Does Iceland’s renewable energy make it the ideal data centre destination for UK businesses?

With its mid-Atlantic location, active volcanoes and frequent - albeit extremely low level - earthquakes, Iceland might seem like an unusual destination for UK businesses to place their data centre infrastructure.


But while web-scale firms like Facebook and Google have already looked to the colder climes and greener energy of the Nordics, more traditional enterprises are beginning to realise the benefits too.

“We are really excited and buoyed by the attention that has been moving north: lots of companies are really considering Nordic data opportunities,” says Tate Cantrell, CTO of Verne Global, which is based in Keflavik, a short distance from the Icelandic capital of Reykjavik.

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“Data centres are no longer limited by site location where, if I needed to serve an office block in London, I needed a data centre in London. Those days are over.”

While such a testimony can be expected from a company that set up shop in a former NATO base on the island, Cantrell is not alone in highlighting the growing interest in the region.

A recent report from data centre analyst firm Broad Group claims that the Northern European co-location market is experiencing swift growth.

Third-party data centre capacity is set to increase by almost two and a half times in terms of m2 space by the end of 2017, it claims, while MW power requirements are set to triple. Overall it is estimated that €3.3billion will be invested in the sector over this period.

Icelandic data centres: Playing it cool

So what is driving this trend?

Data centres are notorious for requiring significant amounts of power to operate. Leaving aside the environmental benefits, the most obvious advantage for hosting servers in Iceland is access to cheap, plentiful and reliable energy.

Uniquely, one hundred percent of Iceland's energy is created through renewable sources - principally hydroelectric and geothermal power - and the country produces considerably more energy than its population of 323,000 requires. Meanwhile free air cooling all year round also helps reduce total cost of ownership, says Cantrell.

Overall, this means lower data centre costs – and BroadGroup claims that operating a facility in Iceland is roughly half the price of the UK, Germany and the US.

In addition to this, Iceland’s locally produced, renewable energy means it is not subject to the fluctuating prices seen in countries which are reliant on other, non-renewable forms of power, with domestic energy providers able to adopt lengthy fixed rate contracts.

This stability has helped foster the island's aluminium smelting industry, and the Icelandic government hope that more data centre operators will be attracted too.

"In terms of price stability, if you look at trends in places like Germany and others it is very clear. We see that under almost all scenarios you are going to see 70 percent plus increase over the next ten years," says Cantrell.

"There are certainly macro-economic issues that will continue to drive people in the direction of locations where you have got to have a very stable energy supply. When you are using rainwater and super heated rain water to be able to provide power it is a pretty stable infrastructure."

Image: Verne Global. The UK-headquartered data centre provider is currently expanding its facility in Keflavik

Icelandic data centre: What to consider

However, there are considerations for UK based businesses hosting applications over a thousand miles away. At such distances latency can become an issue.

An obvious example is high frequency trading, where latency is measured in microseconds.

"Some applications, such as high-frequency trading systems, voice over Internet Protocol (VoIP) systems and virtual desktop infrastructure (VDI) platforms, need the lowest latency possible to make them effective," warns Gartner research director Tiny Haynes in a recent report.

But for the majority of workloads this is unlikely to be a problem. Gartner recommends that businesses consider whether applications as data warehousing, collaboration systems and batch-process applications, for example, warrant the extra cost of hosting in the UK.

BMW's use of Verne Global's data centre for data intensive high performance computing is a clear example of this. The German car-manufacturer moved its high performance computing clusters to Iceland three years ago, claiming to reduce its data centre operating costs by 82 percent.  (See also:  How Verne Global's Iceland data centre helped BMW i3 win green car award)

Verne Global's Cantrell says: "For us it is only very specific instances that we start to see issues. Those sometimes come in where someone is trying to run a virtual desktop on a particular application that is very sensitive.

"Things like email delivery, storage requirements, basic enterprise collaboration applications - all of that is in a realm that can operate very nicely within Iceland."

Örn Orrason, VP of business development at undersea internet cable provider, FarIce, adds that there is a perception that Iceland is too remote for co-location purposes, but the latency from Reykjavik to London using undersea cables is "very similar to the Facebook data centre" in Lulea. It takes 18.9 milliseconds for data to arrive in London from Reykjavik, compared to 18.7 ms from Facebook’s north Sweden facility.

"People think that is further away than it is," he says, "for almost all applications it is good enough.”

Icelandic data centres: What are the risks?

In fact, advocates of Iceland's data centre industry claim that there are a number of misconceptions about the country. One example is the potential risk from active volcanoes.

While the Mid-Atlantic Ridge tectonic plates help provide the island’s geothermal energy, they are also responsible for creating volcanoes such as Eyjafjallajökull, which caused widespread disruption to flights around the world back in 2010.

Yet, the risks can be overstated. During 2010 air traffic to Iceland was barely affected, while its data centres were able to operate too.

“This particular campus has actually had the benefit of operating through two very large volcanic eruption events [without disruption],” says Cantrell of the Verne Global data centre. “We had Eyjafjallajökull, which had no disturbances to this area, no disruptions to the network.”

Another eruption lasted 14 months and left a lava field in the middle of Iceland that is “as big as the size of Manhattan and 100 metres deep”.

“We operated without any incidents or issues,” he says.

From a technical perspective, a lack of connectivity to the island may have been a problem in the past, but this is no longer the case, says Cantrell, as the small data centre industry shows sign of maturing.  (See also: Icelandic government hopes to entice internet giants to its shores with chilly climate and geothermal power)

For example, Verne Global itself has announced a number of deals with connectivity providers such as BT and Level 3, with multi-terabit-per-second connectivity to America and Europe. 

“The great thing about data centre operating environments is that when you build a campus it becomes a little bit of a mall, plaza - you put the plaza in, you anchor it with a well known store and maybe a restaurant and all of a sudden there are others showing up and they are benefiting from each other,” says Cantrell.

“You are starting to see evidence of that growing ecosystem with announcements like we have with BT and Level 3 and others that are coming. It becomes an ecosystem. And as that develops more networks will occur.”

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