An Icelandic saga for the sustainability crisis - why data centers in Iceland may have found their moment

Martin Banks Profile picture for user mbanks October 7, 2022
Iceland has made another pitch at providing a sustainable, low carbon answer to the carbon footprint problem. Does that mean every data center in Europe should hop across the North Atlantic? Probably not, but this time it does suggest that a goodly slice of that business should seriously consider the possibility


One of the big questions for all users of IT, large or small, is whether this winter will see planned - or worse still, unplanned - electricity blackouts. Data centers of all types could be hit hard if they do occur, and in particular those that are providing cloud services a majority of business users and all consumers of social media and online retailing. Those businesses may well find their ability to function significantly impaired by lack of availability of their key IT resources.

Even if there are no black outs sprung on businesses, they are likely to come self-inflicted, and some have already started to occur. It is suggested that, in Germany particularly, those data centers with racks or whole pods of systems running compute-heavy workloads are only spinning them up when there is specific work to be completed, otherwise they are being shut down. This is said to be increasingly common in university facilities running research programs.

The reason is not that hard to deduce either; the cost in energy alone has become crippling for a growing number of large data center sites, and even if energy prices stabilize the chances of them declining significantly are remote - at least in the medium term. Running data centers, particularly across Europe, has therefore become a major cost burden. It is likely that many of them will be obliged to apply operational restrictions and shutdowns.

It is hardly surprising, therefore, that Iceland has gone onto a promotional blitz to demonstrate its potential as a solution to such problems, and not just a temporary fix, but as a permanent option that offers a large number of businesses solutions to issues that the data center community now faces.

The Energy and Green Solutions Section of Business Iceland offered the chance to investigate more deeply the capabilities, facilities and economics of what the country can provide when running data centers, and the equally important infrastructures of network connectivity, energy provision, and sustainability. So, donning my wooly hat and duffle coat, I set off to Reykjavik, and it has to be said that, particularly at this time, there is a story worthy of being told.

Carbon and sustainability

It is possible to believe that Iceland, with its volcanic activity,  was almost purpose built with data centers in mind. To paraphrase an Icelandic saying: if you need hot water, poke a stick in the ground. That simple fact, coupled with summer high temperatures generally around the 16o C mark, gives the first clue. Air cooling of large data centers is relatively easy and can be done with far less artificial cooling, so it is much cheaper than most other places in the world. Volcanic activity means the generation of electricity has half the necessary infrastructure provided by nature, in plentiful and continuous quantities. Add in hydro-electric generation and the country has power sources in abundance.

It also has two other important contributory factors, neither of which are directly relevant to running data centers, but both increasingly vital to the management, accounting and selling of their services. These are carbon footprint management and sustainability.

Iceland’s energy provision is about as carbon neutral as it is possible to get without having to pay for carbon offsets. It is also sustainable. That comes from the fact that Iceland is slowly being torn apart as it sits over the both the Eurasian and North American tectonic plates, which are slowly separating. Hot magma is rarely far from the soles of your feet, so it is easy to get to, and easy to exploit. No carbon is hurt in the making of sufficient heat so, as with hydro-electric generation, so, once built, the generation facilities need only management and maintenance. And unless something stupendously cataclysmic happens, the capability is available with a high level of sustainability.

Prove you’re green

Both of these factors are now crucial for data center facilities providers, the data center providers’ own customers – such a major enterprises operating their own, dedicated co-location services – and in turn for those customers’ own customers. They now have to be able to demonstrate down the chain that their suppliers meet best practices, have low carbon footprints and high levels of sustainability. Without that evidence, they may not be able to sell their goods or services to their customers in their turn.

Business Iceland set up visits with three Icelandic data center businesses, Verne Global, and Borealis, together with Farice, which provides international networking and connectivity; On Power, which provides thermo-electric generated energy; and Landsvirkjun, which provides hydro-electric power.

According to Tate Cantrell, CTO of Verne Global, customers down the line are now starting to track back not just on their own carbon foot print and sustainability efforts, but all those in its own extended supply chain:

Our Scope One, Scope Two and Scope Three emissions, we're one of the first data center companies on the planet to be reporting all three, all the way into all of the 15 different variations of scope three emissions. Those are the indirect emissions that a lot of people just don't talk about, and especially in the data center industry, where our goal as infrastructure providers is to extract complexity, and allow the end application users to take advantage of the resources that we build, with no friction along the way. But that also can work against the idea of global sustainability targets, because if you're not keeping track of your third party emissions, your indirect emissions, and not informing your customers about those emissions, than we're all abstracting our it impact and the true footprint that we have.

