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1-22-2001 an article from the Electronic Design, Technology News and Network http://www.edtn.com/ Rolling blackouts raise concerns for Silicon Valley's futureBy Jerry Ascierto
and Will Wade
A region that has weathered earthquakes, fires, floods and the disappearance
of its once-thriving manufacturing base watched helplessly as power flickered
off — usually with mere two-minute warnings — in one neighborhood after
another. Companies lost e-mail, network services and work in progress in the
first two days of the blackouts. The total financial hit was still being tallied
at press time.
Integrated Device Technology Inc., the largest private-sector employer in
Monterey County, saw a production line in Salinas go down for four hours on
Wednesday (Jan. 17). The power went out for an additional two hours on Thursday,
causing IDT to lose everything on that production line, the Silicon Valley
Manufacturing Group said.
Contract manufacturer Solectron Corp. sent some first-shift workers home on
Thursday after losing power to a few buildings at midmorning. While some of its
buildings have backup power, and all of them have disaster contingencies such as
emergency lights, most of Solectron's manufacturing can't operate in a blackout.
"Things go quiet, the lights go out and all the machines stop
working," a spokesman said. Isolated blackouts can be tolerated, the
spokesman said, but he added that Solectron will need to study alternatives if
the problems persist. Possibilities include backup generators or the more
draconian measure of moving work to facilities outside California.
The blackouts prompted talks between the Silicon Valley Manufacturing Group (SVMG)
and state and local legislators on Thursday (Jan. 18) regarding short- and
long-term fixes to the energy crisis here. The blackouts have also sparked
intramural discussions of the viability of doing business in Silicon Valley. The
area has thrived as, arguably, the epicenter of the technology age, but an
unreliable supply of power — the mother's milk of the industry — throws its
future into question.
"What I've heard from many executives is, we want to stay and prosper in
Silicon Valley, yet at the same time, there's a very real recognition that if
you do not have a reliable source of power and your products can go down, it
becomes extremely difficult . . . to prosper," said Carl Guardino,
president and chief executive officer of the SVMG.
No threats "There are those who work throughout the world, who have sites around
the world, who are happy to make the very tough plans of 'where can we produce a
product if we keep losing that product down there' [in Silicon Valley],"
said Guardino. "We say this in a very sober way. It is not in any way a
threat, it is a reality of business practice that a product must be built. We
want to do it here but we have to address this crisis in order to do so."
Chi-foon Chan, president and chief operating officer of Synopsys Inc.
(Sunnyvale, Calif.), said the EDA vendor suffered a two-hour blackout on
Thursday. Though he claimed blackouts "really aren't a problem right
now" thanks to Synopsys' emergency generators, Chan fretted about how long
the California energy crunch will last.
"I wonder about the companies here that are in manufacturing," said
Chan. "The loss of power for a few hours may not be a big problem, but
recalibrating the equipment is." Moreover, "Power is a very important
issue for the infrastructure [in Silicon Valley] — like roads," he said.
"I hope we don't get to that stage."
A spokesman for Advanced Micro Devices Inc. said that AMD, headquarters in
Sunnyvale, lost power Thursday morning for an hour and a half, but the company's
uninterruptible power-supply deal with Pacific Gas & Electric — one of the
state's two major utilities — kept fab operations stable.
"This just tells you how important information technology has
become," the spokesman said. "It feels like California has become a
third-world state. This is why there's not a lot of silicon left in Silicon
Valley."
Both Pacific Gas & Electric and Edison Co., the state's second major
electrical utility, are teetering on insolvency.
For some, history kept the lights on. When Jerry Fiddler helped found Wind
River Systems Inc. on the island community of Alameda, in the East Bay area of
San Francisco, he probably wasn't thinking about electricity. But Alameda has
owned its own power utility for more than 100 years, shielding Wind River and
the other companies situated there from the blackouts besetting their cohorts
across the water.
Backup generators and multiple power-supply contracts have kept the likes of
Sun Microsystems Inc., Sony Electronics and Intel Corp. from danger. But beyond
supply, G. Dan Hutcheson, president of VLSI Research Inc. (San Jose), said the
bigger issue is cost.
