Electricity Makes, Breaks Silicon Valley Unreliable supplies could kill expansion Marshall Wilson, Chronicle Staff Writer

Tuesday, January 2, 2001 ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/chronicle/archive/2001/01/02/MN112244.DTL

In a nondescript building on a nondescript San Jose street, Jeff Monroe walks between row after row of locked cages. Inside each one, banks of computers stacked from floor to ceiling work round-the-clock processing the data that buzzes across the Internet.

"What you have going on here is active, dynamic, online business," said Monroe, vice president of AboveNet Communications Inc., which is building Web-hosting service centers in San Jose and San Francisco. "If they are shut down, it's devastating."

With California's power woes showing no signs of abating, Monroe and representatives from other Silicon Valley companies are growing increasingly worried that unreliable energy supplies will wreak long-term havoc on high- tech companies and pull the plug on ambitious expansion plans.

Some of Silicon Valley's most successful companies -- Oracle Corp., Cisco Systems and Sun Microsystems -- are planning new campuses that will put ever greater strain on the state's limited power supply. Other companies, working behind the scenes to power the Internet, also have big plans.

"Are we going to go to PG&E and have them tell us the power is all tapped out?" Monroe said. "If there isn't power in Silicon Valley, the industry will absolutely be impacted."

And if Silicon Valley -- widely seen as a driving force in California's economic boom -- goes into a tailspin, the whole state would suffer.

How great is the concern? Skyrocketing electricity rates and worries about rolling blackouts, like the one that struck during a heat wave in June, are competing with traffic congestion and high housing prices as the biggest gripes in Silicon Valley.

"I think you're going to see companies consider having a reliable supply of electricity as a primary factor if they are going to locate here or expand here," said Justin Bradley of the Silicon Valley Manufacturing Group, which was formed during the energy crises of the 1970s but moved on to lobby on such issues as transportation and housing more recently.

"We have a grid that wasn't developed for the communications revolution," Bradley said. "If we don't get enough power this summer (when demand peaks), we're going to be in big trouble."

Estimates of how much power the Internet and its related computers, fax machines and modems consume vary widely, from 1 percent of the total supply to up to 13 percent. But one thing is clear: Like the need for skilled engineers, Silicon Valley's demand for electricity has skyrocketed in the 1990s as energy- dependent companies proliferated along with the use of computers.

Peak usage in the region stretching from Milpitas around the south end of the bay to Mountain View jumped from 2,237 megawatts in 1994 to 2,961 megawatts in 2000, a 32 percent increase, according to Pacific Gas and Electric Co. A megawatt is enough electricity to power about 1,000 homes.

Silicon Valley, meanwhile, imports about 80 percent of its electricity needs on a fragile supply chain. And despite the dive some dot-com stock prices have taken, the valley's -- and the Bay Area's -- demand for power is not expected to ebb.

POWERFUL EXPANSIONS

Computer giant Cisco Systems plans to build a 688-acre office park in San Jose's Coyote Valley, and the company is also planning a large expansion in Fremont. Oracle, based in Redwood Shores, has proposed building an 830,000- square-foot campus in Dublin in Alameda County.

Sun Microsystems also is building offices on both sides of the Dumbarton Bridge. Sun and Oracle, both notoriously tight-lipped, did not reply to messages seeking comment about the state's power problems.

"I think people are just waking up to the reality of the situation," said Gary Fazzino, spokesman for Hewlett-Packard Co. of Palo Alto.

"Six months ago, if you were to sit down with a group of high-tech executives in the valley and ask them their biggest concerns for the industry, I don't think a reliable source of power would have been in the top five on the list," he said.

Many high-tech executives are worried about a repeat of the blackout that occurred June 14, which turned out to be one of the hottest days of the year. To prevent a wider problem, the California Independent System Operator ordered rolling blackouts that hit Silicon Valley and its energy-dependent industries particularly hard.

Donald Scifres, president and CEO of San Jose's SDL Inc., called the blackout a "calamity" that cost high-tech companies "well over $100 million."

Yet a proposed power plant in southern San Jose has generated considerable controversy in the high-tech world.

Calpine Corp. wants to build a 600-megawatt, natural gas-burning plant in the Coyote Valley. It would be near the entrance to Cisco's proposed campus for 20,000 employees.

OPPOSITION TO POWER PLANT

Cisco, San Jose's largest employer, opposes the Calpine plant. In November, the San Jose City Council unanimously rejected Calpine.

Chris Peacock, a Cisco spokesman, said the company was concerned about how emissions from the plant would affect its employees and the 800 children in the proposed day care center. He said the company was confident that enough power would be available for its new campus.

Calpine, meanwhile, has turned to the California Energy Commission, which can overturn San Jose's decision. The commission staff backs the project, saying in a report that it "will result in substantial electric system benefits" that outweigh environmental concerns.

Terry Winter, the president and CEO of the California Independent System Operator, which runs much of the state's power grid, called the San Jose area "the most vulnerable metropolitan area on the PG&E system for local system problems."

While state lawmakers, regulators, utilities and consumer groups argue over the best solution, high-tech continues its nearly insatiable, 24-hour-a-day appetite for power.

AboveNet, whose clients include AskJeeves and America Online Inc., is building a 220,000-square-foot Web-hosting center in San Francisco's South of Market neighborhood and another 230,000-square-foot center in San Jose. They will complement three other centers, two of which are 120,000 square feet.

SECURE CAGES

Packed with computers rather than thousands of employees, the buildings are a transit planner's dream come true. Companies based elsewhere can station their Internet service computers in secure cages at the Web-hosting center, which is to sensitive computers what a greenhouse is to a rose.

A single center draws up to 20 megawatts of power -- enough for 20,000 homes -- to power the computers and for air conditioning, which runs continuously to keep equipment cool.

With the state's power supply notoriously unreliable, AboveNet has taken steps to ensure that electricity continuously flows to its customers' computers, which can crash at the slightest power glitch. Diesel generators the size of trucks and $1.5 million continuous power supply units are ready to switch on so fast that a computer wouldn't notice.

Monroe said the centers were booming as Internet companies looked for the ideal environment for their computers and the fiber optic system the company provides.

"Power," he said, "is essential to the growth of the industry."

E-mail Marshall Wilson at marshallwilson@sfchronicle.com.

©2001 San Francisco Chronicle

-- Martin Thompson (mthom1927@aol.com), January 02, 2001