My visit also afforded a sneak peak at the carbon capture and storage technologies of, respectively, Climeworks and Carbfix. The latter has found a way to transport carbon some 2km down into the rock, which it then combines with permanently. Again, this combination has no direct part in running data centers, but its planned capability to lock away some 40,000 tonnes of carbon a year is now a key component in businesses demonstrating that they, and their supply chain, are making every effort to offer sustainable services with low carbon footprints.

When it comes to carbon footprints, Iceland does have a real advantage, with 10.5 grammes per KiloWatt/hour carbon released to the atmosphere. This compares with Frankfurt at 391g/kwh, London at 275, Amsterdam at 378 and Dublin at 321. Those numbers all stem from the fact that electricity comes from fossil fuel-based generation. Paris, at 96, only gets that low because of a higher use of nuclear power sources. This all gives Iceland  lower operating costs and a lower PUE (Power Usage Effectiveness) ratio, at 1.2, than just about anywhere else, at least in the Northern Hemisphere.

Distance is an obvious issue with Iceland, with its nearest large IT marketplace, the UK, some 800 miles away. This is the challenge the network operator, Farice, has taken up, with undersea cables installed or nearly ready to be commissioned that connect the country to all the Northern European countries, the USA and with established plans to extend to China and the Far East. Latency with the newest UK connection, to be commissioned early next year is predicted to be under 30 milliseconds for a round trip. This is considered sufficient to service most of not all applications: the exception being those that require ultra-low latency, such as real time financial trading.

Applications such as compute-heavy tasks like Fluid Dynamics analysis and other modern product design tools are already a strong market for Iceland, but the latency issue is expected to decline in importance as network capabilities improve, security services continue to be extended, the provisions of GDPR, and the widespread adoption of cloud services will continue to enhance the perception in Iceland that needs for data sovereignty regulations will decline. The data centers already talk of classic back office workloads now coming from European financial institutions, such as overnight batch processing runs.

As Alex Picchietti, Senior Director of Strategic Alliances at Verne observed, it's impossible to tell accurately the share of applications and workloads that could be moved to Icelandic facilities because, ultimately, it's an architecture discussion at the enterprise level:

But I'd say that a fair assessment that, based on the correct architecture, 90 to 95% of typical applications can run here for most of Europe. And considering what is an acceptable latency for customers to operate with, a lot of workloads, aside from HPC, I'd say that, conservatively, 90% would run here without issue.

My take

There is a school of thought which suggests that, if Iceland was such a wonderful location for data centers anywhere in the northern hemisphere, then the huge hyperscalers such as  Amazon AWS,  Microsoft Azure and Google would already be there. And almost up until the beginning of this year such thinking would have been sound. But the changes that have occurred in areas such as energy prices and climate change impacts, must now be putting great pressure on both the providers and the users of such services.

Even if the Russia/Ukraine war ended tomorrow, the damage done to energy supplies will be long lasting and the changes will be permanent. Sanctions against Russia are unlikely to disappear any time soon, and current geopolitics suggest it is unlikely that many Western countries will want their data processed in countries likely to be willing to buy Russian oil and gas.

And while Western (European in particular) countries talk big about sustainable energy sources – wind, solar, wave and SMR nuclear – they do less than might seem expedient to invest and build out. For example, while the UK Government talks big on such subjects, its actions have been biased towards providing positive hindrance to such developments, coupled with continued support for oil and gas as the primary energy sources.

This of course all leads directly into the other half of that argument: significant increase in the use of sustainable energy sources than can deliver with a low carbon footprint, and the growing importance of proving that all activities are doing the best they can to increase the former and reduce the latter.

With most data centers running at the multi-MegaWatt/hour level of consumption, their chances of getting close are obviously reducing with energy based on oil and gas. That will be a problem, especially as the one thing no one needs – and looks increasingly likely this winter – is that those centers will be obliged to stop working – or at least increase their carbon footprint by running on their emergency generators.

Energy supply problems can be solved, but climate change issues are not going away – and some energy supply solutions will only make it significantly worse. Given the increasing levels of energy being consumed by IT, there is now an argument that all businesses now need to rethink, or at least reconsider, their strategies on where their critical business processing is done. It can be argued now that the old rules – such as the importance of data sovereignty – are less strategic than the reliability of processing being done at all.

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