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What are Reserved Instances?

AWS Reserved Instances (RIs) are a pricing mechanism by which an AWS customer can gain heavily discounted rates on AWS services by committing upfront to pay for a set amount of usage. An RI is not actually an instance. When you buy an RI, you have not actually created an instance like you would when buying an EC2 compute instance, for example. Think of an RI as a coupon that guarantees you lower rates on those instances that you provision through their normal channels (for example, via the AWS console).

RIs can currently be purchased for EC2 compute instances or RDS database instances. In either case, large discounts can be gained by purchasing RIs, assuming you plan to use those services in a relatively consistent manner. With an RI, you commit to pay for a set amount of instance usage, so if you are only running those instances for a subset of hours within a month, RIs may not be worth the committed cost.

Commitment terms 

RIs can be bought for either a 1 year or 3 year term. 

Payment options

There are three payment options for RIs:

• No Upfront RIs – No Upfront RIs offer a significant discount compared to On-Demand prices. You pay nothing upfront but commit to pay for the RI over the course of the RI term.
• Partial Upfront RIs – Partial Upfront RIs offer a higher discount than No Upfront RIs. You pay for a portion of the RI upfront, and then pay for the remainder over the course of the one or three year term. This option balances the RI payments between upfront and hourly.
• All Upfront RIs – All Upfront RIs offer the highest discount of all of the RI payment options. You pay for the entire RI term (one or three years) with one upfront payment and get the best effective hourly price when compared to running the same instance on demand.
  
  

Applying RI discounts to running instances

An RI discounted rate is applied at each hour during which that RI is active. For a single RI, if there is an instance running that has the same attributes as the RI (it is of the same instance type and running in the same region or availability zone), that instance will get the discounted hourly rate. If there are more running instances than RIs purchased at any given hour, only a subset of those running instances get the discounted rate and the others are priced at the normal On-Demand rate. At any given hour, AWS selects at which instances get the discounted rate and which do not, giving preference to the account that purchased the RIs.

For enterprises with Consolidated Billing (most enterprises opt for Consolidated Billing to centralize billing where resource control is distributed across a large number of AWS accounts), if there are RI discounts available, they are applied to running instances associated with accounts that did not purchase those RI, ensuring those purchases are not wasted when possible.

RIs in the AWS billing reports

Each RI purchase show up in the AWS billing reports as long as there was an RI financial transaction for that month. For All Upfront RIs, for example, there will only be one line item in the bill for the month in which that RI is purchased. For all other months in the term of the RI, there will be no purchase line items. For Partial Upfront or No Upfront RIs, on the other hand, billing reports for each month in which those RIs are active will include a line item for each RI purchased. See the Cost Allocation report and Detailed Billing report sections below for more information on the information included in the billing report RI purchase line items.

Cost Allocation report

AWS Cost Allocation reports include line items for RI purchases. The following lists the definitions of the metrics included in the bill for these line items:

• UsageQuantity – The number of hours for the month associated with the RI. In the screenshot below, the 1440 hours in the UsageQuanitty field indicates there were two c3.xlarge RIs purchased (720 hours in a month X 2 instances).
• BlendedRate – The effective hourly rate for the RI.
• CostBeforeTax – The monthly cost for the RI. This is the amount actually paid in the month in which the bill is applicable. 

RI purchase line items can be identified in the Cost Allocation report by looking at the UsageType field. Any UsageType value that contains the term “HeavyUsage” indicates the line item is for an RI purchase.

Because the RI purchase line items include costs for those RIs, the usage line items have lower costs as the billing report must balance out in total. The metric definitions for usage line items are as follows:

• UsageQuantity – The number of hours the compute resources were running during the month.
• BlendedRate – The averaged rates of the Reserved Instances and On-Demand instances used by linked accounts. For more information on blended rates, please see the AWS documentation here.
• CostBeforeTax – The UsageQuantity X BlendedRate.

Detailed Billing Report (with Resources and Tags)

The Detailed Billing Report (DBR) also includes line items for RI purchases, although the metrics included in those line items take on different meanings for the DBR. The following metrics are included in the bill for these line items:

For EC2 RI Purchases

• UsageQuantity – The number of unused hours associated with the RI purchase.
• BlendedCost – The monthly fixed cost of the RI purchase (zero for all upfront except in the month the RI is purchased).
• UnblendedCost – The cost of Unused RI Hours.

Blended and Unblended Rates are blank

For Non-EC2 RI Purchases (e.g. RDS)

• UsageQuantity – The number of instance hours purchased.
• BlendedCost / UnblendedCost – The monthly fixed cost of the RI purchase (would be zero for all upfront except in the month the RI is purchased).
• BlendedRate / UnblendedRate – The effective hourly rate for each RI purchased.

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