Weekly Update

The Scandinavian data center push

In the past I’ve looked at the strategy some IT leaders are using to reduce data center energy costs by locating data centers off the beaten path. Iceland was one case I examined because the small country has an abundance of clean energy—hydroelectric and geothermal—as well as a large fiber channel to mainland Europe.

But it’s not just Iceland. It’s increasingly looking like the Scandinavian countries with their temperate climates and tax breaks are becoming important destinations of choice for large North American IT giants that want to serve mainland Europe, a place that is notorious for having very expensive electricity. France and England each average around 20 cents per kilowatt hour while Germany runs as high as 34 cents per kilowatt hour. Compare that to the American range of 8 to 17 cents with reports of data centers in North Carolina and Washington State paying around 5 cents.

Google announced earlier this month that it will invest another 450 million euros ($600 million) in a Finish data center on top of the 350 million euros it’s already invested. This comes at a critical time when Nokia, the Finish IT leader, is itself struggling, signified by an announcement in September that it was selling its handset business to Microsoft.

The Hamina facility uses seawater cooling to dissipate heat from servers, a fairly novel approach that helps reduce energy costs related to running chillers at most normal data centers. Overall, the more temperate Finnish climate is an advantage for locating data centers there along with the government’s willingness to extend tax incentives.

It’s not just Finland, though. Norway’s Green Mountain Data Center, a colocation center which bills itself as the greenest in the world because it uses 100 percent renewable energy and also takes advantage of seawater cooling, has itself rolled out very competitive long term power rates precisely because of the long term pricing visibility of its hydroelectric power. The data center is offering customers locked in electricity pricing for between 3 and 10 years at the rate of 3.75 euro cents per kilowatt hour.

Finally, Sweden has grabbed headlines, because of Facebook’s $750 million investment in a data center in Lulea, Sweden. Temperatures are low in Lulea where they have not risen above 30 degrees Celsius for more than 24 hours since 1961. The Lule River generates so much hydroelectric power that it’s producing a 50 percent surplus of energy.

Facebook’s Lulea data center is also near a technology university, should Facebook want to invest in, for example, a research collaboration or make further cloud investments. One criticism of the tax incentives IT giants have received in Scandinavia centers around the fact there’s an initial large investment which drives the local economy through construction, but long term employment is usually far less as data center staffing is typically light with servers executing tasks night and day.  From one perspective these data centers are effectively information warehouses. The Swedish government provided an investment grant of 103 million kronor ($18.6 million dollars) to Facebook.

It’s fair to say that a one off data center isn’t going to turn around the IT game in a place like Finland, that has struggled with Nokia’s decline. Rather, the hope is that a larger data center hub forms in these locations as it has in places like North Caorlina.

Global demand for cloud services like streaming video, data analytics, online music libraries, email and search will continue to drive IT leaders to locate data centers in places where broadband infrastructure is solid and where energy pricing is stable. If there’s been one lesson from the growth of data center infrastructure in Scandinavia it’s not just that companies like Facebook and Google want clean power, it’s that stable electricity pricing, which is a key advantage of renewable energy, can help drive data center business to new and promising locations.