Exporting power in the form of hosting by Peter Judge

Views and Opinions on Green IT (Feb 12 2012)

1. 

   Last week, I got to visit Iceland, to see the place’s potential as a data hub. The trip was provided by Verne Global, sponsor of this blog, and creator of the country’s first large multi-tenant data center.

   Readers will be well aware of the data centre, and the story behind it. What I got from the visit was a feel for the context - the big picture. The idea here has been described rather well as a suggestion that Iceland could “export energy via data centers.”

   The fact is, Iceland has power to spare. The 17TWh (terawatt-hours) of energy it produces each year is more than its 320,000 population needs. And it is cheap (about $40 per MWh) and sustainable (from geothermal and hydroelectric power). And, unlike solar or wind, these sources are steady, reliable base load power providers.

   It’s difficult to export power. There is a proposal to run a connector from Iceland over the more than 1000 miles to mainland Europe, via Scotland, but no one expects it to happen any time soon, and in any case, Iceland’s extra power won’t solve Europe’s power crisis - 17TWh is small compared with the 637 TWh which Europe uses in total every year.

   So Iceland has been exporting power in other forms. For the last forty years, companies like Rio Tinto Alcan and Elkom have been using Icelandic electricity to smelt aluminum. From bauxite which is mined in Australia, exactly as far away from Iceland as it is possible to get.

   But now, data centers are suggested as the next industry for Iceland - effectively using electricity and exporting data, or the ability to store and process data.

   It’s an order of magnitude less energy-hungry than aluminum (tens of MW, instead of hundreds), but it could be very lucrative, when backed by the environmental and reliability story.

   Iceland hopes to get one percent of the European data center market by 2020 - using around 1.5TWh of its spare capacity energy production each year, Rikardur Rikardsson, marketing vice president of the state-owned utility Landsvirkjun, told us, during a trip round a hydroelectric plant and a geothermal generating station.

   The big hurdle to get over is getting those outside Iceland to trust their data to the data centres in Iceland. The government is behind the idea, and has done some specific things to encourage it, according to Ossur Skarphéðinsson, Iceland’s Minister of Foreign Affairs.

   Firstly, the value-added tax (sales tax, or VAT) regime is favourable to data centres - or at least, as favourable as the European Union’s trading rules would allow. Iceland is not part of Europe, but hopes to join, so is pre-emptively sticking to European laws.

   Secondly, Iceland is planning to operate under European laws for data protection. Europe hopes to build a regional market for cloud computing, encouraging firms to locate their data across borders. If it can work in mainland Europe, Iceland hopes, it should be even more favourable in a country with cheap sustainable energy.

   So far, the customers at Verne are either Icelandic (CCP Games, maker of Eve Online) or service providers (GreenQloud and Datapipe) hoping to entice in non-Icelandic players. The decision of partner Colt to locate a point of presence (PoP) there should help allay doubts about moving in, Verne hopes.

   And there are hopeful signs from the other public data centre in Iceland. Thor, built more quickly using containers (and now modules) from AST Modular, has been in operation for a year, and is working with smaller customers on shorter sales cycles.

   Thor has recently been bought by service provider Skyrr - now renamed as part of the Advania group. Advania is relocating some Icelandic government processing to Thor, and through its subsidiaries in the Norway, Sweden and Denmark, is starting to get international customers in there - notably the Nordic universities’ supercomputer.

   It’s early days still - even though it’s taken years to get this far - but the story still stands up.

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