Thinking more radically around green issues
Imagine the Internet revolution was starting tomorrow. Where would you locate those power hungry data centres that are part of the critical infrastructure?
Would you go to a country which fears that a cold winter could lead to black outs or one that actually exports energy?
Would you go to a city that has already suffered several crippling black outs in 2019 or one that has never had grid issues?
Would you go to a country that it recorded its highest ever temperature of 46 degrees in June this year, or one with an average annual mean temperature of around 5 degrees?
Would you go to a location that offers renewable energy, but which is using imported sources and you would be denying other users the opportunity, or one with an abundance of renewable energy?
Would you choose a government that is looking to ban the building of new data centres for the next year or one that is actively encouraging and incentivizing new data centres?
Would you choose a government that is concerned that data centres could take 15% or more of available power, and the potential impact that this could have on other industries, or one with a surplus of power that is very keen to keep that power within the country?
Would you choose an edge strategy with multiple sites close to population centres and then supplemented by larger sites near those same population centres, or move the larger data centres to a location where power is cheap, available and renewable?
OK, I think the point has been made, and there are many rebuttals to these points from addressable markets to data sovereignty to eco-systems to latency to future power strategies to mitigate some of these issues.
BroadGroup Consulting works with investors around the world. We have conducted over 30 commercial due diligence projects in the sector.
Investors have also often been guilty of following ‘conventional thinking’. A bit of the, “You can’t go wrong building in Amsterdam” approach.
Or that if you can make 50-60% EBITDA margin in a FLAP market, you need a pretty compelling business case to look outside.
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When will thinking change, if at all?
The consensus assumption among investors has been it will be very gradual. Yes, the Nordic markets will become larger and more attractive, but the FLAP markets retain their pre-eminence.
This argument can be supported by global trends, and locations such as Singapore and Ashburn.
It can be supported by future roadmaps and building plans for data centre operators. It cane supported by very strong demand seen in 2019.
Concerns are seen as more temporary or solvable. The fact that there were perhaps two providers who could realistically provide a 2MW offering in Amsterdam in 2014, and that this is now perhaps eleven?
Does this show over-supply or simply the tremendous demand and the development of new and innovative offerings?
Or, that in July 2019, the local government in Amsterdam set out a year-long ban on permits for new data centres?
Does this change the attractiveness of Amsterdam or is it simply a temporary halt, and part of a trend to develop more appropriate sites, such as Agriport?
But could anything make this change in thinking about location much more rapid and dramatic?
The two most likely drivers are government and hyperscale cloud.
Governments are clearly facing growing pressure to consider environmental impact, and also legal commitments such as the Paris Climate Change Accord.
Recently, we have seen even Singapore grow wary of allowing new data centres, given its Paris commitments.
Could data centres, widely quoted as using around 2% of global energy, suddenly be seen as a ‘bad thing’? Or, at least, a bad thing to be housed in our country?
The hyperscale cloud providers are also under immense pressure to do the right thing and not simply engage in ‘greenwash’.
Greenpeace has led the charge in monitoring their activities. It is interesting to see some of the recent changes in site selection personnel at the cloud players. Will environmental issues suddenly get much higher priority in their location criteria?
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