The Green Gold Rush Over Iceland's Data Centers

There’s a gold rush mentality right now when it comes to building data centers in Iceland, according to execs of the companies that have been moving into that market. The latest person to reference this phrase to me is Tate Cantrell, CTO of startup Verne Global, and he told me it’s not uncommon for his web-serving customers to bring up the description when asking about the industry. Cantrell says of building a business around data centers in Iceland, “We’re very bullish on it. It’s a great place to do business.”

Why is a country, which blipped on the global news radar in recent months because of its ash-spewing volcano and hard-hit financial markets, such a hot place to construct data centers that could house thousands of servers and run web services for Internet giants? First off: location. Its placement between Europe and the U.S. means that companies in the U.S. can run their web services for both continents in one location, potentially saving money.

Secondly, because of its abundant hydropower and geothermal power, Iceland can offer data center services powered by 100 percent clean power for the same price or less than web services powered by fossil fuel-based grids in other locations. Internet companies can use the clean power to market their green services, or take advantage of green subsidies in certain markets.

Verne Global, which has offices in Iceland and Washington, D.C., is actually financing and building the data centers in Iceland, and has built a data center complex on a 45-acre plot west of Reykjavik. The data center complex is being powered by 30-45 MW of clean power, and the site has the capacity to be built out to 140 MW.

Iceland’s power grid was developed with aluminum smelters in mind, and the industry was able to negotiate very aggressively to get the cost of clean power down to a bare minimum, explains Cantrell. Following that path, Verne Global was able to secure low-priced clean power contracts with utilities over a 20-year period. According to Cantrell, Verne Global’s service could offer a company in the U.S. that needs 4 MW of web-serving capacity, a savings of $65 million over a 10-year term.

The company hasn’t formally launched yet, but is already selling services, and plans to invest a lot more in sales in marketing throughout 2010. Verne Global also wouldn’t disclose any customers, because it says its customers want to use its data centers as a competitive edge, but Cantrell says the company is working with some well-known Internet companies.

The biggest hurdle for the company is that the business model requires a lot of funding. It can cost tens of millions of dollars to build data centers, and Cantrell admits that the model is “extremely capital-intensive.” In comparison a company like Greenqloud, which is launching this week at our cloud computing conference Structure in San Francisco, is looking to offer managed services over green power-run data centers in Iceland, which is a lot less capital-intensive.

Greenqloud CEO Eirikur Hrafnsson has also seen the gold rush mentality around data center services in Iceland. Hrafnsson thinks that’s mostly due to a combination of the devalued Kronor, the IT history of the country and the emission-free power grid.

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