64
Utility Incentives
Statesoffer incentivestoattractnew
businessesorexpandexisting facilities
withintheirborders.Utilitycompanies
offer incentives forthesamereasons
statesdo: theyhavemillionsofdollarsof
investments intheirserviceterritories
andmanyhavecapacityavailablealong
existing infrastructure.Mostutility
incentivesareofferedbyelectric
companies, thoughsomeareofferedby
gasutilitycompanies.However,
determiningtheavailable incentives is
oftendifficultsinceutilityservice
territoriesdon’ttypically fallalong
establishedstate,cityorcounty lines.
Also,manystateshavemorethanone
utilitycompany,andeachwillhave
different incentiveoptionsavailable for
companiesexpandingorrelocating intoa
particularserviceterritory.
Utilitiesareparticularly fondofdata
centerprojects, sinceadatacenter’shigh
electric load factorallowsthemto
maximizetheirassets. Recently,a few
utilitieshave incorporated load factor
input intotheir incentiverates.
The incentivesofferedbyutility
companiestypicallyrange fromtwoto
fiveyears,witha few lasting longer. All
ratediscountsdepreciateovertime
duringtheirtermandmosthave
minimumkWdemandorkWhthreshold
requirements,eitherdeterminedasanew
loador incremental load increase.The
kWdemandrequirementsrangesas low
as 10-25kW,andwhilemostutilities
requireatotaldemandof200kWor
moretoqualify, somerequireasmuchas
1,000kW.
Inthecaseof facilityexpansions,an
increaseoverprioruse,knownas
incremental load,mustmeetathreshold
overtheprioryear.The incremental load
formsthebasisofthecredit. Insome
specialcases, someutilitiesarepermitted
tonegotiate ‘offtariff’ rates.
Manyutilityeconomicdevelopmenttariff
ridersare linkedwiththecreationofnew
full-timeemployeesortheapprovalof
stateor localeconomicdevelopment
incentives inordertoreceivethe
discountedrate.
Eachutility’sthresholdtoqualify foran
economicdevelopmenttariff,howthe
discount isapplied, thetermofthe
discount,andthevalueofthediscount
varieswidely.Thecharacteristicsofeach
utility’s incentiveprogrammustbe
consideredalongwithstateand local
economicdevelopment incentive
programs.
Conclusion
Inconclusion,datacenterownersand
operatorsshouldkeep inmindthatmany
cities, statesandutilitycompaniesnow
recognizethevalueofdatacentersand
areactivelycompeting forprojects.
Therefore,asdemonstrated inthecase
studythat focusesonarecentNewYork
statedatacenterrelocation, incentives
canrangeupto$400persquare foot,or
10-15%ofthetotal lifeofthedatacenter
project. Theopportunitytosecure
incentivesshouldbeconsidered inthe
earlysiteselectionandduediligence
process.
7X24MAGAZINE SPRING2014
TimComerford is themanagingdirectorat SugarloafAssociates, and senior vicepresident, BigginsLacyShapiro&Co. LLC.
He canbe reachedat
n
Utilitiesofferelectrictariffsthatreward
high load factor. Sincedatacenters
operate24hoursaday, sevendaysa
week, theyprovideanexcellent load from
autilitystandpoint. In fact,mostdata
centershave load factorsexceeding75%.
Theutilitycanmaximize itsnecessary
investment inequipmentandcapacity
sincethe facilitywillbeconsumingavery
highrateofkWhs foreachkWofcapacity
and installed infrastructure.
Thebelowchart identifiesasamplingof
utilitiesthatoffer“high load factor”tariffs.
Inmostcasesthere isaminimum load
requirement;however, itvaries
considerably,andoften includes
minimumtermsofcommitmentranging
from 1totenyears.
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