A springboard for green datacenters in Southern Norway
A springboard for green datacenters in Southern Norway Southern Norway as a leadning international region for climate-friendly energy use and business development
A springboard for green datacenters in Southern Norway
A springboard for green datacenters in Southern Norway About the report This report is written by Oxford Research and commissioned by the counties of Vest-Agder and AustAgder. The objective of this report is to provide ideas and input to the Region’s strategy for attracting green data centers.
About the authors Rune Stiberg-Jamt is the VEO of Oxford Research Norway and a senior analyst. He has been project leader on this report. Bernhard Weigel is an analyst at Oxford Research Norway. Jon P. Knudsen is a senior analyst at Oxford Research and an associate professor at the University of Agder. He has had the role of quality manager on this project Eva Kvelland is a senior advisor at Ordkraft and has been the communication advisor. Jouni Eho is the former CEO of Oxford Research Finland and has had the role of consulting expert in this report. Jakob Stouman, a senior analyst, is Head of Department at Oxford Research Denmark and has been a consulting expert on this report.
About Oxford Research Knowledge for a better society Oxford Research is a Nordic research company. We are documenting and developing knowledge through analyzes evaluations and investigations, providing political and strategic stakeholders with a better basis for their decisions. We combine scientific methods with developing creative ideas to present new knowledge for our clients. Our specialties are analyzes and evaluations within industrial and regional development, research and education as well as welfare and education policy. Oxford Research was founded in 1995 and has companies in Norway, Denmark, Sweden and Finland. Oxford Research is part of the Oxford Group and aims its efforts towards the Nordic and European market.
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A springboard for green datacenters in Southern Norway
Introduction Kristiansand, 15th June 2015 The Regional Development Plan Agder 2020 requested input for a comprehensive strategy for attracting data centers to the Agder region. We have built the strategy input around our understanding of cluster dynamics and regional business development. A comprehensive strategy to attract data center business to the Agder region should contain efforts both at the global level, the national level, and at the regional level. For inspiration, we have looked to our neighbor countries that have managed to attract major multi-national internet companies. Now that many bottlenecks in Agder and in Norway are being removed, we are optimistic that Agder will be able to become a notable host for green data centers in Northern Europe. In the course of the research for this document, we have looked at experiences from data centers in Lule책, Sweden, Hamina, Finland and Viborg, Denmark. We have talked to our colleagues from Oxford Research Finland and Denmark, communication experts at Ordkraft, and people at the University of Agder. We were also invited to a two-day seminar about the Swedish regional development company The Node Pole. We hope this report will be useful for the work that will follow.
Oxford Research AS
Harald Furre CEO
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A springboard for green datacenters in Southern Norway
Introduction
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Executive summary
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The Goal
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The Why
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The How
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About this report
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Regional Development Plan Agder 2020
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Why green data centers?
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What can Agder gain from green data centers?
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Key factors for establishing data centers
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Norway’s advantages
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Regional advantages
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Southern Norway’s powerful potential
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Future prospects
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Understanding data centers
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The Data Centre Risk Index
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Three types of data centers
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A measure of efficiency
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Norwegian efforts
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Case studies
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Luleå and Facebook
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Facebook’s impact on the local economy
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Hamina and Google
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Google’s Impact on the local economy
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Strategy – At The Global, National & Regional Level
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A global strategy
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A national strategy
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A regional strategy
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Recommendations
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Acting quickly, communicating clearly
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Questions that need to be answered
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A springboard for green datacenters in Southern Norway
Executive summary Oxford Research has been commissioned by the Regionplan 2020 initiative to provide input to a regional strategy for attracting green data centers to the region.
THE HOW The strategies we propose in this report are centered around the global, the national and the regional level. One major component is to remove current and future bottlenecks that may inhibit data center establishment in the region. At the same time, the region needs to position itself nationally as the number 1 site for data centers. This should entail being proactive in creating favorable conditions at the regional and the national level, and strengthening R&D with the University at the center.
THE GOAL The goal of this report is to provide the Regional Development Plan Agder 2020-initiative with input to a regional strategy for attracting green data centers.
In addition to positioning Agder as the number 1 data center location in Norway, the region should engage in targeted marketing towards potential investors. We suggest a communication strategy that employs existing businesses and clusters in the region, and focusses on the region’s international orientation, energy potential and ability to adapt to new developments.
THE WHY Green data centers fit well into the portfolio in the regional development plan, where ambitions are to “pave the way for increased use of renewable energy”, and where the region wishes to “encourage technology development in the region”. We believe that such data centers could work in concert with the region’s technology cluster, the University of Agder, and other knowledge and research-based environments, and local power companies.
Furthermore, hiring agents and third parties that may facilitate contact between investors and potential sites should be considered. We believe that national authorities and high-ranking personnel from the counties’ administration should be in charge of marketing and communication with potential investors.
Green data centers present a meaningful opportunity to make use of the available power resources in the region. Theoretically, there already is sufficient surplus in power to operate several big data centers. Furthermore, there are several potential data centers sites in the region.
Creating consensus around the common goal is crucial in order to be able to act quickly once an investor signals interest in the region. All relevant stakeholders need to be engaged in the process to secure their cooperation and to make sure data center establishment happens as quickly as possible. At the same time, there must be a clear idea of who will be responsible for what.
At the same time, green data centers would mean a massive influx of foreign capital in the region, potentially creating a substantial number of jobs, both during construction and operation, and to spark increased research and development activity in the region.
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A springboard for green datacenters in Southern Norway
1. About this report This report has been commissioned by the municipalities of Vest- and Aust-Agder with the aim to contribute to an overall strategy to attract data centers. This is part of a larger strategy, the socalled Regional Development Plan Agder 2020.
selskap. Furthermore, the region already possesses an excellent knowledge environment through the University of Agder, where relevant expertise is produced and can be coupled with the industry’s needs.
WHY GREEN DATA CENTERS? REGIONAL DEVELOPMENT PLAN AGDER 2020
Recent trends in data center technology have gone towards running data centers on renewable energy. The reasons for this are simple: Data centers consume large amounts of energy. This makes cheap energy an important factor in the decision if and where to invest in a data center. However, not all cheap energy is clean and green. Nuclear and fossil power seems cheap at the moment. On the other hand, there is uncertainty in the future if these energy sources will remain as inexpensive as they are today. Scarcity and carbon-taxes may dramatically increase the market price of fossil fuels2.
