Select a Sustainable Colocation Facility

Colocation, or “Colo” Centers

A colocation data center facility rents space to businesses for housing servers and other IT hardware. Typically, a colocation facility provides the building, cooling, power, internet connectivity and physical security.  The customer provides servers, storage, and networking equipment.1  The use of colocation space is growing – a 2016 study indicated that the U.S. colocation market will grow at a compound annual growth rate of 12% from 2016 to 2020.2

IT managers seeking colocation data center space have a fairly short list of crucial criteria – reliability and cost are at the top, according to leading providers.  But many are now considering the environmental impacts of their IT operations, and they are wondering about the impacts of their leased data center space as well.  Addressing environmental impacts in leased colocation space isn’t different than doing so for your own data center facilities.  Although you have to work with, and sometimes through, the owner of the colocation property to get solid information and to undertake efforts to reduce energy use or procure greener power. 

Leading colocation providers indicate that they are increasingly asked about energy efficiency and green power procurement. Some have responded by improving the efficiency of their facilities and offering power purchase options. Colocation providers may be open to including efficiency and procurement features in lease contracts.  Below is a list of questions to ask your existing or prospective colocation provider to help assess their commitment to sustainability.

Efficiency Questions

1. What is the Power Utilization Effectiveness (PUE) rating of your facility?

While it may be rare to see a colocation data center with industry-leading efficiency performance, many collocation operators can provide information about the energy performance of their facilities. Usually, a colocation center will indicate the Power Utilization Effectiveness (PUE) of their facility, which is the ratio of total energy used by a data center facility to the energy delivered to IT equipment – see Figure 1, below.  PUE approaches 1 as the data center becomes more efficient.  A 2014 survey3 by the Uptime Institute indicated that the average reported PUE is 1.7.  Google and Facebook have claimed PUE levels as low as 1.1 for their data centers.4  Read how colocation vendor Green House Data Centers keeps their PUE at less than 1.25.

PUE Example

Figure 1: How Power Usage Effectiveness (PUE) is calculated.  A PUE of 3.0 indicates a relatively inefficient data center.  Image credit: DataClean.

2. Is there a strategy in place to improve the efficiency of the facility? Will tenants be called upon to assist in those plans, by implementing airflow management improvements, for example?

Many retail 5 colocation facilities use separate fenced-in “cages” to secure their tenants’ IT equipment.  Because supply air temperatures and air flow cannot be optimized for every single cage, they overcool the data center. However, some colocation operators have driven PUE down by partnering with their tenants – like requiring them to use racks with integrated cooling – to reduce building-wide cooling waste.

3. If we buy energy efficient equipment or implement efficiency measures, will you help us obtain utility incentive funds, where available? Are you open to a cost/benefit sharing arrangement for efficiency projects?

Utilities may offer “custom” incentive programs where the applicant receives a certain dollar amount per kWh saved by an efficiency measure.  Many data centers have benefited from these programs.  Ask your colocation provider if they partner with tenants to improve efficiency, and how the financial costs and benefits are shared.  If utility energy efficiency program incentives are available for a project, discuss who will receive the incentive payments – tenant or owner. 

Power Procurement Questions

4. Do you participate in utility green power programs?   How much power comes from renewable sources?

Colocation providers sometimes enter a “green power purchase” program with their electricity supplier.  This arrangement allows them to purchase electricity from renewable sources such as wind farms or solar arrays, typically at a premium.  This option is available to more than 50% of retail utility customers in the United States.6  In some cases utilities allow very large customers, such as colocation providers, to purchase power on the wholesale market. As in retail markets, green power purchase programs exist in the wholesale market as well.  As a tenant, you can inquire about participating in such a program for your portion of a colocation center’s energy use  Read about how Digital Realty purchases 40% of their power from renewable sources.

5. Do you buy renewable energy certificates (RECs) to support renewable power generation?   If so, are they third-party certified?

Colocation providers may also purchase Renewable Energy Certificates (RECs).7  Certificates are produced when renewable electricity is generated and fed to the electrical grid.  These certificates can be sold and traded or bartered, and the owner of the REC can claim to have purchased renewable energy. RECs offer colocation providers – or any other entity – a way to purchase green power even where it not locally available.  As a tenant, you can purchase RECs to offset your power use in a colocation facility. 

