Inside Extreme Scale Tech|Tuesday, October 21, 2014
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Iceland Wants Your Datacenter Business 

A new independent study conducted by global research outfit BroadGroup Consulting reveals that Iceland is on track to becoming an international datacenter hub. The report describes Iceland’s unique advantages: clean energy reserves, low power prices and a solid infrastructure. These characteristics are an undeniable draw for datacenter operators.


Hrauneyjafoss Station – Iceland’s third largest power plant, producing 210 MW

The report was produced in cooperation with Iceland’s national power company Landsvirkjun, which generates renewable electricity from hydro and geothermal power sources. BroadGroup evaluates the Nordic European island country across a wide array of criteria, comparing it with other leading datacenter locations from around the world.

The research house starts from the premise that datacenters, which developed to accommodate an increasingly Internet-reliant society, have become the backbone of modern life.

“Data centres have been described as the ‘physical part of the virtual economy’ – the mission critical, purpose built facilities that support and enable the computing power that drives all business, consumer and government development,” the report states.

As the Web community expands adding nearly five million new users each week and cloud migration continues to gather momentum, datacenter growth is assured. According to Cisco, annual Internet growth for developed countries is 40-60 percent (by traffic volume), and it’s even higher in emerging nations. Smart devices are also consuming and creating torrents of data that get stored in the cloud.

With so much valuable data “out there” datacenters must be secure and reliable. Downtime is bad for business. In addition to the financial hit which can quickly run into millions of dollars, a business’s reputation is on the line. A typical high-end datacenter can tolerate about 26 minutes of downtime per year. This is one reason why operators are averse to locating sites in regions that experience severe weather events, which could knock down power lines for a lot longer than 26 minutes.


Key flight routes into Iceland – Source: Icelandair

Because of all these factors, datacenter owners and operators hold security and reliability, and the cost of obtaining these characteristics, as key concerns. Essential components, such as power distribution, chiller units and uninterruptible power systems, must have redundancy. According to BroadGroup, on average, a 2,000 square meter datacenter costs roughly $16-20 million to construct. A Microsoft report estimates that annual global spending on datacenter construction will rise from about $50 billion today to about $78 billion by 2020.

Datacenters are notorious energy hogs. Power accounts for 20-40 percent of datacenter operating costs, which comes out to approximately $2-3 million for a 2,000 square meter site. Figures released by Lawrence Berkeley National Laboratory show datacenters are responsible for 1.5% of all global power usage, a figure that is due to hit 2 percent in the next five years. Access to an inexpensive, reliable energy source is a paramount goal for datacenter owners.

These factors, price, reliability and security – all critical business concerns – are very much tied to location, so the issue then becomes where to build the datacenter?

According to the report authors, selecting a site requires an in-depth assessment of multiple factors, based on a minimum period of 15 years. Take power availability for example. The energy source needs to be stable and predictable over the long-term. It’s a complex process, but an important one. Microsoft’s methodology is based on more than 300 criteria.

A number of basic requirements need to be met, e.g., power, connectivity, safe climate, reliability, accessibility and business/legal environment factors. Ongoing operational costs are scrutinized, especially with regard to power pricing, which can contribute up to 40 percent of annual operating budget. The cost of property, labor costs and taxes are also considered.

The report examined all these factors and concluded that Iceland has clear advantages as a datacenter location. When it comes to the issues of power, namely cost and regulation, Iceland came out ahead of other leading locations such as the US, UK, Sweden, Singapore and Hong Kong. Iceland’s power costs were shown to be more competitive than other European countries – about half that of Scandinavia. Over the long-term, its power costs are expected to remain stable, and there is the opportunity to cap prices for greenfield projects, for ten years or even longer.

10 Year Cost of Datacenter Operations

Bjorgvin Sigurdsson, executive vice president for marketing and business development at Landsvirkjun, Iceland’s national power company, says, “Iceland’s power proposition is to provide economic advantages with the most competitive energy prices in Europe through fixed-rate, long term contracts. Our ample renewable and secure power resources offer differentiating opportunities for global sustainable business development.”

Iceland is powered with 100 percent renewable energy. Electricity is produced with a mix of hydropower, geothermal energy and onshore wind, which are all sustainable, green resources with zero carbon trade-offs. Access to such a large amount of competitively priced, carbon-neutral electricity is pretty rare, which gives Iceland a competitive advantage.

Another benefit of Iceland is solid Internet connectivity. Existing telcom infrastructure is being upgraded over the next several years and will support 30 Tbit/s of full capacity.

Among the global companies who are operating Icelandic datacenters are Opera Software, COLT Telecom, BMW, Datapipe and the Joint Nordic Supercomputer. Datacenter outsourcing companies Advania and Verne Global have also set up shop in Iceland.

As more companies seek to reduce their power bill and their environmental impact, access to economical, earth-friendly energy sources becomes increasingly important. If it’s good for the planet and the bottom line, what could be better?

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