Kerið Crater: volcanic systems provide the geothermal resources that bring heat and power to Iceland. Source: Ben Payton
Meanwhile, data centres that present a compelling sustainability narrative are potentially more attractive for acquisition. Cube Infrastructure Managers acquired a majority stake in Nordic data centre operator GleSYS in March. Camille Mueller, investment director at Cube, says that the company’s “sustainable growth potential” was one of the factors that led to the acquisition.
“Digital transformation must go hand in hand with the energy transition, and this is where Cube wants to invest,” she says. Like Iceland, Norway’s electricity is almost totally based on renewables. Sweden and Finland also generate the vast majority of their electricity from low carbon sources. And operators are looking for ‘circular’ solutions to help them re-use the heat generated in data centres. GleSYS, for example, is recycling the heat it produces into a district heating network, Mueller says.
Many other operators agree that sustainability provides a competitive advantage. Lefdal Mine Datacenter, which is majority-owned by Columbia Threadneedle Investments, is built in a disused mine on the Norwegian coast, 170km north of Bergen. “We probably have one of the most sustainable data centres in the world,” claims Mats Andersson, Lefdal’s chief marketing officer.
He explains that the facility uses cold sea water in its server cooling systems. The water becomes warm after running through the systems – and the data centre is working on a plan to transport the warm water to a nearby salmon hatchery. Andersson says that this would help the hatchery save 12MW of power annually, meaning that Lefdal Mine Datacenter could claim to be carbon negative.
This kind of approach is vital for winning business with a growing range of customers that have made reducing their data storage carbon footprint a key part of their net-zero goals. Andersson cites Microsoft as an example of a customer that is putting data centres under pressure on sustainability. “If you cannot really prove to Microsoft that you are ESG compatible, that you are doing everything you can to reduce carbon, then you are out of business with Microsoft.
“If you are not within this sustainability ring of trusted companies within three-four years, you are going to run out of business.”
Quantum leap
Historically, the obvious objection to storing data in Iceland has been its distance from customers’ operations. But improvements in international connection speeds over the past decade, brought about by subsea fibre optic links, have made Iceland a viable data storage location for a growing range of customers.
A new subsea cable, linking Iceland to Ireland, entered into service in March, reducing latency between Reykjavik and Dublin to just 10.5 milliseconds – a level that is suitable for the vast majority of applications.
This, tied to the growth of cloud storage, has helped change attitudes around storing data in remote locations and enabled Iceland’s data centre industry to take off. Today, there are three main data centre operators in the country. All are owned by international investment funds.
Verne Global, which now also operates sites in Finland and the UK, was acquired by D9 Digital Infrastructure in 2021. Rival Nordic data centre operator atNorth, which has three facilities in Iceland, is owned by Partners Group. A third major player, Borealis Data Center, is held by Vauban Infrastructure Partners.
“In the past, proximity to operations was an important factor,” says Esther Peiner, co-head of European private infrastructure at Partners Group. “But we have seen companies getting comfortable with migrating to the cloud for cost reasons. Companies got increasingly comfortable with the majority of their data storage being quite far out of reach.”
With the rise of HPC applications, and eventually quantum computing, the advantages of Iceland and other Nordic countries will become increasingly evident.
“Quantum computing has a very different architecture to traditional service set-ups. They concentrate significant amounts of power in a relatively small room, and they run extremely hot,” notes Peiner. “There is a really interesting question of how you design a data centre that could cater to a quantum cloud, or cater to quantum calculations backing scientific analysis or complex financial calculations. I think the vast majority of solutions will be housed where you have the natural advantage of cooler climates.”
Ward offers a similar view. “The demand that we’re going to see moving to the Nordics is particularly around large language models, artificial intelligence, machine learning – and it needs massive density. It’s hugely power intensive and power hungry.”
The power of the north
Although the Nordics are well-positioned to provide the power supply that the next wave of data centres will require, data centres in the region will still need to make sometimes difficult choices about when and how they use the power available to them.
Even in Iceland, data centres are looking for ways to minimise their power costs. Both atNorth and Borealis are piloting a platform developed by local start-up Snerpa Power. This is designed to help companies forecast electricity loads and allow them to automatically place bids in the market that help the grid operator with balancing supply and demand.
When a bid is accepted, companies reduce usage slightly for a limited period. The grid operator then compensates the companies for the energy reduction according to their bid price.
“For data centres, energy efficiency and sustainable energy use is a key factor in being competitive and providing the best available services,” says Íris Baldursdóttir, Snerpa Power’s chief executive. She says that, where flexibility in power usage is possible, companies may be able to reduce their electricity costs by 2-6 percent.
Meanwhile, data centres in the Nordics, especially in regions where demand from other power users is greater, are not immune from the competition for electricity that has been seen globally. A Norwegian defence company warned in March that it could not increase production of armaments for Ukraine due to a nearby TikTok data centre consuming so much power. Its chief executive publicly blamed “the storage of cat videos” for blocking its expansion.
In Iceland, bitcoin mining has been a contentious issue. Tómasson says that bitcoin miners “were important to build out the data centre infrastructure”, although he adds that crypto customers are now becoming less important.
Ward says that Verne Global took on a large number of bitcoin customers around 2014 and 2015, but found that most swiftly went out of business. By 2018, he says, “we decided we couldn’t really see the benefits versus the disadvantage of supplying infrastructure to crypto currency”.
“There are two other operators in Iceland that took a very different decision and continue to support crypto currency to quite a significant level. That is not something that we intend to do.”
Security considerations
The political stability of the Nordics is another advantage for data centre operators. But data centres in Iceland and Norway – which are not members of the EU – face questions on whether regulations might one day require companies to keep their data within the bloc in certain circumstances.
There are divergent views on whether being outside the EU is problematic. Peiner says that Partners Group is mindful of potential future cybersecurity regulations.
“It is partly why we are looking to diversify our sites within the EU and outside the EU,” she says. Portfolio company atNorth has a facility in Sweden and another under construction in Finland – both of which are member states.
“I think we might see a little bit of deglobalisation on that, and potentially some intervention or regulation that could render certain locations more or less attractive for certain customer groups,” says Peiner. “That is something we will need to navigate.”
Others are sanguine about the risk that future EU regulations pose to the data centre markets in Iceland and Norway. For one thing, both countries, although outside the EU, are members of the European Economic Area and are therefore largely aligned with EU regulations.
“For us, it has not been a disadvantage,” says Andersson. He points out that since Norway is an EEA member, “we practically live by the same laws as the EU.”
Similarly, Ward notes that as Verne Global has a site in Finland it could accommodate storage requests for customers worried about keeping their data within the EU. But he believes the question is largely academic. “We just don’t see that being a particular issue.”
All roads lead north
There are few reasons to doubt that many more data centres will emerge across the Nordics in the next few years. The reality is that with the rise of HPC and ever-increasing demand for data applications, companies have no choice other than to look for data storage infrastructure outside of traditional locations.
“The vast majority of applications and data do not need to sit where they currently sit,” says Ward. “If you can be more efficient and more cost-effective with your decisions around where data and applications can sit, then you can have a significantly more efficient digital infrastructure portfolio.”
Verne Global is in the process of expanding its current site in Iceland, as well as looking for new locations in the country. Ward is more convinced than ever that the Land of Ice and Fire is the ideal location for companies to store data. “Iceland is so well-positioned for this new wave of compute that’s only just beginning and is going to dominate the kind of growth that we’re going to see in this industry over the next few years.”
Source link : https://www.infrastructureinvestor.com/the-rise-and-rise-of-the-nordic-data-centre-industry/
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Publish date : 2023-06-26 07:00:00
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