Why you should go to an Icelandic Cloud with your Data PDF Print E-mail

 

Iceland may be the answer to the problem of high energy costs for your IT infrastructure. This remarkable country, 600 miles north of Scotland, is unique in several ways. The one that should appeal most directly to anyone responsible for managing data centres is the astonishing fact that the country has current generating capacity which is nearly five times greater than demand. The global cost of fossils fuels has risen sharply driven principally by demand from China and elsewhere and this has feed through into a 40% increase in electricity prices over the last 12 months. The consequence of this is that electricity in Iceland costs approximately 10% of the cost in the UK. This leads to an obvious and massive potential operating expense saving on data centre costs of up to 40% based on an approximate energy component of data centres at 50%.

And the next remarkable fact is that all of the electricity generated in Iceland is both renewable and entirely clean.  75% is hydroelectric and the balance geothermal.  This will also give Icelandic based data centres a competitive advantage over UK hosted facilities. Since 2001 all businesses in the UK have been subject to the Climate Change Levy. The CCL was introduced after the Kyoto Summit on Climate Change in 1997. The UK government set high targets for the amount of energy to be generated from renewable energy sources in the future, and the levy was introduced to fund investment in cleaner, greener energy. It is essentially a carbon tax that adds around 15% to the energy bills of all businesses and public sector organisations. CCL Rates are currently 0.485p/kWh for electricity and is collected automatically by your business energy supplier on behalf of HMRC. It is also VAT chargeable.

So, unless you are running a trading desk and have to have lightning speed response times or are holding really sensitive and highly classified data or are an incurable server hugger why not relocate all or part of your operations there now? There is really no compelling reason not to. If you have started the journey into the cloud and are comfortable there this would be a rational next step.

But would it not be crazy to place your data in a place that is liable to catastrophic disruption from volcanoes? Why not really …although there is highly likely to be more volcanic activity the scale and location of this is well understood by seismic scientist and is not expected to affect the country’s electricity supply or the operations of other infrastructure such as data centres. Iceland is a very large country and the volcanoes that are likely to erupt are located a long way from Reykjavik and other towns. Thanks to the great works of historic literature known as the Sagas, Iceland's volcanic eruptions have been well documented for the last 1,000 years. The one that is the favourite to go next is Katla which could dwarf the 2010 impact from Eyjafjallajokull. Katla has a 10km crater, and has the potential to cause massive flooding as it melts the frozen surface of its caldera and sends billions of gallons of water surging into the Atlantic Ocean. Scientists in Iceland have been closely monitoring the area since 9th July last year when there appears to have been some sort of disturbance that may have been a small eruption.

The last major eruption occurred in 1918 and caused such a large glacier meltdown that icebergs were swept into the ocean by the resulting floods. The volume of water produced in a 1755 eruption equalled that of the world's largest rivers combined. Katla usually erupts every 40 to 80 years, which suggests the next significant event is now overdue. But notwithstanding all of this detailed assessments have established that the seismic risk to properly located data centre operations is no greater in Iceland as a whole than in Birmingham. And furthermore the historic electricity grid reliability in Iceland is double that in the UK as a whole.

Potential Data Center locations and volcanic activity since 1900


If there is a concern about the standards of existing data centres this should be addressed by a PWC benchmark study conducted in 2007 which looked at 4 data centre operations scenarios from small to large in 4 geographies and established them as world class. Substantial additional capacity has recently become available which creates a window of opportunity for a buyer’s market.

Electricity transmission and distribution losses as a percentage of total electricity production output.

What about network capacity and latency? Iceland’s existing network infrastructure is both robust and under-utilised. There are currently three high bandwidth connections: to the UK, Scandinavia and the US, with another spur from the planned new US-Ireland link planned for later this year. Latency speeds are well within most operating requirements.

What will it cost to move to Iceland? Iceland was the first and possibly the most dramatic causality of the 2008 financial crash. The economy was running high on credit, was highly over leveraged. Approximately €5Billion of debt is still held principally by European Banks. This was in effect trapped when the economy collapsed in a spectacular way that only a country which is outside the distortions of a currency bloc such as the Euro can. The result was devastating for creditors, local people and businesses, but the long term consequences have in fact created a very benign environment for the export of cloud services.

When the three principle commercial banks collapsed their debt obligations where taken over by the Central Bank of Iceland who devalued the Krona by 60% and imposed a de facto exchange control restriction on the export of foreign currency. Whilst this has allowed the economy to recover to a considerable extent it has also prevented foreign capital inward investment. The Central Bank have attempted to address this by announcing last year an exemption to the exchange control rules in favour of debt holders who reinvest in qualifying capital projects having a term of five years or longer. This also presents a unique opportunity for the holders of pre 2008 debt and other investors who are prepared to reengage with this recovering market in order to take advantage of the obvious surge in the demand for reliable low cost cloud services from outside Iceland.

For the bold and the adventurous a trip to Iceland to review the prospects of either a dedicated hosting environment or smaller scale pilot or specialist application, storage disaster recovery or development environments could be a good call for financial, energy security and good corporate social responsibility reasons.

Robert Marcus is Managing Director of CarbonZeroIT LLC a specialist cloud services provider working closely with local Icelandic suppliers.

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