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According to report Microsoft wasted millions of watts of power to avoid a fine for misreporting its needs

The New York Times is offering up a fascinating story on the small town of Quincy, Washington and its residents' frustrations with Microsoft Corp. (MSFT).

I. Small Town, Big Hopes

Increasingly large tech companies like Microsoft and Apple, Inc. (AAPL) are looking to position data centers in small rural towns that offer convenient access to local tax breaks and plentiful power.  For Microsoft, in 2007 that meant locating to Quincy, a small farm town of 6,900 along State Route 28.

For the town of Quincy, this seemed like a sure-win proposition.  So they rolled out the red carpet with the local utility -- Grant County Public Utility District -- offering hydroelectric power from dams on the Columbia River at a rate of 2.5-3.8 cents/kilowatt-hour, well below the national average of 6-7 cents/kilowatt-hour.  The rate was good for 7 years.  Microsoft also got large (the article does not specify precise numbers) tax breaks.

And in some ways things have paid off.  Microsoft's new data center -- which joins Dell, Inc. (DELL) and Yahoo! Inc. (YHOO) data centers in the county -- has brought in $3.6M USD in taxes for 2012, even with the breaks.  While landowners didn't get the windfall profits for the 75-acres of bean farms Microsoft bought to build its new data center on, they do now have repaved roads and a new library, thanks to the extra tax revenue.

Tim Culbertson, who was the general manager of the local utility back in 2007 recalls early optimism, commenting, "You’re talking about one of the largest corporations.  You’re talking Microsoft and Bill Gates. Wow!"

II. Microsoft: a Demanding House-Guest

But tensions have risen in the town over Microsoft's tough power demands.  

Culbertson claims that instead he was met with a frustrating "level of arrogance" from the tech giant.  He comments, "Microsoft had lot of expectations.  Early on, I don’t think it was as cooperative as it could have been."

For Microsoft stakes were high -- its Bing service has been heavily served out of the Quincy data center.  Hence it was crucial to produce enough power and consistency to meet the demand for steady cloud service.

Microsoft Bing
The new data center powers Bing, Microsoft's search engine.

Frustrated by the town's slow construction of a 48 million watt substation for it -- equivalent to the electricity necessary to power 29,000 average U.S. homes -- Microsoft demanded $700,000 USD in reimbursements.

And there were also clashes over Microsoft's diesel power backup generators.  In its rush to push the project through, the Washington State Department of Ecology approved permits for 24 on-site generators, each capable of generating two million to three million watts.

In backup power mode this was no real problem, but in 2010 the generators reportedly spewed a large level of particulate pollution (smog) when Microsoft ran them nearly continuous.  Microsoft claimed the utility asked it to do so during a substation upgrade, but the utility claims Microsoft is lying, saying that Microsoft requested to be temporarily taken off the grid.

Microsoft, which has run afoul of Californian regulators for its diesel generators, this year received permission to expand its total number of generators to 37.  A group called Microsoft-Yes; Toxic Air Pollution-No is challenging the new permits in an appeal to the state Pollution Control Hearings Board.  Led by a retired school-teacher and environmental access, the group hopes to block Microsoft's expansion plans.

Yahoo ran its backup generators for only 65 hours in 2010, while Microsoft ran its generators for 3,615 hours.

III. Wasting Power

A final bone of contention is Microsoft's wasteful defiance of a utility fine.  Utilities regularly request forecasts from their biggest customers to match production with demand.  If those forecasts don't match up, they charge there super-users fines.

Microsoft and Yahoo both surprisingly overestimated their power use.  When they were order to each pay tens of thousands in fines Yahoo paid its $94,608 USD penalty without question.  But Microsoft stood its ground, refusing to pay the $210,000 USD fine requested by the utility.

It vowed to simply waste power to meet the quota, saying it had to do so because of the utility's punitive policies.  It commented in a letter, "By staff estimate.  Microsoft could incur approximately $70,000 in power costs to avoid the $210,000 penalty, resulting in real savings of $140,000. Microsoft must make the decision on continuing to burn $70,000 worth of power in the next three days."

Microsoft wasting power
Microsoft vowed to waste power as a way to avoid a fine for overestimating its power needs.
[Image Source: Treehugger]

After Microsoft made good on its threat to begin wasting millions of watts, the utility backed down.  It begrudgingly slashed the fine to $60,000 USD in a bid to convince Microsoft to stop what it admitted was a "commercially unproductive" and "unnecessarily wasteful" use of power.

Microsoft calls the conflict "a one-time event that was quickly resolved".  But some in Quincy are growing frustrated with their new unruly neighbor.  Randall Allred, a utility commissioner and local farmer, comments, "For a company of that size and that nature, and with all the ‘green’ things they advertised to me, that was an insult."

One can expect more clashes between Microsoft and the locals as the construction of the new diesel generators heats up.

Source: NYT

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RE: Laughable
By Captain Awesome on 9/25/2012 9:57:48 AM , Rating: 2
That's funny, but it sort of evens out... Over in Ontario on the other side of Canada we make too much power because of all the windmills and hydro dams, and lost manufacturing companies. So maybe once a month the electricity rate goes negative, and we pay neighboring power companies in New York, Michigan, and Quebec to take our power.

Which is pretty stupid... :)

RE: Laughable
By arazok on 9/25/2012 1:28:39 PM , Rating: 2
What’s really stupid is that despite falling energy demand and over capacity, we plan to bring on even more wind and solar capacity in the next several years. We’ll end up selling even more energy at negative prices – double soaking the taxpayer.

RE: Laughable
By Calin on 9/26/2012 4:00:25 AM , Rating: 2
When the power generated at the stations increase, the voltage at the sockets (assuming the load is kept the same) increases.
In order to have stable voltage at the socket in almost any conditions, the electricity generating system must adapt to shifting conditions - like when all of the city lights in a city like New York are lighted in the same second, there's a power surge of megawatts. To take over this kind of load, one uses "fast-spooling" generating plants (expensive gas turbines, ready steam in steam turbines). When everyone takes a shower in the morning, all the electric boilers starts (within an hour, let's say). To take over this kind of load (slow changes - gradual ramp up), coal-fired power plants are good enough (or nuclear, or hydro).
However, ready steam is usable for very short amounts of time, and gas turbines are expensive. Also, when the wind picks up quickly at a wind farm, the generating capacity increases quickly, so in order to keep the socket voltage low enough, one has to either spool down generating capacity or quickly add load (as in pumping water, heating things, ...).

As such, if your system is going with 90% hydro (slow ramp up) and the wind picks up, you have extra power which will increase socket voltage. You can't ramp down coal fired plants quickly (as the fuel already in the furnace will burn and burn, and you can't slow it down safely, and you can't vent too much steam, and ...) so in order to keep the voltage under control you are willing to give the energy for free to someone that can take it. The other possibilities: let the voltage soar and pay damages, or run with only 75% hydro and 15% gas turbines (10x as expensive as hydro, but you have decent spool down capacity), find extra "on demand" load (either industry that uses "ready steam" and is willing to take electricity for electric boilers at a moment's notice (this really is at a couple of seconds' notice ), or build local loads (water gravity storage, heat storage, ...).
So, it could be really useful to have someone to take over your overproduction at a moment's notice and help you keep your socket voltage at a sane level

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