The Growing (Green) Power of Iceland

Iceland currently generates all of its power from a mixture of hydroelectric and geothermal plants, giving it impeccable green/sustainable credentials. The nation generates 17 terawatt hours (TWh) per year of electricity, but there's serious talk of doubling that capacity by 2025, setting the stage for Iceland to export carbon-free power to Europe.

Last week, I was in Iceland as the guest of Verne Global and Colt. Verne Global has built the industry's first carbon-neutral, 100 percent renewable-powered wholesale data center campus in Keflavik, Iceland. The 45-acre complex is just minutes from the international airport and west of Reykjavik, the capital. During the press event, reporters and analysts from Europe and the United States spent close to three days learning about Iceland's power infrastructure and the nation's economy.

Today, Iceland's three main industries are fishing, tourism, and aluminum smelting. The country has a series of hydroelectric plants that supply around 70 percent of the power mix, with the rest supplied by geothermal.   As a result, power is cheap as well as clean, with a rough "list price" cost of about $37 per megawatt hour – about a half to a third of what you'd find the price of power in Europe.

Four aluminum smelters currently use roughly 76 percent of the country's generated power.   The electricity supply has to be very reliable; a loss of power for more than four hours during a smelting run would end up trashing the equipment.

Iceland's political leadership would like to have more diversity in its business portfolio, especially after the banking crash of 2008. The unemployment rate soared from around two percent in 2007 to over eight percent at one point in 2010, according to various reports, and is now around six to seven percent.

Enter data centers, with the need for megawatts of power to power rows and rows of servers. Iceland has multiple transatlantic cables connecting it to both North America and Europe. Officials from Colt say the latency between New York City to London is around 52 milliseconds one way – and half that between Iceland and either city. 

Cheap power and low latency are only two parts of the data center story. Colt has customized its modular data center concept to take advantage of Iceland's third natural attribute: Free cooling. Sitting at around 66 degrees north latitude, Iceland's weather is described as "subpolar oceanic" with average low temperatures ranging between 27 degrees Fahrenheit in the winter to highs of the 70s over the summer.   Rather than using expensive (capital, operational, and maintenance) air chillers, cold air can simply be drawn in from outside to provide cooling. Since you don't have traditional HVAC, you also don't have the additional power for that overhead.

Datapipe (News - Alert) Vice President Sean McAvan said the total cost advantage once you factor in free cooling meant you could operate a server in Verne Global's data center for about one fourth the power bill of a server in a London facility. Multiple that by a lot of servers, and the operational cost advantage of moving a server to Iceland becomes substantial.  If the EU defines and implements a standardized carbon tax, Iceland's price advantage could become more substantial.

Moving forward, Iceland is building more geothermal plants, with some wind potentially throw in into the mix. New hydroelectric plants are not under consideration, due to the potential impact upon the environment and ecotourism.   New power capacity could be sold through a proposed interconnector cable, linking Iceland's electrical grid with Western European countries. The cable would be built by 2020 and stretch from 1,170 kilometers (landfall in Scotland) to 1,900 kilometers (German). 

Estimated power prices for Iceland in 2020 are $43/MWh. Germany's price would be $96/MWh will England is expected to pay $108/MWh.   Building a high capacity DC power cable would be an expensive undertaking, but offering carbon-free power at roughly 20 to 40 percent off the local market price would leave plenty of margin to pay for the delivery infrastructure.