How Do Data Centers Make Energy-Efficiency Investment Decisions? Qualitative Evidence from Focus Groups and Interviews

The data center industry is one of the fastest growing energy users in the US. While the industry has improved its energy efficiency over the past decade, engineering analyses suggest that ample opportunities remain to reduce energy use that would save firms money. This study explores whether and why data centers might limit investment in energy efficiency. Given the scarcity of empirical data in this context, we conducted focus groups and interviews with data center managers to elicit information about factors affecting their investments and used content analysis to qualitatively evaluate the results. Split incentives between departments within companies and between colocation data centers and their tenants, imperfect information about the performance of new technologies, and tradeoffs with data center reliability were the most pervasive factors discussed by participants. While we find some evidence that market failure explanations such as split incentives and imperfect information had a limited role in slowing adoption for participants, rival explanations such as the cost of acquiring context-specific information, and opportunity costs associated with alternate uses of funds or highly valued attributes played a larger role in slowing investment in energy efficiency.