This report is part of a wider initiative by the counties of Vest- and Aust-Agder, called the Regional development plan Agder 2020. The plan outlines a vision for the Agder region for 2020 with a range of goals within climate, transport, quality of life, education and culture. In the plan Agder region aspires to become ”an important industrial region internationally”, and an important contributor to ”a future lowemission society” 1. These goals will be realized by:
”paving the way for increased use of renewable energy and encouraging technology development in the region”
”allocating regional development funds to projects addressing climate challenges and energy efficiency”
”strengthening educational and research environments in respect of all fields of energy and technology”
At the same time policies are being introduced in several European countries that favor renewable energy and support development of renewable energy sources, making green energy more available and reliable in the foreseeable future. In addition, using green, “popular” energy, may provide legitimacy to a data center, than using fossil-based electricity. By using renewable energy, the company can create the image of contributing to a sustainable energy future. This is illustrated by the case of Apple, when the company decided to construct a green data center in Viborg, Denmark3. Apple also runs a data center in North Carolina, a state with a high share of nuclear and coal-based energy production. In order to have
The region already holds a substantial advantage taking into account production of renewable energy and an energy-efficient industry, represented by companies such as Agder Energi and Sira-Kvina kraftRegional Development Plan Agder 2020, 2012. The controversial world of clean power and data centers: https://gigaom.com/2012/07/11/the-controversialworld-of-clean-power-and-data-centers/
Apple bygger nyt kæmpe-datacenter i Danmark: http://www.computerworld.dk/art/233255/applebygger-nyt-kaempe-datacenter-i-danmark-investerermilliarder
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its data center run on clean energy, Apple built the world’s largest privately owned solar panel farm and a biogas operated fuel cell farm4.
There is a surplus of energy in the region equivalent to 7-8 TWh6. Locked-in energy may potentially lead to lower electricity prices, and will have a negative impact on the municipalities’ budgets. Energy intensive industry, such as green data centers, will contribute to stabilizing demand.
Such data centers rely on renewable energy sources, and fit well with the region’s ambition to “pave the way for increased use of renewable energy”. At the same time this will contribute to technological development in the region. These ambitions are lined out in the Regional Development Plan Agder 2020.
Data centers have a range of requirements in order to thrive (see below). Among these, we find a solid internet infrastructure and a skilled work force. Having established these, the site becomes more attractive for additional data centers that will draw on the same factors. We call this the Lemming-effect (see below).
WHAT CAN AGDER GAIN FROM GREEN DATA CENTERS?
Furthermore, the synergies between academia, local businesses and data centers may prove to be very fruitful: Finland reports that local businesses have taken steps to integrate cloud storage into their ITsolutions, and Norrbotten (Sweden) has seen a immense increase in the local university’s popularity.
Experiences from Sweden and Finland have shown that data centers have a substantial positive impact on their locations, primarily in terms of invested funds and jobs created. Experiences from our neighbor countries show that during construction a number between 500 and 900 jobs are created. After construction the Google data center employed a 230 people, similarly, the Facebook data centers in Luleå are estimated to account for 120 full-time jobs in dayto-day business. The regional development plan initiative estimates that green data centers may create “thousands of new green jobs” in the long term5. Boston Consulting Group reports a Type I economic multiplier of 1.7 for the Facebook center, meaning for each job created at the data center, another 0.7 jobs are created in surrounding industries. Based on the report Finland’s Giant Data Center Opportunity by Oxford Research Finland, we estimate that the Type I multiplier of the Google data center lies around 2. For every job at the data center another job in surrounding industries follows.
We see a substantial potential in the potential synergies. Additionally, part of the strategy to attract green data centers requires investments in infrastructure, research and development (R&D), and marketing. We believe that the region will benefit from these investments in itself, independent of the data center outcome. Hence, we regard the investments recommended here as beneficial in themselves.
North Carolina’s mega data center cluster: https://gigaom.com/2012/07/08/a-geeks-road-tripnorth-carolinas-data-center-cluster/
Datasentre – en ny norsk grønn næring, Regionplan 2020. 6 Memo: Power Supply in Southern Norway – A Brief Overview, ADAPT Consulting, 2015.
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have played a major role in the decision to establish a data center in Luleå.
KEY FACTORS FOR ESTABLISHING DATA CENTERS
Given the pace of today’s and tomorrow’s technological development, data center equipment can become obsolete quickly. Bulk Eiendom, who seek to establish a data center in Vennesla, argue that server equipment needs to be exchanged every three to four years. Locating a data center in an urban area makes this highly impractical. In addition, urban property is more expensive than rural sites.
In their report concerning Google’s investment in Hamina, Finland (see below), Oxford Research Finland lists a range of factors for attracting data center investment. Among these factors are: 1) internet connectivity for connecting to consumers, 2) energy, in stable and cheap supply, 3) environmental conditions, such as weather and low risk of natural disasters, 4) natural resources for construction and cooling and 5) favorable and predictable regulation.
International ranking on selected variables
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This is supported by Norrbotten municipality’s report on the county’s strategy on data centers. At the same time data centers should not be located in a too remote location, either: there is a need for a trained workforce who can maintain the facility. This workforce can both be local or international. The data center must be easily accessible. In addition, a data center should not be located too far from its primary energy source: energy needs to be transported through the existing electricity grid. Locating a data center in direct proximity to its power source may save up to 20 øre/ kWh7. In the next chapter, we will present the Data Centre Risk Index (DCRI), which is a comprehensible list of factors, and ranks countries according to their score on the index. The factors presented here and in the DCRI can be considered requirements for establishing data centers. When considering potential sites, data centers seldom deviate from these factors without a good reason. The absence of favorable factors and the presence of factors that may inhibit establishment of a data center, will here be referred to as “bottlenecks”.
Source: Data Centre Risk Index 2013. * = this is being addressed by the Norwegian government. As a consequence, Norway’s ranking migh increase.
A report on the Swedish experiences with Facebook lists the same requirements as above. In addition, local competence and an ICT-trained workforce, along with a favorable business environment, seems to
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Sky og fjordane, IKT-Norges Grønn IT-prosjekt, 2009.
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The Agder region has consistently had low energy prices, and is among the cheapest fixed-price regions in the Nordic countries. In fact, fixed-price energy costs in Agder are lower than in Sweden and Finland. While Sweden and Finland produce large amounts of their electricity in nuclear power plants and coal plants, over 97% of Norway’s energy mix is green hydro power.
NORWAY’S ADVANTAGES Norway has several advantages, which are reflected in Norway’s rating in the DCRI (see table above and DRCI below). Norway is considered a very businessfriendly country in the index. Norway performs well within relevant categories, such as:
Low inflation,
High availability of water,
High GDP per capita,
Secure energy supply
A high degree of sustainability (i.e. energy from renewable sources)
Currently the region has the necessary connectivity with the European Continent through fiber cables, which run via Denmark and Sweden. In addition, there are discussions to include a fiber component in the planned interconnector to Germany as well. This would increase connectivity even further, and contribute to low latency to users outside of Norway. The Agder region could thus potentially become the best-connected region in Norway.
The last point is especially relevant, since none of the competing Nordic countries come close to generating the same amount of renewable energy as Norway. In fact, Sweden generates approx. 40% of its energy from nuclear power, while nuclear and fossil energy accounts for roughly 60% of Finland’s power mix8! Once the tax discount on electricity is implemented, Norway might have Europe’s cheapest electricity available for industry and data centers9.
