A taxing thought about datacentres…

Should the government – in this case Scotland where DataVita is based, but this could easily apply to the wider UK and beyond – tax datacentres according to how energy efficient they are?

Well, what do you think?  I started to give this idea some thought whilst putting together a rather “tongue in cheek” presentation for last year’s Scot-Cloud show in Edinburgh.

History is littered with taxation policies implemented by governments in an attempt to align taxes to deal with specific problems.  Here are a few examples:

In most cases, these have not been well received, but in all cases they were trying to address a specific problem.  So what problem do we have with datacentres?

According to a variety of articles I have read recently, datacentres are consuming around 3% – 4% of the global energy supply.  Doesn’t sound like much does it?

Well it is and it is only going to grow.  As a result datacentres have two problems:

  1. The amount of energy they use
  2. The type of energy they use

The second one can be solved if you are prepared to put the effort into it.  It is now possibly in most countries to access 100% renewable energy sources.  We have done it at DataVita.  It wasn’t easy  but we did it.  But, doing this before you address the first point is verging on irresponsible.  What’s the point of consuming too much renewable power?

Energy efficiency

So back to the bigger challenge – driving down the amount of energy datacentres use.  This is a two stage process.  Stage 1 is to address your IT load (I.E. the amount of power your IT equipment in your datacentre in consuming).  There are lots of ways to address this and I won’t go into them all.  Good examples are:

  • Virtualisation
  • Consolidation
  • Migrating to fewer (newer more powerful and energy efficient) servers
  • Application rationalisation
  • Turning off servers that are not used

There are many ways to drive down the IT load, so you get the idea.  The second stage is to look at the energy overhead required on top of the IT load to run the datacentre. This overhead is typically made up of cooling, lighting, power for building management systems – commonly referred to as the Power Usage Effectiveness (PUE).

Now in researching the background for this blog, I came across the UMBRELLA CLIMATE CHANGE AGREEMENT FOR THE STANDALONE DATA CENTRES and I (for a moment) thought someone had already done this.  I was wrong.  To save you reading 20 odd pages of legal text, skip to the last page and look at the targets set out for this agreement – a baseline PUE 2.0 with a 15% target for reduction by 2020 (so a PUE of 1.7).  That’s a bit like Lewis Hamilton settling for a top 20 finish.

This is where I think Scotland has an opportunity and I hope Ms Sturgeon or someone in her team reads this and takes note.  What if Scotland introduced a meaningful tax scheme that encouraged organisations to build and operate energy efficient datacentres here?  What would the impact be?  Could Scotland become a new Datacentre hub and attract billions in investment from the global content and cloud providers like Amazon, Google, Microsoft and alike?

There is of course a precedent for this – Ireland.  In case you are not familiar, take a look at Host in Ireland – an organisation set up expressly to help attract investment in the region. Sweden have also recently announced a major tax reduction on power for datacentres.

In Scotland, the word Digital is used just about everywhere for anything that looks vaguely like innovation in technology. That said, there are some amazing home grown software houses coming up alongside the “unicorns” that always get a mention (and I won’t mention them). All this is great but investment from outside Scotland by some of the big content/cloud providers will have a much bigger impact on the economy. Did you know that 9 of the world’s top 10 ICT companies have a presence in Ireland and the ICT industry accounts for 25% its annual turnover?

Its a simple formula – find a way to attract the big content/cloud providers and they will bring jobs that need digital skills and in turn they will have a big impact on Scotland’s GDP.

We have a real advantage here – the climate is ideally suited to building highly energy efficient datacentres, so why not use it Scotland?