Intelligent Energy

Iceland cometh

Iceland cometh

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The N. Atlantic island has been trying to lure industry with 100 percent renewable, stably priced electricity. A Jersey City IT firm serving NY, London financial districts is moving in. Is IBM next?

Iceland's geothermal forces and temperate climate are good for energy - and winter hot tubbing.

There’s no country on the planet with cleaner electricity than Iceland’s. It generates 100 percent from renewable sources – about 75 percent from hydropower, 25 percent from geothermal.

With that as a hook, the N. Atlantic island nation has for several years been trying to attract foreign industry, including data centers. As an added incentive, the country holds electricity prices steady for as long as 20 years – astonishing in today’s world of volatile fossil fuel rates.

Yet, for whatever reason – maybe volcanoes, maybe a perceived remoteness (Iceland is reasonably accessible), misperceptions of a cold climate (its winter average temperature is actually above freezing), or perhaps a shaken economy that’s still recovering from the 2008 banking collapse - the foreigners have merely trickled in, not rushed.

That could be changing, if the pending arrival of Jersey City, N.J.-based managed services firm Datapipe is an indication. Datapipe announced today that it will move into facilities run by Reston, Va- based data hosting company Verne Global, which has been gussying up a disused NATO naval base on a windswept peninsula near Reykjavik into an energy efficient data hub.

Datapipe will use the center in Keflavik to serve information technology clients in New York, London and other locations across a range of industries including financial and technology, according to Sean McAvan, vice president of sales for EMEA.

Both Datapipe and Verne are clearly enamored of the green, steadily priced electricity. Data centers are enormous energy consumers that by some estimates are on a pace to exceed airlines as CO2 culprits by 2020, so the industry is under pressure to both reduce its carbon footprint and its electricity bill. Iceland’s year-round temperate climate – temperatures range on average between 36 degrees and 60 degrees F – means that Verne and Datapipe will spend little if any money running chillers to cool their servers. Conventional cooling can account for 70 percent of a data center’s electricity consumption.

A geothermal plant in Hellisheidi, Iceland.

“Power and cooling efficiencies combined with the strategic geographic location will provide our clients with an option for carbon neutral, enterprise ready IT services and a 100% green cloud,” said Robb Allen, Datapipe CEO. Added VP McAvan, “The ability to take a 20-year view on power costs is incredibly attractive in today’s volatile energy markets – a big part of delivering IT services in any kind of utility model is to try to make the costs (and service quality) predictable.”

“The source, availability and cost of power remain one of the primary concerns for data centre operators around the globe,” said Verne CEO Jeff Monroe.

Geothermal forces on display at the Strokkur Geyser.

It’s been slow-going for Verne in Iceland. About a year ago, it looked like IBM was going to move into the Verne center and use it to transmit data via subsea fiber that connects Iceland to Europe and the U.S. But, apparently deterred by unfavorable valued-added tax requirements (since rescinded by Iceland’s parliament) and other reasons, IBM has balked, although it remains interested.

“As we learn of customers interested in building data centers in Iceland, we will consider working with various suppliers to combine their offerings with those from IBM and third parties to meet their customer requirements,” an IBM spokeswoman told SmartPlanet.

Some sources believe that relatively high bandwidth prices charged by Icelandic fiber optic company Farice are suppressing interest. Farice, which operates fiber lines that run to Europe and to N. America did not comment.

Things could change next year, when League City, Texas-based Emerald Altantis is scheduled to lay a 100-gigabit per second fiber cable connecting the U.S., Canada, Iceland and the UK. That line would be faster than the Farice connection, and some sources say it could bring price relief. Emerald is planning the line in partnership with Morristown, N.J.-based TE SubCom, a unit of Schaffhausen, Switzerland’s TE Connectivity Ltd.

Geothermal makes volcanoes, too. Mt.Eyjafjallajokull.

“Projects like Emerald Atlantis are of interest because they provide more choices,” the IBM spokeswoman said.

For now, Verne’s showcase client will be Datapipe, a company that declines to reveal its client base, but that says it serves “a range of vertical industries, including business and financial services, healthcare and pharmaceutical, retail, media and communications, social networking, technology and software.” Datapipe also has ties to Amazon – the two companies work together to provide cloud computing services (exactly what they do together in the cloud is a bit, er, nebulous). McAvan said that Datapipe’s Icelandic location will not be involved in the company’s Amazon work for the time being.

Melting glaciers provide the force behind much of Iceland's hydropower. Here, they feed Gulfoss falls.

Verne expects other clients to follow Datapipe into Keflavik. Verne is currently putting the finishing touches on a portion of the center that Datapipe and others will occupy. Verne is installing a 500 square meter module of racks, platforms and other furniture built by London-based telecom and data specialist Colt, which is shipping the module from the UK to Iceland. Verne will customize the racks with servers according to its customers’ specifications.

Verne and Emerald Atlantis are both majority-backed by the UK’s Wellcome Trust, the world’s largest medical charity. (Verne is in the process of relocating its headquarters to London). Some sources believe that Wellcome is interested in IT investments to help support the massive computing power deployed in the international Human Genome Project.

A few other data operations have also set up shop in Iceland, at data centers other that Verne’s. Opera, the Norwegian browser company, runs data operations from a center hosted by Icelandic company Thor Data Center in Hafnarfjordur, Iceland. So does a network of Scandinavian supercomputer operators, the UK’s Hertford Regional College, and Transputec, a London data services company whose customers include Chubb Insurance, Accor Hotels, Nandos, the UK’s Ministry of Justice, and others.

Aurora borealis over Iceland.

Iceland also hopes to attract other industries beside data centers. It has hosted large aluminum smelters run by Alcoa, Century and Rio Tinto Alcan for decades. But those are controversial within Iceland because they use a lot of energy, don’t create a lot of jobs, and they pollute.

Some Icelandic proponents of foreign direct investment prefer to attract small-to-medium sized industrial operations. New York City-based Globe Specialty Metals, which makes silicon for solar panels, earlier this year announced it is locating a factory in Iceland.

More could follow, although maybe the sparse population will deter some companies that prefer a larger dose of humans. If Manhattan had Iceland’s density - 318,000 people on 103,000 sq. km – it would have a total of 224 inhabitants. Then again, those 318,000 Icelanders are concentrated in and around Reykjavik, a cultured and lively place.

One day within the next decade, there might be an alternative way to tap into Iceland's green electricity. Landsvirkjun, the state owned utility, is considering building a sub-Atlantic high voltage cable to Europe.

Photos: Ragnar Th. Sigurðsson – ArcticImages.com, except for Mt. Eyjafjallajokull, from David Karnå/Wikimedia.

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Mark Halper

Contributing Editor

Mark Halper has written for TIME, Fortune, Financial Times, the UK's Independent on Sunday, Forbes, New York Times, Wired, Variety and The Guardian. He is based in Bristol, U.K. Follow him on Twitter. Disclosure