"Power usually is about 5 to 10 percent [of] the cost of operating a fab,"
Hutcheson said. In other words, if a DRAM chip costs $3 to make, the power part
of that budget is 30 cents. If the price of power goes up two or three times,
then its portion rises to 60 to 90 cents, making the chip less competitive to
sell.
Supporting demand reduction through a voluntary load-reduction program as a
short-term measure, SVMG, a consortium of 190 Silicon Valley employers, is also
seeking grants from state and federal sources to seed energy-efficiency
measures. SVMG — whose members include Agilent Technologies, IBM, Intel,
Lockheed-Martin, National Semiconductor, Solectron and Synopsys — has called
for an increase in generation and transmission resources. These include emerging
sustainable technologies as well as removing regulatory barriers to installing
temporary emergency power plants.
Claiming the recent blackouts have cost Silicon Valley companies tens of
millions of dollars, SVMG said that 75 of its 190 members have submitted reports
on the impact of the power losses. "Nearly 75 percent of those 75 companies
were directly impacted by the rolling blackouts," Guardino said. "On
average they were out of power for 90 minutes to two hours," often without
warning or with insufficient warning, he said.
Call for action SVMG urged legislators to support long-term energy contracts and incentives
for investment in natural-gas infrastructure, the shortage of which has driven
up power prices two- to fivefold, the group said. Surprisingly, the group came
out in support of deregulation, a measure which, though much maligned in the
press as the root of the crisis, has never fully seen the light of day here.
"Deregulation, the competition of price and services, is getting bashed
often today," said Guardino, "and we need to recognize that we have
never achieved deregulation. At best, we had a quasi-, semi-deregulation, taking
the worst from both worlds and leaving us with the consequences."
The genesis of California's power crisis came five years ago when the state
legislature overhauled the electricity industry with an eye toward cutting
consumers' rates. Arguments now fall into two basic camps: The legislature went
too far and should have left well enough alone, and the legislature didn't go
far enough — it enacted only partial deregulation, affecting wholesale prices
but keeping caps on prices to consumers. That has prevented the power vendors
from passing along their costs, according to this school of thought.
Meanwhile, said SVMG, the population boom this area has witnessed will not
cease. A 10 percent growth rate is pegged for the next two years alone,
highlighting what some observers peg as bureaucratic inefficiencies in
California.
"In the last 10 years, since we built our last major power facility in
the Golden State, we have added nearly 6 million Californians," Guardino
said. "It shouldn't take one to four months in Texas to get a generation
site approved when it takes a year in California."
Since 1995, power-generation companies have added about eight times as much
new capacity in Texas as they have in California, largely because of stricter
environmental controls here.
Blackout busters In the short haul, the SVMG has initiated a Demand Responsiveness
building-systems program, known informally as Silicon Valley Blackout Busters.
Done in conjunction with the Electric Power Research Institute, the
"busters" are member companies willing to conduct real-time monitoring
of their power usage. They use equipment installed by the institute at the
company's meter in an effort to reduce power consumption at peak hours.
A member company can pre-set the triggers to specify how much power it is
willing to shed, and when. Several state agencies currently provide financial
incentives for companies in the program, or will soon do so.
But "Conservation alone is not enough, you can't count on conservation
in a growing industry," said Ellen Hancock, president and chief executive
officer of the data center and Web-hosting firm Exodus Communications Inc.
Exodus, for its part, is moving to more power-efficient ways of building its
data centers, she said, and is also building a substation on one of its
campuses.
Finally, SVMG has also urged legislators to view California as part of a
bigger power region instead of a lone wolf. "We are asking legislators to
not forget that California is not an island, we are part of a region of states
on the same power grid," Guardino said. "Our underlying message is,
we're all in this together. The time for pointing fingers is over and the time
for joining hands must begin."
— Additional reporting by Michael Santarini, Craig Matsumoto, Junko
Yoshida and David Lammers. | |||||||
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