The local university already offers a range of courses and degrees within ICT and thus contributes to a skilled and competent workforce in the region. This permits for synergies with data centers and local businesses, and has been identifies as an important factor for success in regional development10. Data centers produce considerable heat and thus require cooling mechanisms. Cooling may account for up to half of a data centers power expenditures (see below for a measure of data center energy efficiency). The prospect of air-cooled data centers is therefore a very lucrative one. Agder, with a relatively mild climate11 makes for a fitting and profitable location.
REGIONAL ADVANTAGES The Agder region has several advantages that make it suitable as a location for data centers. There are a number of hydro power plants that are capable of producing the required amount of power at any given time. This is well-illustrated by the local utility company’s ambitions to export huge quantities of electricity to Denmark, Germany and the Nether-lands.
In terms of transportation and traffic, the Agder region is well connected, by both motorway, train and airplane. By air, one can reach Amsterdam and Copenhagen in about one hour. In addition, the region
Memo: Power Supply in Southern Norway – A Brief Overview, ADAPT Consulting, 2015.
Regional dynamics in non-metropolitan hi-tech clusters, Teräs & Ylinenpää, 2012. 11 The yearly average between 1961 and 1990 was 7,4 degrees Celsius. Source: SNL
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Datasentre – en ny norsk grønn næring, Regionplan 2020. 9
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has a clear international orientation, as there are already a range of multi-national businesses in the region, such as National Oilwell Varco, and industrial clusters such as NODE and EYDE. This international presence entails an awareness around international actors’ needs, such as international schools in Kristiansand and Arendal, housing and a good level of English-speaking competences among locals. Kristiansand chamber of commerce through its EXPAT program already has a solution to this issue.
stance, towards 2020 there is an expected annual surplus of 7-8 TWh12. The region has a stable power infrastructure with low losses during transmission, allowing for some distance between power generator and consumer. In addition, power prices are considerably lower in Southern Norway than in the competing neighboring countries13.
FUTURE PROSPECTS
Interestingly, Norway ranks below the competing neighboring countries in terms of risk of natural disasters occurring. The Agder region, on the other hand, can be considered a relatively safe region which has mostly been spared from natural disasters, such as flood, excessive rain and wind.
As the world goes online, the amount of data being generated is expanding exponentially, creating a huge increase in required digital infrastructure. Five years ago, eight hours of video were being uploaded to YouTube each minute. Today, it is 300 hours per minute14. More than 250,000 words - two and a half books - are published on Google’s Blogger platform - per minute15. Some 1,000 million websites16 now are up and running. By the end of 2020, some 50 billion devices will be connected around the world, double the amount today. Total internet traffic is expected reach 1000 Exabyte (1000 billion gigabytes) by 2015 – an increase by 3300% from a decade before17.
SOUTHERN NORWAY’S POWERFUL POTENTIAL Southern Norway has developed a strong power balance based on renewable electricity, mainly hydropower with large water reservoirs. The system is considered both highly reliable and offers considerable surplus load capacity.
Massive new data centers are required to cope with this growth. Instead of being stored on hard discs, traffic and storage is moving onto the cloud. Around the world, about 200,000 data centers exist today, with a combined server space capacity of 64 million square meters18. These include dedicated computer
Southern Norway has a long tradition supplying major electricity intensive industries with more than 8000 hours of utilization. Large Data Center clients are looking for the same properties in the production and grid as these large traditional consumers. For inMemo: Power Supply in Southern Norway – A Brief Overview, ADAPT Consulting, 2015. 13 Monthly power prices in Northern Sweden, Finland, Denmark, Oslo region and Southern Norway from May 2010- Feb 2015. Source: NordPool Spot. 14 YouTube statistics: https://www.youtube.com/yt/ press/statistics.html 15 OECD Internet Economy Outlook 2012. OECD, 2012.
Total number of websites statistics: http://www.internetlivestats.com/total-number-ofwebsites/ 17 Delivering Digital Infrastructure - Advancing the Internet Economy. World Economic Forum, 2014. 18 Digital Infrastructure and Economic Development. Boston Consulting Group, 2014.
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facilities that can occupy anything from small rooms to industry-size buildings.
of global internet traffic. Since big modern data centers are so capital intensive, most of the growth will come from the global web giants, not from telecoms or local companies. Analysis Mason estimates22 that content and application providers, including Google, Amazon and Facebook, already invest a total of EUR 26.4 billion (USD 33 billion) in the networks, facilities and equipment of the Internet per annum. The majority of the investments is spent on developing hosting infrastructure.
Over the coming decade, capacity will grow 10% each year. Within the next five years there will be a demand for 60 new major data centers in Europe19. The structure of the cloud will also change. Instead of being processed in small centers, the rise in data will be treated by large one billion euro or bigger sized centers. IDC forecasts that by 2018 large data centers will account for 72.6% of all data center construction in terms of space20.
Given this development, it is unlikely that the demand for data centers will wane any time soon. Nevertheless, demand for storage space in Norway should not be taken for granted: future data centers may very well be located in proximity of existing data centers in order to make the most out of the existing infrastructure and local expertise.
Globally, a total of EUR 110 billion was invested in data centers in 201321. Europe could win a large part of these data center investments, if it manages to provide a competitive investment environment. It enjoys large population of internet users and it is a hub
Datasentre – en ny norsk grønn nÌring, Regionplan 2020. 20 Worldwide Datacenter Census and Construction 20142018 Forecast. IDC, 2014.
2013 Census Report. DCD intelligence, 2013. Investment in Networks, Facilities, and Equipment by Content and Application Providers. Analysys Mason Report, September 2014.
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2. Understanding data centers The digital revolution changing the entire world, as we know it today, has begun. This transformation creates huge amounts of data. The emerging European single market is one of the key drivers behind this growth. Numerous new data centers are built to serve the growing need for digital infra-structure. In this chapter we aim to establish an understanding of data centers and the environment they operate in.
THE DATA CENTRE RISK INDEX The Data Centre Risk Index (DCRI, see Figure 1) is an assessment of macro level factors that may cause downtime for servers and data centers. The latest issue, published by Cushman & Wakefield, HurleyPalmerFlatt and Source8, rates Norway the 8th least likely country for data center disruptions. While Norway has climbed 4 places from 2012, it is still surpassed by Sweden, UK and Iceland who might be direct competitors in Northern Europe. Nevertheless, Norway is still considered a low-risk country.
Figure 1: Data Centre Risk Index weightings of factors
Source: Data Centre Risk Index 2013
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The index consists of 13 factors, which are weighed according to their relative import. Among the most important factors are Energy costs, Bandwidth and Ease of doing business, while Population education level, labor costs and Sustainability are ranked the least critical. The complete list can be found in the figure below.
