The Enabling Technologies of a Low Carbon Economy

1. The Enabling Technologies of a Low Carbon Economy The Potential of Cloud-Computing Project Review February 10th, 2011 The Think, Play, Do Group, Imperial Business SchoolImperial College London, London SW7 2AZ, UK

2. Executive Summary (1) • Our focus: Cloud Computing – it’s carbon impact, likely adoption and the role of policy in four EU countries: France, Germany, Sweden and UK. • Our approach: to develop ‘open’ methodologies and models;leverage data and expertise from our partners; build upon prior work (e.g. GeSI). • Our key findings from shifting 3 applications from ‘on-premise’ to Cloud • Dramatic reduction in numbers of servers = significant reduction energy consumption • Small/micro firms represent 60% of savings • Akin to reducing ICT’s carbon footprint by 5% • Energy mix more influential than PUE CO2e Millions of Tonnes Approx 90%

3. Executive Summary (2) • The extent to which Cloud Computing will achieve broad penetration is still unclear, it may even stall: • Economic case exists ..... but it is very complex • Behavioural/organisational factors within act as barriers to broad adoption • Prime responsibility for driving penetration naturally lies with the ICT industry: • Be aware of adoption life cycle and need to ‘cross the chasm’ • Target segments with greatest to gain from shift to cloud • Work to overcome behavioural/organisation barriers • Public policy can probably play an enabling role: • Increased pressure on organisations to adopt energy efficiency practices • Direct use of cloud within public sector (building legitimacy through demonstrators) • Minimise data security issues

4. What will our presentation will cover?

5. Part 1

6. The Rationale for our Project • Acceptance that carbon reduction is a key challenge for all nations. • Belief that advances in ICT can reduce ICT’s own footprint and enable reductions in many other arenas of carbon production • There is a need for applied research to help better understand how technology can enable a low carbon economy in Europe. • Belief that independent analyses are needed to prove the carbon abating potential of enabling technologies. • Concern that widespread adoption might not occur - ‘carbon saving potential’ is, as yet, is not enough to convince customers to switch

7. Project Objectives • To build a Low Carbon Coalition to support and guide the journey First members; new members welcome. Advisors include:

8. Project Approach (i): An Analytical Framework We have developed a 5-step analytical process to systematically analyse high potential enabling technologies in specific countries. Define Scope Scenario Analysis: “Best Case Potential Impact” Understand Barriers Scenario Analysis: “BaU Impact” Recommend Actions to Drive Adoption • Describe the particular enabling technology - functionality, performance, cost: • boundaries of - performance/function; • the ‘in scope’ applications; • scope of the downstream impacts. Apply GeSI model to assess the potential carbon abatement impact of the enabling technology assuming ‘broad adoption’. Assess feasibility of enabling technologies: • Gaps; • Weaknesses. Assess likely carbon abatement impact given current technological and adoption context. Identify actions to overcome technological barriers: • Policy; • Industry. Assess barriers to market adoption: • Social; • Economic; and • Political. Identify actions to overcome barriers to adoption: • Policy; • Industry.

9. Project Approach (ii): A Toolkit for the Community • Built upon existing world-class research and consulting • GeSI • Accenture/WSP • ICT4EE Forum • WWF

10. Project Approach (iii): A Broad Review Then Deep Dive

11. Part 2

12. What is Cloud Computing? • The Cloud presents a new economic model for computing, not new technology. • Cloud Computing shifts IT services from on-premise servers to the web: • > A business model that enables computing services (software, platforms or infrastructures) that are traditionally provisioned 'on-premise’ to be delivered from cleverly designed and purpose built data centres across the internet in a utility or on-demand fashion.

13. How might Cloud Computing abate carbon emissions? • Carbon reduction may flow from both ‘shifting servers’ and ‘accessing applications remotely’ • Compared to on-premise servers, Cloud-Computing saves energyby: • > delivering economies of scale: • dynamic provisioning; • server utilization; • new technologies and enhanced data centre design; • > Innovating with location: • utilising advantages of cooler climates; and • to geographies with sustainable energy sources (e.g. hydro, wind, solar, geothermal); • > enabling dematerialisation: • removing the need to manufacture software CDs and packaging or enabling more remote working. • virtual meetings, removing the need for travel.

14. How can we assess potential carbon emissions abatement? • GeSi commissioned BCG to develop a standardised framework for assessing carbon impact of new technologies • The GeSI approach emphasises two points: • > The need to carefully define the technology in question • > Only include those areas where the carbon impact is significant i.e. simplify things

15. The GeSI framework applied to the Cloud? Carbon emissions created by the energy produced to power the Cloud Computing infrastructure and through the material acquisition, production, distribution and disposal of hardware The primary enabling effect of Cloud = on-premise servers switched off In scope: Switch off on premise servers Out of Scope: dematerialisation Out of Scope: e.g. Additional applications In scope:Emissions of Cloud infrastructure Out of scope: Cloud increases demand for computing Out of Scope: Enterprises using on-premise servers for new capacity

16. How Accenture/WSP estimate the direct carbon abatement impact of Cloud • Accenture/WSP completed a study to answer this question • Looked at migration of email, groupware and CRM • Considered impact on three different sized organisations (S/M/L) • Focused on changes in power consumption in migrating from on-site to cloud • Assumed a single ‘electricity carbon intensity’ figure • Included carbon in capital equipment • They showed that on average, migration to the cloud delivered per user carbon emission decreases: • 30-60% for large organisations • 60-90% for medium sized organisations • 90+% for small organisations

