We generate more electricity from renewable sources than ever. But, the demand is also higher than ever before.
From one side, the demand for renewables has increased dramatically, and therefore the price of GoOs (Guarantees of Origins) as well in EU area.
On the other there are speculators on the carbon market which pushes prices up – both renewable guarantees and commodity as well.
Where does this leave the web hosting industry? Will it have an impact on end customers? These are the questions we’ll be discussing in this article.
Timing is Crucial
Web hosting companies have massive electricity consumption because of the enormous data centers, so they meet their energy needs through individual supply contracts with energy suppliers.
If a web hosting company looked to secure their future electricity supply contracts nowadays from renewable sources, they would face a massive budget increase. Which in turn will translate into higher prices for web hosting customers.
In case they have an energy consultant or a dedicated energy management team who are procuring energy strategically, at the right time, the cost increase can be moderated, but not entirely.
There is a way out however for web hosts. The answer is Power Purchase Agreements.
Power Purchase Agreements are different than standard supply from an electricity supplier. They represent an investment in renewable electricity by the purchaser, for the renewable energy in turn.
So for example, there is a solar project, which needs funding.
With power purchase agreements, they get the funding to build the solar plant. The customer (for example a web host) will receive a certain amount of renewable energy for a certain amount of time (minimum five years but can even be 15-20 years). All this at a much lower price than if they would buy it on the market.
There’s no doubt that it’s a win-win situation.
The web host will have budget certainty for many years or even decades, while also generating savings compared to the market.
Web hosting companies who are taking energy procurement seriously will be able to remain among the most competitive in the industry.
Others will face the challenges that come with higher renewable prices, most likely passing through the extra cost to end customers to keep the business profitable.
What if you are not looking for green web hosting?
The good and the bad news is that in most countries, energy-intensive activities are levied heavily by the authority to reduce CO2 and as an incentive to increase renewable.
So, most web hosts have to buy renewable electricity. Otherwise, they will pay even more in taxes.
What can you do as a customer?
If you are looking for web hosting now, we strongly recommend that you choose a well-established provider. Larger companies generally are more likely to have energy consultants who handle this aspect of the business for them.
When choosing the duration, we would recommend selecting a longer term (several years) as that will mean that the price will not change for you in the period.