When wholesale colocation is discussed, it typically means a tenant leases a fully-built data center space24. Often the tenant is then responsible for handling all IT operations in that space. The tenant also takes the role of securing financing, developing the site and looking for customers. Wholesale solutions apply when the customer requires a lot of space and power capacity. Wholesale solutions also permit a high degree of customisation. One data center thus houses several applications. The number of employees is higher than with in-house solutions. Examples of wholesale data center operators are Colt DRT and Coromatic.
The DCRI is an important tool in assessing data center establishment, and is likely crucial guidance for potential investors, but also for regions seeking to attract investors. Both the Google- and Facebook reports make mention of the index. Finland has used their score in the ratings to highlight their position as the country with the lowest likelihood of a natural disaster. Norrbotten region in Sweden has gone even further and has announced their ambitions for Sweden to climb to the very top of the rating.
Colocation providers handle the building space and facilities (cooling, power distribution, network connectivity and so on) aspects of the data center. Customers only need to provide the servers and software. This approach ranges from slots in racks to larger spaces for several racks. Companies can thus retain control of their IT infrastructure without building an in-house data center: selecting and purchasing a location, construction or refitting of a building, etc. These solutions usually have the highest amount of employees per MW, but also are smallest in size, investment and effect. Typical operators here are TelecityGroup and Equinix.
THREE TYPES OF DATA CENTERS There are three types of data center- and online storage solutions with different needs. A regional strategy for attracting data centers should ideally be tailored to the potential client’s needs. We therefore seek to give a short overview over different types of data centers and their requirements. In-house data centers are the biggests facilities with an output of over 5 MW. The company that uses the data center also owns and runs the facility. This permits the user full control over all servers and the chain of distribution. The relative size of these data centers allows for an economy of scale, and usually has the lowest number of employees per MW. Apple, eBay, Amazon, Google and Facebook operate this kind of data center23.
A MEASURE OF EFFICIENCY
Länsstyrelsen Norrbotten: Strategi för att skapa en världsledande teknikregion i Norrbotten för klima-smarta effektiva datacenter, 2014.
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A commonly used denomination for describing a data center’s efficiency is the power usage effectiveness (PUE) ratio. Created by The Green Grid, a nonprofit industry consortium dedicated to promoting effective and resource efficient IT-ecosystems, PUE quickly became one of the most important indicators of how ‘green’ a data center actually is.
Markley Group: Retail vs. Wholesale Colocation. http://www.markleygroup.com/retail-vs-wholesale-colocation/
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PUE is an expression of the total amount of energy supplied to the data center divided by the amount of energy used to power the actual equipment, like servers. An ideal data center, i.e. a facility with no energy consumption for cooling, lighting, battery backup, etc. would have a PUE of 1.00. According to Uptime Institute, the average PUE in 2007 was 2.525. For every 2.5 watts that were consumed by the facility as a whole, the actual server equipment used only one watt. The industry’s PUE has since decreased and Google now measure an average PUE of 1.12 in their facilities across the US, Europe Asia and LatinAmerica26.
from electricity tax. IKT Norge has strongly and persistently advocated exempting the data center industry from the tax, and seems now to have succeeded. The Norwegian TSO Statnett is currently planning to build interconnectors to Germany and UK. Currently there are discussions whether to include fiber in the main cable. The extra expenses associated with integrating fiber are considered small27. As mentioned earlier, there are no major data centers in Norway. At the moment, there are a few colocation data center sites (a small- to medium-sized solution) in Notodden, Eide (Møre & Romsdal), Luster and the Oslo region28.
Climate plays an important role in energy effectiveness. During the summer months, the Google facilities’ average rises by 0.1. Being located in a relatively cool region, the Luleå datacenter has a PUE of 1.09.
Rennesøy has received some attention lately when the Norwegian bank DNB moved its data infrastructure to the Green Mountain colocation facility on Rennesøy in May 201529. Previously, DNB had been using eight colocation data centers operated by Evry. Evry, in turn, recently opened Norway’s biggest data center in Fet, outside Oslo, housing 30 000 servers30.
NORWEGIAN EFFORTS Norway has been somewhat lagging behind its Nordic neighbors. There are no major data centers established in Norway that can compare with the Facebook or Google sites in the neighboring countries. One of the reasons for this we believe is electricity tax. Until recently, green data centers have not been recognized as an industry that could be exempted
The introduction of the tax exemption and the prospects of direct fiber connections to Germany and UK might be game changers for Norway and remove the most important issues preventing from choosing Norway.
Uptime Institute: Data Center Industry Survey, 2013. Google: Efficiency: How we do it (2015) http://www.google.com/about/datacenters/efficiency/i nternal/ 27 Datasentre – en ny norsk grønn næring, Regionplan 2020.
Invest in Norway: Data centre sites in Norway. http://www.invinor.no/no/Industries/Green-IT/kartog-liste/ 29 DNBs omfattende flytting av data var vellykket: http://www.tu.no/it/2015/05/25/dnbs-omfattendeflytting-av-data-var-vellykket 30 Nye datasentre i et klimaperspektiv, Minister of Climant and Environment, 13th April 2015.
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3. Case studies In this chapter, we aim to demonstrate the impact data centers can have on regions that have realized the potential of data centers. Google turned a closed paper mill in Hamina, Finland, into a modern data center. The data center construction and operation generated a significant impact on the local economy through employment, increased consumption and tax revenue. The same can be said about Facebook’s data center in Luleå, Sweden.
A reliable power grid and renewable energy
Robust fiber infrastructure
Cold climate and
Low risk for natural disasters
National commitment and investment
Local competence and an ICT-trained workforce.
Most of these factors can be found in other parts of Northern Europe as well and are not exclusive to Luleå. In addition, there was available competence from local process industry and an established (yet, declining) hi-tech industry cluster31. Such competences reduce the operator’s risk for production problems32.
LULEÅ AND FACEBOOK In 2013 Facebook established its first data center in Luleå, Sweden, investing approx. SEK 1.5 billion. Since April 2014 Facebook has been in the process of constructing their second data center on the site. So why did Facebook choose Luleå?
FACEBOOK’S IMPACT ON THE LOCAL ECONOMY
Facebook sought to establish a green and efficient data center outside the US, as early as 2010. Sweden presented itself as a natural choice early on, mainly due to Business Sweden’s proactive role in promoting Sweden as a suitable site for data centers, highlighting low costs, and high availability of land and power. Business Sweden made their first visit to Silicon Valley in 2009 to discuss the possibility of establishing a presence in Sweden. The organization has since served as an intermediary and a channel for communication between Swedish regional initiatives and Facebook. A total of 22 regions participated, whereof four regions were taken into serious consideration. Boston Consulting Group explain why Luleå was chosen as the optimal site:
Boston Consulting Group in their report estimate that Facebook has spent a total on SEK 3.75 billion on its first data center. Hereof SEK 1.5 billion were spent on local businesses, mainly construction work, logistics, mechanical and electric work. The main part of the work force needed to assemble the data center was local. When external expertise was needed, they were flown into Luleå, generating revenues in lodging, food and retail purchases.