17. Building upon the Accenture/WSP approach • We consider same three applications but build upon the Accenture/WSP approach in five ways. • 1.We take into account each country’s different electricity carbon intensity level. • 2.We use Eurostat criteria to define three broad markets, by size of organisation: • Micro and Small (1 – 50 people, average 25 users) • Medium (50 – 250 people, average 150 users) • Large (Over 250 people, average 500 users) • 3.We take into account the extent to which the various applications are used for the types of organisation • 4.We assume that Cloud is in same country – and model separately the effect of cross-border DC relocation • 5.We’ve refined data through the coalition – estimates differ widely, need for care

18. Estimating carbon reduction under a ‘broad adoption’ scenario • Cloud could reduce the ICT sector’s carbon foot print by 5% • We assume that 80% of organisations in each size category migrate. • We estimated carbon abatement potential of 1.52 Mt CO2e • Equivalent to: • 0.23% reduction of total annual emissions • 4.6% reduction of the ICT sector emissions • 90.4% reduction compared to on-premise emissions • 500,000 cars permanently off the road

19. A look at these estimates in more detail The overall emissions abatement can be described as follows: Total emission abatement enabled by Cloud Computing The total emissions created by Cloud Computing infrastructure Net carbon emissions abatement enabled by Cloud Computing

20. So what is really driving these savings? • The key to achieving these savings is the micro/small business market and the procurement of new servers • Key driver of CO2 abatement: reduction in number of servers • Energy consumption is key effect; embedded carbon is negligible • Upgrading to the latest, most efficient computing hardware has a positive impact, even in the face of increased production/disposal emissions

21. So what is really driving these savings? • Key sensitivities: • If all Cloud infrastructure was located in France, carbon abatement would increase by 8%. • Improving PUE by 100% would only offer a 4% improvement. • If only half the enterprises switch off their on-premise servers, abatement potential would be slashed by nearly 50%

22. Part 3

23. What are the Technological Gaps • The technologies that enable Cloud-Computing are mature and available in all four focus countries. • Assumption: • The technologies that enable Cloud-Computing today are mature and near-term future developments are feasible. • Cloud-Computing and its immediate future incarnations are not reliant upon technological innovations. Communications network, e.g., fibre optics Data centre technology, e.g., clustered computers/mainframes Virtualisation technologies Operating platforms for on-demand

24. Assessing Adoption: The Basic Economic Case • The basic economic case for cloud is complex. Complexity reduces clarity of the basic economic case

25. Assessing Adoption: The Basic Economic Case • A “straw man” to help estimate the cost of providing applications to users. Costs are lowerbut we need real industry data

26. Assessing Adoption: The Behavioural Factors • There are four behavioural factors that may underpin non-rational behaviour. These factors are likely to further inhibit the depth and speed of adoption

27. Assessing Depth and Rate of Adoption • Five factors can help us determine depth and rate of adoption These factors are likely to reduce/slow adoption

28. Our estimate of actual adoption under a “business as usual” scenario Given the complexity of the economic case and significant behavioural factors, Cloud adoption is likely to peter out before the mainstream adopts Business as Usual Impact: 0.3Mt Co2e ? CHASM

29. Part 4

30. Several broad ‘mega trends’ favour shift to the cloud • Most social and economic mega trends support the adoption of Cloud Computing, but none will make a decisive difference on their own Global Economic Turbulence Sustainability Movement Rise of Social Technologies Globalisation Rise of Mobile Technologies Commoditisation Privacy and Data Protection Concerns Supportive trends Unsupportive trends Note: A number of trends that support the adoption of Cloud Computing are also likely to drive the growth of the ICT sector, therefore, increasing Carbon Emissions.

31. What can Vendors do to Drive Adoption? • Gear actions around three adoption curves - one for each segment – to help cross the chasm Targeting strategies niche marketing to cross the chasm Stimulate social networks CHASM

32. What can Policy Makers do to Drive Adoption? • Each of our four countries guide or provide broad incentives for general energy efficiency. • e.g. The UK • Policy is broadly supportive • However, it is so “at 10,000 feet” • Can policy makers have a more direct impact?

33. What can Policy Makers do to Drive Adoption? • Gear actions around three adoption curves - one for each segment – to help cross the chasm and help broadly de-risk energy efficiency adoption • Public procurement of Cloud • Supporting industry to focus on adoption challenge Helping to reduce cost or increase value of shift to energy efficiency CHASM

34. What can Policy Makers do to Drive Adoption? • Let’s assess the levers policy makers have at their disposal.

35. Next Steps: Coalition Feedback and Refinement • Complete a feedback process with members of the project coalition to sharpen and enhance the findings, assumptions and conclusions. • E.g. Imperial team to: • Analyse EU policy environment and policies regarding privacy and data protection • Assess impact of dematerialisation in application distribution (materials and shipping) • Cost of additional communication (between cloud DC and end-users) • Additional applications (e.g., accounting, web hosting) • Additional countries (especially East EU) Use finding to sharpen strategy and shape policy to enable carbon abetment Research 1 x technology in four EU countries Present initial findings (inc. gaps in data and assumptions) Assimilate feedback / conduct further research Refine & Disseminate Enact process for further refinement

36. The need for further work • We ought to extend our analysis by including • Impact of dematerialisation in application distribution • materials • shipping • Cost of additional communication (between cloud DC and end-user) • Additional applications (accounting / web hosting) • Additional countries – especially East EU

37. For More Information If you would like more information on the project and coalition membership, or if you want to get involved, please contact: Ray Pinto Microsoft rpinto@microsoft.com Pete Thomond The Think Play Do Group at Imperial College London peter.thomond@thinkplaydo.com Elena Bonfiglioli Microsoft elenab@microsoft.com