Over the past few months, three or four news stories have crossed my desk that make me think we could be at a major tipping point for the data center industry. The problem is, from what I’m reading, it’s tipping in the wrong direction, and for possibly the wrong reasons.
In September, it was reported that Apple has told Irish authorities that its $1bn data center investment in Galway is under threat from ongoing delays. According to the story by João Marques Lima at Data Economy, “the iPhone X maker is also said to be concerned about potential objection over the power needs of the data center, which according to local report, would put even more pressure on Ireland’s national grid. One of the sources said Apple is worried the power issue could delay the project even more.”
Amazon’s plans to build a massive €1bn data center in Dublin is also in jeopardy. According to the Irish Independent, “Allan Daly, an engineer from Athenry, Co Galway, has argued that permission for the project should not be granted until the Internet giant specifies precisely how much energy the campus will use. He also suggested that Fingal County Council should not grant permission for the huge development until an assessment of Ireland's renewable energy framework, currently being undertaken by the Department of Communications, Climate Action and Environment, is completed. There is no visibility on when that assessment will be finalised, however.”
The third news story, as also reported in Data Economy was that Microsoft plans to build a power station in Dublin as the power grid struggles to handle the demands of the $10bn data center industry. Microsoft has said it will install 16 gas-powered generators which will produce up to 18MW of electricity. While the company states on its website that its global operations have been carbon neutral since 2012, and that they have purchased more than 14 million megawatt-hours of green power, installing gas-powered generators to offset limitations of the local power grids they use will have an adverse impact on that.
Is Microsoft becoming a Utility provider? The company is great at software and operating systems but managing the complexities and infrastructure related to gas-fired power production doesn’t seem to be in their sweet spot, or near its sweet spot…or anywhere within miles and miles of its sweet spot.
To add more pressure, Microsoft announced that it plans to add capacity at all of its data centers as they ramp up a major push against Google and AWS.
All three of these stories highlight the impact and pressure data centers are placing on power grids, and in-turn the reciprocal pressures insufficient power provision is placing on Internet giants in their efforts to scale and keep pace with demand. According to the World Bank, Ireland ranks 33rd in the world in terms of the ease at which companies can get access to electricity. Belarus, Macedonia, Luxembourg and Iceland all rank higher. Ireland ranked 27th on this list in 2016, so one can assume that the pressure from power-hungry data centers is starting to have a meaningful impact.
But it’s not just Ireland. By 2020, data center energy consumption is predicted to top 507.9 terawatts, more than the power consumed by most countries on their own as Al Gore points out in his ‘An Inconvenient Sequel: Truth to Power.’ To put that into context, globally data centers today account for more than 3% of the world’s power, doubling the 1.5% from just three years ago. It’s not just the power crunch that data centers are causing, this industry now accounts for 2-3% of the global carbon emissions.
So data centers are putting immense pressure on local, regional and national grids and it’s only going to get worse, especially for grids that rely heavily on non-renewable sources of energy. Not every company has the resources or financial strength like Microsoft to wait out the system and create its own power supply.
Closer to home in the UK we often see reports of a dwindling lack of national power and rising energy prices (normally about the time the clocks go back), so it was no surprise to see this week, Jillian Ambrose at the Daily Telegraph reporting that "British industry faces an energy cost crisis that is set to grow". The cost burden British industry pay in terms of power is second only to Denmark within the EU region - ouch! Ilesh Patel from Baringa Partners says British industry can try and cope with this in three ways: 1 - Reducing reliance on the national grid (ie. doing a Microsoft and building your own power plant), 2 - Pay less for what you buy (ie. establishing fixed energy pricing for 10-15 years) and 3 - Using less energy through energy efficiency measures. Good advice but not altogether easy, as many people will testify from painful experiences questioning their domestic power bill with their local energy provider.
The good news is that you don’t have to have the luck of the Irish or the spending power of Microsoft to address this problem. Iceland, for example, ranks 9th on the same World Bank list mentioned earlier. According to the [OECD](https://www.oecd.org/environment/country-reviews/Iceland Highlights web6.pdf) “Iceland’s combination of geological activity, large glaciers and numerous rivers provides vast potential for geothermal and hydro-electric power development, only part of which is exploited. All electricity and 95% of heat are generated from these two sources, with no need for support measures such as those used in many countries. Both geothermal and hydro-electric power production have increased considerably, especially since 2005.”
So what does this mean? Well looking back at Ilesh Patel's 3-point plan, maybe there should be a fourth suggestion? 4 - Think Iceland.
Iceland is geographically close to the UK and Ireland, has excellent fibre connections and is only a 2.5 hour flight from Heathrow. The country is blessed with massively abundant, available power now. It’s supplied at one of the lowest cost points in Europe and can be secured with long-term 12-year contracts, today. And you can leverage the ambient air to cool those servers year-round and since approximately 30-40% of power costs for data centers is spent on cooling, that’s a lucky break as well for Iceland’s data centers. No surprise then that manufacturing giants like BMW and VW, and pioneering high performance computing users like DeepL and Earlham Institute have all chosen Iceland as the home for a great deal of their compute.
For any company that expects to expand their data center needs (this might just be everyone), it might be time to give Iceland a look.