Regional dynamics in non-metropolitan hi-tech clusters, Teräs & Ylinenpää, 2012.
Etableringen av Facebooks europeiska datacenter i Sverige och Luleå. Rapport Tillväxtverket 0170, 2014.
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Considering both data centers, the second one expected to be operational in 2018, Facebook is estimated to annually invest SEK 315 million in their Swedish data centers.
Google has made efforts to increase local participation. Few companies in the Kotka-Hamina region were used to dealing with a global multinational and few knew how to bid for work on such a giant project. Google joined the local Chamber of Commerce and began reaching out to increase the number of local subcontractors. The first building was to a large degree bought from outside, but after that more and more services have been bought from Finnish companies.
Not considering the financial aspect, the investment has also led to a significant development in the region. Working on the data center project, a network of regional companies, academics and government stakeholders has evolved. Luleå Technical University has both increased its competences within relevant sectors, and has seen a substantial increase in student applications. Additionally, the Facebook investment has put Luleå on the map for potential customers, and the region is now aiming to establish itself as a preferred site for future data centers, the goal being a total of 20 data centers in Northern Sweden33.
Employment in running the data center has also increased. As of 2013, some 230 people, mainly locals, were employed at the datacenter in full time and contractor roles across engineering, technical work, security, food service, and buildings and grounds maintenance. The impact on local and national economy has been considerable. The steady jobs that were created in the data center operations generate an estimated EUR 11.8 million in wages annually, boosting the local economy through consumption and tax revenue. Furthermore, the project-based construction work generated an annual wage sum that has been estimated to vary from EUR 38.5 million to EUR 69.3 million34. In comparison, the city of Hamina spent around EUR 48 million in wages in 201335.
HAMINA AND GOOGLE In 2009, after discarding Iceland as a potential site, Google purchased the former Summa paper mill in Hamina to build a major data center that contributed to considerable development in the region.
The construction of the data center also generated jobs, not only for the workers who are building the data center on the site, but also in the supply chain providing goods and services for the construction. Based on industrial input-output statistics36, employment of 1800 workers in construction generated employment for an additional 1800 people in the supply chain.
GOOGLE’S IMPACT ON THE LOCAL ECONOMY The first phase of construction began in 2009 totaled EUR 200 million. After announcing several more expansions, the total amount of investment to Hamina data center amounted to EUR 800 million.
Länsstyrelsen Norrbotten: Strategi för att skapa en världsledande teknikregion i Norrbotten för klima-smarta effektiva datacenter, 2014.
Estimations based on Google data and statistics from Statistics Finland. 35 City of Hamina budget figures for 2013. 36 Statistics from Statistics Finland.
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4. Strategy – At The Global, National & Regional Level In the previous chapters, we have established what data centers are, what they require and how regions can profit from hosting data centers. In the following chapters, we will provide input towards a strategy for the Agder counties in order to attract investors.
At the global level, we recommend a clear marketorientation, i.e. finding and approaching potential clients and creating a narrative of Agder as a successful and attractive region. We recommend that local clusters and success stories be incorporated into the narrative, as well as high-ranking officials from the Agder region, and possibly Norwegian government as well.
This chapter is meant to provide an input into the most important issues at the global, the national and at the regional level, which we believe need to be addressed. We want to focus mainly on the ‘what’ and not the ‘how’. In those cases where we do recommend a specific procedure, we intend to use this as an example of how issues can be tackled. We propose that the region’s strategy be divided into three areas: the global arena, the national level and the region itself.
At the national level, there are some issues that need to be addressed. Some of those have already been solved or are in the process of being solved; other issues have found their way on to the national agenda, while other areas can still be improved. The main goal here is to remove bottlenecks and to make Norway more attractive to potential investors. At the same time Agder needs to position itself as the number 1 region for data centers in Norway
A three-fold strategy
A Global Effort
Finally, there are a few regional elements we would like to discuss. One of these will be what we call Plug & Play, making establishing a data center as easy as possible, and signaling appreciation for a potential data center. Clusters will play a role in the strategy as well, both in regards to existing clusters and the possibility to develop a new cluster centered around a potential data center. Finally, promoting R&D should be high on the agenda. There is a potential for streamlining regional competences and financing mechanisms.
The National Position
Based on the elements in this strategy we formulate a range of recommendations in the last chapter. We believe that these recommendations in concert will work in the region’s favor in attracting green data centers.
Regional Business Development
Source: Oxford Research
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A GLOBAL STRATEGY The following section discusses what we believe are key aspects at the international level for attracting data centers. Oftentimes developers of public business strategies focus on eradicating so-called bottlenecks, believing that businesses and investors will come by themselves. We believe a comprehensive and successful strategy for attracting data centers must include active and targeted marketing of the region, as well as a clear narrative of the region as a businessfriendly location for data centers.
Looking for investors As mentioned above, a successful strategy for attracting data centers needs to focus on attracting investors who are willing to build data centers, in addition to removing bottlenecks. As a first step towards attracting investors, there must be a certain level of awareness of Norway as a potential site for data centers. This can be achieved by targeted marketing towards investors, by participating in international conventions and by showing a presence. Here the Swedish regional investment company The Node Pole seems to set a good example. Putting Norway on the map should not pose the biggest challenge: both Denmark, Sweden and Finland have already been put on the map by their data center investors. The case of Iceland (see box) shows that this strategy can be quite effective in being noticed. However, this is not sufficient, as the case shows. We will therefore discuss further strategies in the next section.
The needs of a data center As discussed in previous chapters, data centers have needs that determine where operators choose to establish their facilities. When those needs are not met or when there are significant hurdles to establishing a data center, we speak of bottlenecks. These bottlenecks should be addressed quickly. At the same time, we know that needs and hurdles may change over time.
The case of Iceland Iceland had been promoting itself aggressively and lined out its advantages and will to attract data centers to potential investors, among which was Google. This initiative made Iceland a veritable contender during the selection process, until Iceland was discarded in favor of Finland. The main reasons for choosing Finland over Iceland were better internet connectivity and relative safety from natural disasters. Nevertheless, the case of Iceland demonstrates how targeted and consistent marketing helps putting a potential, but rather unknown location on the international data center map.
From the Google and Facebook experiences, we gather that the current needs of data centers include internet and power connectivity, stable environmental conditions, predictable and favorable regu-lations and a skilled workforce. We believe business agencies should constantly monitor the needs of potential investors and seek to meet those needs. A good example of this has been the initiative to reduce electricity taxes, spearheaded by IKT Norge. But even as such needs are addressed, new requirements and bottlenecks may arise. Spotting those and quickly adapting to the new conditions may be key to being taken seriously as a potential host country or region.
