Silicon Valley Fear of Outages Has Generator Firms in Chips

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Silicon Valley Fear of Outages Has Generator Firms in Chips

Electricity: High-tech companies scramble to avoid interruptions in Internet service, other business.

By JOSEPH MENN, Times Staff Writer

SAN FRANCISCO--With California's unstable electrical system threatening temporary blackouts that could cost them hundreds of millions of dollars in the months ahead, Silicon Valley businesses are resorting to every trick in the book to make sure they stay humming.

Companies that make chips or run other firms' Web sites are cutting deals to keep most of their power in times of crisis. Engineers are designing state-funded software to help others drop electricity use on demand. And many businesses are simply grabbing every old-fashioned diesel-fueled generator they can find. Such technologically sophisticated companies as Sun Microsystems, WorldCom and Web-site host Verio have all received permits in recent weeks for new diesel generators, according to the Bay Area Air Quality Management District. Sun now has enough generators to keep its computer manufacturing facility in nearby Newark running through a blackout, the company said. "Most of it's driven by the Internet," said Tim Treat, generator sales manager at Peterson Power in San Leandro. The backlog for Peterson's 2-megawatt Caterpillar generators, which cost about $400,000 and can drive a medium-sized business, has climbed to five months from two months last year. "It's a great time to be in the rental business," said Peterson's Roger Wood. Businesses across California are scrambling to avoid potentially catastrophic power losses, and the fervor is especially pronounced in Silicon Valley. Verio, which guarantees Web-site accessibility for such customers as IBM, DuPont and Lucent Technologies, already has twice the number of generators it needs for an emergency at six Bay Area data centers, said Vice President Joe Stephenson. Now it's making sure it has more than one supplier of fuel for those generators.

Some Fear Diesel as New Pollutant The run on generators shows how desperate some of the biggest power users have become to dodge blackouts--and the huge losses they would entail in lost work time, data and sales. Indeed, the trend is so pervasive that environmental regulators fear that diesel exhaust soon could add significantly to the pollution around San Francisco.

Last year, the Bay Area air district began to require permits for new generators, and despite industry objections, it is in the process of further tightening its rules for their use.

"I'm not terribly sympathetic. These companies are major new drains on the public utilities," said air district official Steve Hill. "Their proposal is: 'We're going to put the system into the red zone and break it, and then we'll be OK--we're going to fire up our own engines.' "

Snapping up 2-megawatt generators, which arrive on 40-foot trailers, is just one trick for the companies that led the country's economic boom and drove up California's demand for energy in the process.

Other steps include reducing lighting and air-conditioning use, relying on energy-efficient appliances and, in some areas, trading pledges of 10% cuts in power use for a virtual free pass from rolling blackouts. The companies are in a tough position. They are both responsible for much of the rising demand that has stressed the state power grid to the point of failure and the most vulnerable to blackouts that the state could impose in a so-called Stage 3 emergency. In Santa Clara, the heart of the Silicon Valley, peak demand for power has climbed one-third in five years, from 2,237 megawatts on the busiest day of 1994 to 2,961 last year. One megawatt is enough power for about 1,000 typical homes. In Palo Alto, home to Sun and Hewlett-Packard, businesses suck up more than half the power in town.

Whereas research labs spend less than 5% of their operating budgets on energy, power is the largest single expense for some manufacturers. For them, cutting back on consumption is just good business, especially given the 7% to 15% in emergency rate hikes granted the big utilities last week. For others--like EBay, Yahoo and E*Trade, which lose sales with every second they are offline--reliability is almost life or death. On June 14, during localized rolling blackouts caused by transmission bottlenecks in the Bay Area, businesses lost about $100 million. More than three-fourths of companies in the valley believe they have a moderate or high risk of being blacked out this summer, according to a recent member survey by the Silicon Valley Manufacturing Group, an industry association. In good Silicon Valley tradition, some companies are working to develop new technology that will help. Last week, the manufacturing group began supporting a pilot program, funded with $1.4 million from the California Energy Commission, that will allow companies to automatically shut down some of their consumption on days when heavy usage threatens the system. The program also will sort through a growing number of rebates and discounts offered by utilities and state agencies for companies that agree to some power-use reduction.

"The only near-term solution is load management--reducing demand when requested or on a price basis," said William L. Smith of the nonprofit Electric Power Research Institute, which is running the program. IBM, Hewlett-Packard and General Electric are among the participants.

Municipally Powered Firms Are Lucky Some companies in the valley are at less risk of a blackout simply because of location. Relying on Pacific Gas & Electric, the utility that serves most of Northern and Central California, is riskiest, given its role near the heart of the shaky statewide power grid. The luckier companies get their power from one of about two dozen municipally owned utilities, which have remained largely protected from the state's electricity crisis.

These local power authorities generally have more control over what gets cut off and when. If the state grid operator suddenly demands a reduction in power use, and that gets passed on to a municipality, the town can often get by without blackouts by making some phone calls and throwing some prearranged switches. The most fortunate companies may be those in Santa Clara, which are served by the city-owned Silicon Valley Power. Under a program begun last year after the June blackouts, large customers that agree to throttle back usage by 10% can avoid having crucial operations blacked out in all but the most dire emergencies.

"We allow the companies to create a sacrificial lamb," said Santa Clara utility official Larry Owens, referring to noncrucial facilities that can be cut off early. "The power-reduction pool members offer a buffer to the shortage for all of Santa Clara." The program's 18 participants include Santa Clara-based Intel as well as facilities operated in the city by 3Com, Sun and National Semiconductor. Because Intel's Santa Clara chip plant participates, "we move to the bottom of the list for a blackout," said company spokesman Chuck Mulloy. That's a good thing, because the factory has only enough generator power to maintain lights, environmental-protection equipment and other basic functions, and not nearly enough to keep going full-tilt. Other cities, under pressure from big customers, are seeking to develop similar programs. Palo Alto is working on a nearly blackout-proof plan for some customers that can drop 20% of their consumption on short notice. Although many Silicon Valley companies act as good citizens by dimming their lights, the area mentality also means that the profit motive never evaporates completely. Some companies exploit the conservation programs by routinely firing up their backup generators as they cut down on using power from the grid, keeping rebates or other benefits from "curbing" their consumption. Others use alternative systems to send power back into the state grid and cut their bills to little or nothing, according to Pacific Gas & and Electric.

As regulators get a better handle on what's going on, they are likely to crack down on such tactics. "If they are masquerading as standby engines, that's a problem," said the air quality district's Hill, and could lead to permits being revoked.

http://www.latimes.com/business/reports/power/lat_scramble010108.htm

-- Martin Thompson (mthom1927@aol.com), January 08, 2001

Answers

With the New Economy so fired by Silicon Valley, what will this do to our hi-tech revolution?

Not too promising a thought, I think.

-- Loner (loner@bigfoot.com), January 09, 2001.


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