Locating your data center off the beaten path

The question of where to build your data center has become increasingly complex as the power demands of data centers themselves have grown, making power the largest operational cost for data center operators after labor. Controlling power costs means building data centers in places with temperate climates, cheap power, and for the environmentally conscious, access to renewable energy.
With improvements in fiber optic networks and government investments in network infrastructure, many governments in unlikely places are angling for a piece of the growing data center market. This has been true domestically on a local level as North Carolina and Central Washington State, not exactly IT hubs, have taken the lead in data center build outs, owing to cheap, abundant power and tax incentives.
In the global environment, the question has always been how far afield can we go? The general rule of thumb has been that for every 100 miles of fiber cable that data has to travel, a millisecond (ms) of latency is added. Latency just refers to the time delay of data traveling across any system.
I caught up with Tate Cantrell, the CTO at Verne Global, a data center colocation business. Verne Global opted to locate its 200,000 square foot facility on 45 acres at an ex-NATO base in Keflavik, Iceland. The first question Cantrell gets from prospective customers is about volcanic activity in Iceland. But the second, more important question is about latency and the distance the data must travel to get from Iceland to its destination.
Verne Global is focused on the European market, and quotes latency times of about 20 ms to London, 25 ms to Amsterdam and 45 ms to New York. For comparison, 25 ms is about the latency you’d expect from the Midwest to either coast. Iceland is about 1200 miles from London, and the Icelandic government in cooperation with private companies has invested in fiber cabling such that there is now 28 terabits of physical capacity directed at Europe.
Beyond traversing the question of latency, the biggest issue comes down to power pricing, and that’s where Cantrell thinks Verne Global has an advantage. Power is abundant in Iceland, about 20 percent coming from geothermal and 80 percent coming from hydroelectric. It’s all renewable and it costs just below 4 cents per kilowatt-hour, on par with what cheap power in data center hubs like North Carolina and Oregon is going for. (Some estimates have low cost hydropower in Oregon as low as 3 cents and estimates in North Carolina can reach as low as 4 cents). But any way you slice it, these prices are much lower than paying for power in high cost Europe. (For more on issues related to data center locating and pricing, see the report “Locating data centers in an energy-constrained world” on GigaOM Pro.)
Perhaps as important is that Verne Global has 20 year pricing visibility due to locking in long term electricity pricing, which is typically easier to do when the source of power is renewable. The underlying resource (sun, wind, steam, hydro) in renewable energy is free, so utilities are able to offer long term pricing guarantees, which data center operators like as it frees them from potential pricing volatility related to natural gas and coal prices.
Competition is heating up for data center business and Iceland, where the government is trying to lure big IT companies, is not alone. Facebook headed to Sweden for its European data center build, partially because of an extremely reliable grid there, and Google is investing $265 million at a Finnish data center where it is using local seawater to cool its center.
Apple went to North Carolina for cheap power, only to later wind up building its own solar array and fuel cells in order to maintain a renewable energy source and keep some PR distance from the nuclear and coal that powers the grid there. Locating data centers in countries where the grid is powered by renewables solves the PR problem that arises from sourcing dirty power.
Verne Global has 100 megawatts of capacity it’s able to bring online at its Iceland data center, and currently has four European customers including DataPipe and CCP Games. The challenge remains to convince customers of the speed and reliability of the network. But with clean power at 4 cents a kilowatt-hour, IT decision makers have more reason to consider locations a bit off the beaten path.

Question of the week

Is latency a real concern for data center locating?