Source: Oxford Research Finland
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Experiences from Finland show that networks and contacts can play an important role as well. Third parties, such as consulting agencies that perform feasibility studies, and agents that facilitate contacts between parties, may play an important role in connecting investors and sites. These agents may provide valuable insights and access to the companies’ decisionmaking processes. We believe that an investment in agents and facilitators may be worth the cost. In addition, it may be fruitful to find influential persons (e.g. board members, former CEOs) who possess a wide network that can be used to the region’s advantage.
investors that their investments in the country are safe, and that the government will do everything in their power to create a fruitful and stimulating business environment.
Story-telling – making facts work for you From what we gather from the cases of Google and Facebook, objective factors, such as the price of electricity, internet connectivity, etc. play an important role in choosing which regions are put on the shortlist of potential locations. However, once on the shortlist, the region competes with other locations that meet the formal requirements as well.
In order to better understand how large corporations make decisions where to locate their branches, we can look to the corporations that have a presence in the region. We recommend approaching the NODE and EYDE clusters and mapping how their members go about when selecting a location. We believe there is much that can be learnt about location selecting from such companies and cluster members.
We therefore consider it expedient to go beyond meeting these objective factors. The region already has thriving clusters in IT (DIGIN), oil & gas (NODE) and process industry (EYDE). The presence of those clusters and their affiliated companies is proof of the region’s business-friendly climate and infrastructure. We recommend using this to the region’s advantage.
The cases of Finland and Sweden demonstrate how public investment agencies are most effective when they work in concert, for instance when both national and regional business development agencies cooperate to secure investments. The Swedish Tillväxtverket describes the region’s stance towards Facebook as a “proactive, professional and engaged welcoming”37.
While Ericsson had a presence in Grimstad, the company cooperated closely with the University of Agder (see below). This can be marketed as one of the region’s success stories. From what we can see, the regional development agency The Node Pole employs a strategy of story-telling towards potential investors: the agency points towards successful data center establishments in the region and uses these as references for future customers. In addition, the agency is explicit about how it is solving potential issues and bottlenecks: In May 2014 the agency released news to the press about Telia Sonera’s intention to increase bandwidth in the region. Four months later a new press release came,
In the case of Google, we see similar behavior: The Finish Prime Minister entered Google’s selection process, signaling to the investors that their needs and interests were top priority to the Finish government. We believe it is best if government officials enter the process early and market the country as a suitable and attractive host. Once a certain region has made it to the top of the shortlist, government officials can re-enter the process in order to assure the Etableringen av Facebooks europeiska datacenter i Sverige och Luleå. Rapport Tillväxtverket 0170, 2014. 37
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stating that the Swedish utility company Vattenfall was planning to make further investments into power generation in the region.
dressed by the regions’ administrations. Again, locally established businesses can play a role here in telling how the region made an effort to eliminate bottlenecks for those businesses, making it easy to follow suit.
We believe the Agder region could employ a similar strategy. Such a strategy of story-telling would include using a few selected, well-respected companies that have established themselves in the Agder region, and having them recount why they chose Agder, how they experienced the local conditions for doing business, and how satisfied they are with the cooperation with local authorities. Ideally, this narrative would include factors that are common for established industry and data centers. For instance, local process industry would stress the stable and inexpensive supply of electricity, while another business with highly competent workforce (engineers and IT programmers) would communicate the advantages of having the University of Agder and an IT cluster nearby.
This is often referred to as the Lemming effect38. Data centers tend to move in proximity of each other. The rationale is simple: it is less risky to choose a site that has already been validated by someone else. We believe existing clusters, such as DIGIN and members of NODE can contribute to creating a perception of Agder as an already validated site. The region will need to take steps to communicate the message effectively. As mentioned earlier, attending conventions may be an important component. Advertising in relevant media may be an additional channel, but will not suffice on its own. Finally, facilitators and agents that establish contacts between potential investors and the region should be considered as well.
It is important to streamline the message the region conveys with the voice of business. In order to have the most effect the same message should come from different voices. Having the region tell one story and the business telling a different story could potentially do more harm than good. Using this strategy should kill two birds with one stone: it impresses the region’s inclination towards inviting business, as well as demonstrating that there are no substantial bottlenecks.
We advise to keep in mind that there are different communication strategies that may work differently. As the case of Apple in Denmark shows, some investors prefer not to be in the public spotlight. Communication with these actors will probably not be established in a public forum. Data center investors who seek to underline their green profile, on the other hand, will be more inclined to respond positively to a public approach.
Concerning the existing bottlenecks, the region should communicate clearly that those are being ad-
10 reasons Apple, Facebook & Google chose North Carolina for their mega data centers: https://gigaom.com/2012/07/10/10-reasons-apple-
facebook-google-chose-north-carolina-for-their-megadata-centers/
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willing to include fiber connection in their planned interconnector, but are not inclined to finance this component, the implication being that someone else needs to fund the undertaking. We suggest the Agder region solves this issue quickly.
A NATIONAL STRATEGY We here present what we believe are key elements in the role national authorities should play in attracting green data centers. This part is structured around three ideas: 1) general conditions that favor data centers, such as the electricity tax, fiber and privacy legislation that need to be addressed, 2) positioning Agder as the number one location in Norway, and 3) the political will to make Norway more attractive. We suggest that the Agder region takes steps to ensure Norwegian authorities follow these principles.
The continued growth of data center demand is dependent on the pace of Europe adopting digitization. In this perspective, one needs to bear in mind that data centers built in Norway don't serve the Norwegian market but rather the greater European market. It is therefore in Norway's very best interest to be the internet’s best friend in terms of working against regulation limiting or hindering digitization and protecting online privacy. Internet-based services such as Gmail and Facebook rely on their users’ trust that data is not being leaked to third parties or shared with state authorities for no reason.
General conditions The national authorities, most notably the Norwegian government have already been contacted and informed about two of the main concerns for green data centers: 1) exempting the data center industry from electricity tax, and 2) making the final decision to include fiber in the interconnectors to Germany and Great Britain, which are planned to be built in 2018.
As demonstrated in the DCRI, the business environment of a country plays an important role. Norway excels in this category. Ease of doing business is considered higher in Norway than in the neighboring countries. A national strategy should be built around continuously improving in this area (see next paragraphs) and communicating Norway’s advantages clearly and consistently.
The first concern has already been addressed. As it became known when the government presented its revised national budget for 2015, Electricity tax will be reduced from 13 øre/kWh to 0.45 øre/kWh from June 2016. Counting the recent reduction, Norway will have a lower fee on electricity than both Sweden and Finland.
On the other hand, CEO of Google Norway, Jan Grønbech, has expressed concerns about The Norwegian Data Protection Authority (Datatilsynet) which he perceives as a threat39. He refers to strong privacy protection as political unpredictability. We recommend addressing these concerns by making clear Norway’s position and what Norwegian privacy protection laws permit, and what is not permitted.
