Last year the administration announced a plan to dramatically and permanently reduce the number of data centers owned by federal agencies. The plan, called the data center consolidation initiative, hopes to close or merge almost 1,000 data centers by 2010, a significant decrease from the 2,800 data centers federal agencies currently operate.

According to the federal government’s Chief Information Officers Council ( the large growth in data centers over the last decade has been part of “redundant infrastructure investments” and is “costly, inefficient, unsustainable and has a significant impact on energy consumption.” Furthermore, argues “information collected from agencies in 2009 shows relatively low utilization rates of current infrastructure and limited reuse of data centers within or across agencies.” The government hopes that by closing and consolidating data centers it can kill two birds, energy use and I.T. infrastructure, with one stone.

Federal Chief Information Officer Steven VanRoekel claims closures and consolidations will shut down 472 data centers in 2012 and 962 by the end of 2015, saving the government $5 billion. However, the uncertain future of many federal agency budgets is changing how the data center consolidation initiatives are being funded.

Originally, the data center consolidation efforts at federal agencies were going to be paid for by congressional appropriations. However, with ongoing debates over federal budgets and the threat of major cuts just around the corner, at least one federal agency is turning to an alternative funding model. The Department Of Energy’s alternative model, called Energy Performance Contract does not pay any upfront costs for data center remodeling programs. Instead contractors guarantee that a certain amount of energy will be saved after the project is complete. In return, the Department Of Energy will pay the difference between pre- and post-remodeling energy costs to the contractor for a set period of time.

The benefit to this alternative funding model is two-fold: it reduces initial financial outlays by the federal agencies while incentivizing contractors to maximize the amount of energy savings achieved — the more energy saved, the more the contractor profits. In these difficult financial times, alternative funding models like Energy Performance Contracts will likely become more common, allowing agencies to continue to make major investments in infrastructure without emptying their coffers.

Mike Jones is a researcher, writer, and analyst on national and international security. He lives in the DC area.

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Mike Jones is a researcher, writer, and analyst on national and international security. He lives in the DC area.