1995...
...power a router, or even build one with propane...
...Silicon brings economic efficiency, which in turn brings economic growth, and more electric demand...
...The question is no longer if information technology (IT) drives productivity, but how much...
...They're all just "loads...
...commercial sector market is becoming saturated (especially for PC CPUs and monitors)," they had declared in 1995...
...And they consumed kilowatt-hours...
...Metcalfe's Law, known for the observation that networks have an inherent multiplier in their spread and value, also applies to the network's appetite for electrons...
...The Harry Potter orders for Amazon required a fleet of 100 airplanes and 9,000 trucks to deliver the pent-up demand following the lifting of a midnight embargo on shipping the book...
...Hardly...
...Silicon plants are the factories of the 21st century...
...Productivity growth in the U.S...
...If anything, the IT part of the GDP should consume more than its pro rata share of U.S...
Vol. 34 • April 2001 • No. 3