The second concern has not been addressed, yet. The Norwegian TSO, Statnett, has signaled that they are
-Jeg har blitt møtt med nei, nei, nei. Fedrelandsvennen, 29.05.2015. 39
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more data centers. Norway’s task here will be at the minimum to equalize the competitors’ head start. Norway has since experienced two important changes: the electricity tax for data centers will be waived, and prospects of including fiber in the interconnector to Germany are good. These factors will contribute to equalizing the competitors’ head start, given that this is communicated well. In addition, the message should underline Norway’s relative strengths, such as better score in ease of doing business and high political and financial stability.
Positioning We believe that aiming to attract a certain industry requires the Agder region to strategically position itself in order to become the number 1 choice for data center location in Norway. Ideally, when approached by international investors, Norwegian authorities will point to the Agder region as the most suited site. As we see it, positioning oneself in an economic context consists of four steps: 1) finding an available position, 2) delivering quality products and improving continuously, 3) continuously reinventing oneself, and 4) learning by collaborating with the best.
Nationally, Agder will need to become the reference point number one. Ideally, when approaching Norwegian authorities and politicians, they will refer Agder as the most suitable site for data centers. This, of course, requires the region to remove all bottlenecks and to become the most suitable region in Norway. Including fiber in the Statnett-cable to Germany would be one such factor. In addition, the region will need to create the impression with Norwegian authorities that Agder indeed is the most suitable region in Norway. Here, the Bulk initiative in Vennesla can be used to underline Agder’s argument.
We consider the first step to be difficult to undertake. On the international arena, we have to keep in mind that other Nordic countries and regions already have positioned themselves as attractive hosts for data centers. Especially Sweden is exploiting its position as hosts for Facebook in the attempt to attract Figure 2: Finland's PM enters the Slush startup conference in Helsinki, November 2014.
The Bulk-initiative may in fact become the locomotive for the future development in green data centers in Agder. As mentioned before, once Agder is validated as a site, the threshold for others may become considerably lower. It is therefore in the region’s interest to see the Bulk-initiative succeed. We believe the Agder counties’ Members of parliament have an important role to play as well: through these MPs the region can put green data centers and legislation that favors IT-industry on the national agenda. Employing the region’s MPs can become an important step in solving the remaining bottlenecks. Ideally, this will also create the impression with national authorities that the Agder region is the most proactive region in Norway, contributing to positioning Agder as the number 1 choice! Source: Oxford Research Finland, Photo by Jussi Ratilainen.
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As part of this process, the region should look at the national competition and define clearly which are the region’s strengths and weaknesses compared to the competitors. As we see it, Rogaland and the Osloregion are among the main competitors, mainly because they recently have seen data center activity.
Finally, one should seek affiliation with leading players in their fields. By working with the very best, both within the industry and outside the industry, one receives new input and new ideas. In addition, these “best in class”, such as Facebook and Google send a clear signal concerning one’s credibility. Oxford Research Finland’s study on Google in Hamina has shown that local enterprises have integrated new IT solutions as a consequence of having Google nearby. Agder needs to identify the “best in class” and strategically use these connections to learn and to position itself as a credible and attractive country for doing business. Here we see a big potential for the region. This will be discussed below.
The second step will be to deliver high quality products. In terms of potential sites, Agder will have to develop high quality products, but so does the competition. Other “products” that should be of good quality and that will need to be continuously improved, are electricity and internet infrastructure. Especially on the national level, these are political decisions. The Agder region will need to play an active part in ensuring that these and other “products” are improving continuously.
Becoming more attractive
Step three is about reinventing oneself. Standing still means falling behind, a popular proverb says. This rings true especially in the digital industry. Norrbotten County (which hosts the Facebook data centers) have realized this: They are discussing Microsoft’s vision of integrating power production and data center operation into one facility40. It is unknown how feasible this is today, but it demonstrates the degree to which Norrbotten County is inclined to think in new ways and keeps an open mind towards innovation and new trends in the data center industry. The Agder counties need to rethink digital industry as well and be open to new ideas. In addition, the counties need to keep pressure on the national authorities to think in new ways as well.
A report by IKT Norway from 2009 describes an interesting situation: when Lkomm established their data center the same year, no extra funds that could have contributed to the data center establishment were made available by Innovation Norway. No other incentives were given, either. At the same time, Sweden offered 50% financing support for upgrading existing data centers and for building new ones. California offered a USD 500 scrap bonus on obsolete servers in order to stimulate enterprises to upgrade towards greener equipment. The cases of Sweden and California not only give economic incentives to choose these locations for potential data centers, but also demonstrate a clear interest in attracting investors. The same could not be said of Norway.
On the plus side, the region has shown itself to be able to adapt to new circumstances41, for example in process industry, mechanical industry and shipping. This message can be used as a prime example of the region’s ability to adapt to new circumstances.
One part in becoming more attractive is to remove the bottlenecks that at the moment make Norway less attractive than its neighbors. The most important bottlenecks such as the electricity tax are already under discussion. Others are on the national agenda.
Länsstyrelsen Norrbotten: Strategi för att skapa en världsledande teknikregion i Norrbotten för klimasmarta effektiva datacenter, 2014. 40
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Krise, omstilling og vekst, Agderforskning, 2013.
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When implemented, Norway will have Europe’s lowest energy prices for industry. Hopes are that this will contribute to attracting investors. Additionally, other incentives, such as scrap bonuses, R&D-support (see chapter on Promoting R&D) and tax incentives can be considered.
Including data centers and digital business in those kinds of internet presences sends a clear message to potential investors that their industry is a welcome investment, and the industry and its needs are being taken seriously.
Experiences from Norway’s internet presence are somewhat mixed. The main trade information and business matching portal, www.nortrade.com, currently delivers zero hits on “data centers”. This is symptomatic of two things: 1) there are no notable data centers established so far that are suitable for advertising Norway as a host nation, and 2) there are no established businesses an investor could team up with, or follow.
A REGIONAL STRATEGY There are range of factors at the regional level that play an important role for green data centers. The region houses many industries in IT, oil & gass, shipping, process industry, which can be employed to the region’s advantage. At the same time, there are a number of issues that require attention. We here recommend streamlining the whole process to allow for quick and uncomplicated establishment, as well as using existing clusters and R&D structures in the process.
On the other hand, green IT and potential data center sites are listed on the Invest in Norway portal. In addition, some of Norway’s advantages and ambitions are listed here. Still, there are no success stories similar to the Google story to show, except for a few colocation datacenters.