RECS should be certified by an independent third party, like Green-e.8 

6. Have you entered into Power Purchase Agreements (PPAs) to support renewable power generation? 

Colocation providers may also enter into power purchasing agreements (PPAs)9.  In a solar PPA, for example, a service company owns, operates, and maintains a photovoltaic (PV) array, and the colocation provider agrees to host the array on its property and to purchase the electricity that it generates.  With a PPA, the colocation provider receives lower-cost electricity from a renewable source, while avoiding the expense, risk, and hassle of designing, permitting, building, and operating a solar installation.  The solar services provider receives tax credits and income from the sale of electricity.

Contracting and Charge Structure Questions

7. How is power-use accounted for in your lease rates? Do tenants pay for power capacity or for actual power use? Are efficiency metrics and power procurement included in the service level agreements in your lease contract?

The way that colocation facilities charge for data center space varies.  Many colocation leases feature a blend of charges based on the amount of physical space required, and usually a rate based on the power capacity needed by the tenant. For example, the facility might charge for each 20-amp circuit of power capacity devoted to a tenant.

Increasingly, colocation facilities are structuring lease contracts based on actual tenant energy usage, using in-house metering systems to determine usage and adding an “overhead” amount for cooling and power delivery. This arrangement has the advantage of encouraging tenants to purchase efficient IT equipment and to operate it with energy use in mind.  While the practice is quite widespread in the colocation industry, be aware that some utility regulators may prohibit “sub-metering” arrangements.

Energy efficiency and power procurement requirements aren’t typically included in a colocation lease agreement, but any prospective tenant can request that they be added.

Savings and Costs

Some utilities offer incentives to encourage their commercial customers to move small, embedded data centers to more efficient colocation facilities. In 2014, ComEd launched a program called “Closet-to-Colocation Data Center Solutions” that offers ComEd utility customers five cents per kWh saved in the first year after a data center move. (See flyer below.)  Energy savings are calculated by comparing the PUE of the customer’s original embedded data center to the colocation facility’s PUE.  

For example:

  • Consider a ComEd customer with a small data center: 20 kW of IT load and a PUE of 1.7.  (This implies 14 kW of load for cooling and power infrastructure.)
  • Suppose they move the data center to a more efficient colocation facility with a PUE of 1.2.  (For 20 KW of IT load, this implies just 4 kW of load for cooling and power infrastructure.)
  • The difference in cooling and power infrastructure loads – the energy saved by the move -- is 10 kW.  ComEd would pay its customer 10 kW x 8760 hours in a year x 5 cents per kWh = $4,380.

Ask your local utility if they offer similar incentive programs.

Closet-to-Colocation Data Center Solutions

Tips and Considerations

Selecting the right colocation space is a complex decision that requires prospective tenants to weigh factors such as scalability, flexibility, available power density, cooling/ power redundancy, uptime, physical security, and costs.  Tenants are increasingly adding energy efficiency and power procurement options to their list of considerations.

By engaging your colocation providers in discussions about energy efficiency and power procurement, you may identify ways to reduce the cost and the environmental footprint of your IT operations.


1 In wholesale colocation, a tenant leases a fully-built data center space or very large portions of the space, such as an entire floor of a building. Often (but not always), the tenant is then responsible for handling all IT operations in that space. In retail colocation, a tenant leases space within the colocation facility; this is usually a rack, space within a rack, or a caged-off area.

2 US Data Center Colocation Market Growth of 12.36% CAGR by 2020 - Analysis, Technologies & Forecasts Report 2016-2020 - Key Vendors: CenturyLink, Equinix, IO - Research and Markets. Business Wire. August 5, 2016.  Available online at: http://www.businesswire.com/news/home/20160805005476/en/Data-Center-Colocation-Market-Growth-12.36-CAGR

3 2014 Data Center Industry Survey. Uptime Institute. 2014.  Available online at: https://journal.uptimeinstitute.com/2014-data-center-industry-survey/

4 Higginbotham, Stacey. Whose Data Center are More Efficient? Facebook’s or Googles’s? GIGAOM. March 26, 2012.  https://gigaom.com/2012/03/26/whose-data-centers-are-more-efficient-facebooks-or-googles/

5 In wholesale colocation, a tenant leases a fully-built data center space or very large portions of the space, such as an entire floor of a building. Often (but not always), the tenant is then responsible for handling all IT operations in that space. In retail colocation, a tenant leases space within the colocation facility; this is usually a rack, space within a rack, or a caged-off area.

6 Learn more at: https://www.epa.gov/greenpower/buy-certified-verified-green-power

7 Learn more at: https://www.epa.gov/greenpower/renewable-energy-certificates-recs

8 Learn more at: https://www.epa.gov/greenpower/buy-certified-verified-green-power

9 Learn more at: https://www.epa.gov/greenpower/buy-certified-verified-green-power