Iceland: New Hot Spot for Data Centers?

CIO - With data center costs on the rise, Jeff Monroe is always looking for a deal.

The CEO of Verne Global, a wholesale data-center hosting company, has searched the world for places that offer cheap power, easy cooling and reliable communications. While energy costs in the United States are uncertain, Iceland, with its seemingly-unlimited renewable energy, cool temperatures and three (soon to be four) transoceanic cables fits the bill perfectly, he says.

"We are finding those points on the Earth that are optimized for server operation-Iceland hits on all those points," says Monroe.

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The assessment is good news for a country that has had more than its share of misfortune. Iceland continues to suffer from a deep recession touched off by the global economic meltdown of 2008 and the nationalization of its three largest banks in October of that year. The country's economy has likely not yet reached its nadir, with the Organization for Economic Cooperation and Development (OECD) estimating unemployment to climb to 10 percent this year and gross domestic product to fall 7 percent.

For companies looking for a good place to put their data centers, however, Iceland's economic malaise is good news.

"Because of the beating that Iceland took (economically), the government might be willing to put forward some pretty healthy incentives for companies," says Nik Simpson, senior analyst of data-center strategies for the Burton Group.

Verne's project is case and point. The data-center company has set up shop in an area that Iceland's government is actively redeveloping-an old air force base in Keflavik-where it has converted two ammunition storage depots on the base into data centers.

Among the benefits: The country's infrastructure is relatively new and built for heavy industry-aluminum smelting- and the power so plentiful and reliable that prices can be predicted 20 years out, Verne's Monroe says. While areas in the United States have begun attracting data centers, such as North Carolina winning Apple's latest facility, future energy prices are always a worry. Not so in Iceland, where geothermal activity can power data centers as well as heat up hot springs.

"You might be able to find a place in the U.S. that has relatively cheap power, but the volatility (of those prices) is the problem," Monroe says. While some states, such as Iowa, are banking on their renewable energy projects, "if you have energy that is 20 cents a kilowatt-hour, no one is going to go there because it is too expensive," he says.