Europe’s Data Centres Hit By US Shale Gas Prices


Europe’s data centres could be hurt by cheap US competition fuelled by shale gas, while efficiency technology could also lose out

Data centres could move from Europe to the US, thanks to low cost energy from shale gas, according to research from 451 Research. Cheaper energy could also dampen interest in efficiency measures for large cloud data centres, the report warns.

The US will have cheap electricity and prices will be stable for some time, thanks to the large-scale exploitation of shale gas. This means that data centres, which can use several megawatts of electric power, will be cheaper to run in America. It will also make data centre owners less likely to invest in energy efficiency measures designed to bring down electricity costs and reduce the carbon footprint of the data centres, the report’s authors warn.

Red light for green data centres?

Server, Data Centre © Oleksiy Mark Shutterstock 2012

“The energy bill for a medium-sized 2MW datacentre in the US with a 50 percent baseload energy consumption could be as much as $500,000 (£335,000) a year less than a comparable facility in the UK – and about $750,000 (£500,000) less than one in Germany,” said Andy Lawrence, research vice president for data centres at 451 Research.  “This figure is large enough to sway decisions about where a data centre should be built.”

Electricity makes up about 30 percent of the running cost of a data centre, according to 451 Research, and prices have been expected to rise steeply, leading to big investments in techniques to increase efficiency and cut energy bills, such as the use of free cooling instead of electrical chillers.

However,  electricity prices are predicted to remain constant for the next few years, thanks to the exploitation of gas in shale rocks, through the process known as “fracking”.

European energy prices are now significantly higher than those in the US . In the UK, there are plans to exploit fracking, but electricity currently costs nearly twice as much here ($0.127 per kWH compared with $0.067 in the US).

Cheaper energy will boos the US data centre market, but it won’t be much help to specialists in reducing energy, said Lawrence:  “The growth of US data centre activity and investment will boost the market for equipment of all kinds but may limit demand for certain energy-efficient datacentre technologies, especially where there is a trade-off with risk and availability.” Europe will continue to need this technology, however, he added.

“Suppliers of energy-efficient technologies have long touted rising energy prices as a demand driver and a reason to invest,” concludes the report, which was co-written by Rhonda Ascierto. “But that is no longer happening, and data centre suppliers will need to adjust.”

The UK data centre industry has been arguing against energy taxes which are designed to reduce consumption of fossil fuels, arguing that higher energy costs will drive data centres abroad. The 451 report suggests this may happen in any case due to high underlying prices.

“This could undermine the UK’s competitiveness in data centres,” said Emma Fryer associate director of climate change programmes at Intellect, the UK IT industry body, “especially as there is no effective carbon tax in the US.” Although existing data centres would not pack up and leave, she warned that future decisions might go against the UK. “They will go where the power is cheaper, and there is a pipeline for cheap power in future.”

Others aren’t so sure. “If power cost was the only factor, all European data centers would be in Iceland or Poland,” said Liam Newcombe of Romonet. “Location and latency are both important so there is only a small subset of the capacity that has the flexibility to be built in the USA rather than Europe.”

Data centre efficiency experts doubt that the lower energy costs will have a large effect on efficiency technologies, however. “There is no real excuse for anyone building a data centre now in either Europe or the US to build one with a PUE of more than 1.4,” said Newcombe. “Evidence shows us that smart people who build data centers in the low energy cost states still build data centres with a PUE less than 1.3,  as they recognise that wasted money is still wasted money. This is true for those who currently build data centers in the hydro-electric powered North West or in the Coal Belt in the Eastern US.”

Both Rackspace and Savvis announced an expansion of  their UK data centres last month, and Rackspace said it did not fear any problems with UK energy supplies.

Efficiency and economics will be on the agenda at 451 Research’s Hosting and Cloud Transformation Summit on 9 and 10 April, London, where Andy Lawrence will lead a panel on the subject.

Are you clued in about Green IT? Try our quiz!


Read also :

Click to read the authors bio  Click to hide the authors bio