Is Iceland Poised to Become a Data Center Paradise?

With clean power and cold air, finding downsides to a data center boom in the North Atlantic is hard to do

3 min read
Is Iceland Poised to Become a Data Center Paradise?
Photo: Verne Global

Past the bullet- and blast-resistant security station, through a two-door man-trap or two, and inside a few card-plus-passcode doorways at Verne Global’s facility one can finally see one of the two main things that make Iceland an attractive place to put data centers: holes in the walls. More accurately, simple vented walls that allow the outside air to come in, pass through some filters and laser monitoring systems, and on into the rooms full of server racks. Data centers need massive amounts of cooling power, and Iceland’s often chilly air can do the trick.

Though the country doesn’t actually get as cold as one might imagine, it has a very narrow range of temperatures, and stays cool year round. Data center operators in places with more wide-ranging temperatures wouldn’t dream of just letting the outside air in; they need big cooling systems to make up for all the heat servers generate, which of course adds to the cost.

The other of the two factors working in Iceland’s favor is the power needed to run those cooling systems, as well as the servers themselves. The country relies entirely on two sources of emissions-free power: geothermal and hydroelectric (which of course, while clean from a climate perspective, does carry its own set of prickly environmental problems). Only about five percent of Iceland’s power goes to households (compared to around 36 percent in the U.S.), with big industry like aluminum smelting accounting for a huge proportion. Power companies and the government would like some more of that power to go to data centers.

imgPhoto: Verne Global

On a visit to Iceland, I asked everyone I could find what the downsides might be to locating data centers on a frigid island in the North Atlantic. Beyond the fact that it probably doesn’t make sense for financial services companies engaged in high-volume trading (physical distance to exchanges matters greatly in that case), it was hard to find good answers. Convincing your best people to live in Iceland and maintain the centers is one issue, though various measures of quality of life always place Iceland high up the list. And with multiple fiber cables connecting the country to both Europe and the U.S., location isn’t really a problem.

A spokesperson for Verne Global said that every potential customer asks about volcanism and earthquakes, given the high-profile eruptions that in recent times have grounded all the planes in Europe for days at a time. In general, though, the gradual easing apart of the North American and Eurasian tectonic plates, which converge down the center of Iceland, won’t yield the types of earthquakes that will do much damage to a well-built data center.

For customer peace-of-mind, the data center I saw featured four backup diesel generators as well as battery systems that could fill the two-second gap before the generators would kick in, should a major grid problem occur. And if an eruption mixed with an odd wind pattern (wind usually sends ash plumes off to the east, toward the rest of Europe, rather than back to the Reykjavik area on the west coast), those holes in the wall can close and air can be recirculated.

The government is so enthused by the idea of becoming a data haven that Parliament is considering lowering the corporate tax rate to be among the lowest in the world, according to Einar Hansen Tómasson, who works to bring foreign investment to Iceland — possibly down to 15 percent, though he stressed he was only speculating. Of course, finance and Iceland may sound a bit scary, considering the country suffered one of the biggest financial collapses in a world full of them in 2008; but unlike in the U.S., the banks were allowed to fail and people actually went to prison for it. Several people told me the country has a bit more “humility” now.

As it stands, Verne Global’s facility is the only major data center in Iceland. But if the hype is true and this tiny country really is some of the best server real estate in the world, that’s not likely to remain the case for long.

Editor’s note: Landsvirkjun, the national power company of Iceland, paid for the reporter’s travel to Iceland.

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