For years, Iceland has exported the lion’s share of its electricity to the world in the form of aluminium ingots. Aluminium is a highly electric-intensive industry, with the most efficient smelters consuming about 13,000 kilowatt-hours per ton of aluminium (by comparison, the average Icelandic home uses 4,500 kilowatt-hours annually). In fact, much of the country’s electricity infrastructure was built out to serve this growing industry, which consumes more than two-thirds of the nation’s electricity.
Economies overly dependent on a limited number of industries risk putting too many eggs in a single basket. Iceland has therefore been striving to find additional outlets for its abundant sources of renewable electricity, One potential outlet is the planned development of a large undersea transmission line to the United Kingdom, but that won’t occur for many years.
In the meantime, Iceland has been working to lure the relatively electricity intensive data center industry, which is growing rapidly and currently estimated to use about 3-4% of the world’s total electricity supply. Given that rapid expansion, and a growing imperative to ensure the data center industry is increasingly green, Iceland’s carbon-free economy stands to benefit. At least five data centers have located in Iceland to date. They are attracted by the sector’s numerous positive attributes, including:
1) Low-cost and long-term power contracts: the local power company, Landsvirkjun, offers electricity at stable and affordable rates for as long as 12 years.
2) Low year-round temperatures offering virtually free cooling. With air conditioning load often representing more than 30% of the data center power bill, this provides a significant opportunity for further slashing operating costs.
3) Ease of doing business: Iceland sits at number nine (of 189) of countries listed by the World Bank for ease of getting electricity.
4) Zero carbon-intensity: Iceland’s electricity is generated by 100% renewable resources. As the focus on carbon increases, this assumes ever more importance.
5) Overall risk: Cushman & Wakefield recently rated Iceland as the number one country for locating data centers from a risk perspective. In assigning its rating, it evaluated a variety of diverse variables, including energy costs, political stability, sustainability, corporate tax, exposure to natural disasters, and international internet bandwidth. The Cushman Wakefield report observes that while many data centers are still located more closely to markets, they expect that dynamic to shift, with a movement towards cleaner energy supplies, “with sustainability measures and demands continuing to move up the agenda.”
6) Finally, strict data and privacy laws are also attractive, earning Iceland the nickname of the “Switzerland of Data.”
Finally, Iceland is perched in an excellent, strategic location. With its location between the United States and Europe, and sufficient bandwidth across a number of submarine fiber-optic cables connecting it to the world, Iceland sits in an enviable spot. The country’s energy economy should gain more than its fair share of business as our society continues to build out an emerging global central nervous system.