In part two of my series on Iceland’s suitability as a strategic data center location, I look at the various costs to financial services firms compared with other locations, and why Iceland represents the best value.
In Citihub Consulting’s recent report on Iceland as a strategic data center location, the total cost of ownership of hosting in Iceland was compared with hosting in other major financial hubs in Europe and North America, based on the following criteria:
- The cost of physical space and capacity
- The cost of power
- The efficiency of power and cooling
- The cost of connectivity
Citihub concluded that Iceland represents the best value as a hosting location among advanced economies. Over a seven-year period, Iceland’s total cost of ownership (TCO) for 1MW of IT load was calculated as roughly $14 million: over $20 million less than Frankfurt, $10 million less than London and $8 million less than Chicago.
Compare this scenario with other advanced economies that are struggling with their power supply. The UK’s reserve margin is expected to peak at 6% over the next four years, and the overall reliability of the grid seems to be declining- there were 537 outages in 2014 compared to 241 in 2011 . Elsewhere, Germany’s painful transition from conventional to renewable sources is driving up prices, while the US must contend with years of underinvestment in infrastructure as it attempts to meet the requirements set out by the EPA’s Clean Power Plan to reduce carbon output by 30% before 2030. Looking specifically at costs, Iceland offers three things that other countries can’t:
1. LOW COST POWER
Firstly, let’s address the cost of power. Iceland’s power profile is unique. It’s the only developed country in the world to generate all of its electricity from low-cost, renewable sources. Furthermore, Iceland’s dual-sourced, 100% renewable, geothermal and hydro-electric power is perfectly suited to hosting data centers, as they provide a predictable base-load of electricity, unlike solar and wind energy.
Data center deployments are long- term assignments, usually five, seven or even over ten years. A TCO analysis should cover fixed-cost power contract to hedge the risk against rising energy costs in financial markets. Iceland is unique in offering fixed-cost power contracts for up to 15 years, making it the perfect place to minimise energy costs, short and long-term.
2. REDUCED OPERATING COSTS
Considering cooling represents up to 40% of the costs of running a data center, Iceland holds a natural advantage when it comes to cutting costs for financial services firms. Thanks to its mild climate - the average annual temperature in Reykjavik ranges from minus 1.5°C in January to 10.3°C in July - Iceland is the optimal location for free air cooling:
3. LESS CAPEX
Finally, free cooling reduces the capital expenditure required to set up a hosting operation in Iceland. That explains why financial services firms can sustain such competitive space and capacity charges.
Also working in Iceland’s favour is the finance industry’s increasing disposition towards artificial intelligence and machine learning . As the emphasis turns from the speed of communication to the crunching of large data sets, the costs associated with this are coming under scrutiny. Reliable, flexible and immediate access to high-density computing power is becoming critical for many financial services firms. Those firms may find that the most cost efficient way to host their systems and capabilities is away from major financial centers. Iceland’s predictable power supply and lower operating costs make it the perfect location to harness these exponential technologies.
Watch out for my next post where I’ll assess Iceland’s connectivity for financial services.