Plug & play – The will to make it happen
Figure 3: Example of a local alliance for “plug and play”
Microsoft’s Windows XP introduced the feature of Plug & play: Connecting a device and having it operational almost instantly, without the need to make adjustments before the device starts to work. We want to borrow the idea and use it in this context. Once an investor signals interest in the region or site, all relevant issues will be solved quickly and without problems. Such issues include:
Construction
Zoning and other permissions
Connection to the grid and infrastructure
The Swedish regional development agency The Node Pole has realized the need to make establishment as easy as possible. This is illustrated by the Alliance of
Source: thenodepole.com/alliance
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subcontractors that play a role in construction and operation of a data center (see Figure 3). In the case an investor signals interest in establishing a data center in the region, all necessary companies for construction are already in place. This allows for starting the building process without delay. Ideally, sites should already be regulated for industry use. Currently Swedish The Node Pole advertise on their web site two available and readily-zoned sites.
cesses are protests and objections that need to be settled. The risk of objections can be minimized if there is a broad understanding and acceptance of the nature of the site and what it shall be used for. We believe that creating consensus around the necessity of zoning such sites for industry and data center purposes will minimize resistance and delay. The issue of consensus applies to other spheres as well: both between political parties and between municipalities. Creating a symbolic unity between the most relevant political parties sends a clear signal to both national authorities and potential investors. At the same time, the level of competition between municipalities should be kept to a minimum. Ideally, such issues are solved early on, before positioning vis-à-vis national authorities starts.
Why Facebook chose Luleå ”After a rigorous review process of sites across Europe, we concluded that Luleå offered the best package of resources – including a suitable climate for environmental cooling, clean power resources, available land, talented regional workforce and supportive business & corporate environment” Facebook on choosing the Luleå site. Emphasis added. Source: Boston Consulting Group (2014).
Another area where regional and municipal authorities can contribute to make the process as quick and easy as possible is in supplying data. Before committing large sums, potential investors wish to have all relevant information available. Such data include internet connectivity and speed, various information about the internet connection speed and latency, power grid, demographics and regional business development projections, etc.
At the same time, regional and local authorities contribute to realizing the project as quickly as possible. Experiences from other industries show that startup time in Norway is higher than in other countries. In wind power, for instance, a typical turnaround process takes 4-5 years, as opposed to 11 months in Sweden42. Planning and turnaround processes must be streamlined in order to make the process from an investor signaling interest in the site to authorities giving the go-signal, as short as possible. As we can see from Apple’s and Facebooks American data centers (see box), acting quickly is key.
In our experience investors, especially those with an American background tend to have clear expectations and requirements which they are used to seeing met. When Apple established its data center in Viborg, Denmark, secrecy was high on the agenda. The company wanted to avoid being besieged by businesses offering their services43. The region should be prepared to hear the investor’s require-ments and make an effort to meet them.
In Norway, zoning is handled by municipal authorities. Such processes open up for many actors to give input during processing in the local administration. Ideally, certain areas are already pre-zoned. As we see it, one of the main sources of delay in zoning proSmart 4H – Forslag til Smart Spesialisering for Nordland, Nordlandsforskning, 2013.
APPLE: Hemmelig oppdrag for Apple i to år: http://www.digi.no/bedriftsteknologi/2015/02/24/he mmelig-oppdrag-for-apple-i-to-ar
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American companies, such as Google, have shown to be careful about local expertise44: They oftentimes underestimate local competences, and tend to bring along their own staff. This is beneficial in terms that this staff will need housing and will boost local consumption. On the other hand, there is local expertise available that the company is unaware of. We believe that making this local expertise visible to the investors will lower the threshold to choosing the Agder region, and will make establishment easier.
Developing a cluster In our experience, cluster initiatives are a good way of attracting investors and kick-starting an industry. We believe that establishing a cluster around the data center’s daily operation may work in the region’s favor. This is strongly related to the idea of plug & play mentioned above. We here focus on how this cluster could look like, based on what we have learned from the cases of Facebook and Google. When speaking about clusters, we refer to a geographical concentration of specialized companies and related companies, R&D institutions, finance institutions, public actors, etc. These actors have established relations with each other and cooperate with each other. A cluster initiative is an effort to establish such a cluster.
Acting quickly Apple’s data center in Maiden, North Carolina, was built within about a year from the time the site was selected. That’s because the county had already developed a plot of land for a data center park. Likewise, Forest City, North Carolina, also had a ready-to-go business park that it made available to Facebook for its data center.
It appears that clusters are forming around the Facebook and Google data centers. The most obvious organizations are the universities that have established close ties with the data center owners, and are adjusting their curriculums to the new investors in the region, thus creating a supply of in-demand competence that keeps the regions attractive for IT companies. In the case of Finland Google coexists with the Playa Game Industry Hub, a network of game developers, hardware manufacturers, suppliers, research institutions and other stakeholders.
When searching for a site, we’ll “find that there are places where it just takes too long to build it,” says a Facebook official. ”My response to them is: “I’m sorry, my development horizon is just not that long.” Source: 10 reasons Apple, Facebook & Google chose North Carolina for their mega data centers, gigaom.com (2012)
We here stress that we do not recommend making larger investments in sites beforehand. The will to develop sites and infrastructure quickly once an investor wants to commit should be communicated clearly, but not prematurely.
In Luleå the Facebook data center is surrounded by companies such as Vattenfall, NCC, Area, Cygate, Cisco, Amazon and Big Data. Luleå Science Park functions as a common arena for meeting and exchanging ideas among these companies and the university.
In sum, these factors should contribute to creating an attractive business environment that may become pivotal in a situation where the region enters competition with other sites.
Finland’s Giant Data Center Opportunity, Oxford Research Finland, 2014. 44
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Existing clusters in the region can have two important functions. As demonstrated above, one of these functions is closely related to marketing the region internationally, and demonstrating that the region has a favorable business climate. Further-more, the mere existence of these clusters, and especially the DIGIN cluster and the potential Bulk-initiative in Vennesla, show that there is a substantial pool of relevant companies to cooperate with.
The cluster is proof of the skilled workforce in the region. We believe the most relevant functions the cluster will be able to offer the data center operator, will be centered around day to day operations of the data center, including repairs, power supply, fiber infrastructure, security, construction, equipment, transportation and catering. A first step towards cluster integration will be meetings between leadership in the respective companies. Both the existing cluster infrastructure as well as meetings arranged by public actors will be able to function as facilitators in this.
Additionally, the case of DIGIN illustrates that the region has a history of housing IT-businesses. When the mobile phone manufacturer Ericsson had a presence in Grimstad, they were closely integrated with the region’s university (more on that in the next part: Promoting R&D).
Public authorities as the municipal and especially the regional level have an important role to play in attracting investors. This, however, must not be interpreted as a reason to abandon the data center once it has been established. Experience from other clusters in Norway and Europe shows that authorities have a role to play, even after the cluster is established. Clusters are typically not completely self-sustaining. Hence authorities may make an effort to keep up activity in the cluster and among cluster member. In addition, public actors can support the cluster by showing continuous engagement in the clusters activities and listening to the cluster members’ challenges and needs.
Additionally, the data center operator could become a member of an existing cluster, for instance DIGIN. The cluster has a wide portfolio of activities that may be of interest for a potential data canter operator. Among these activities we find:
e-commerce
e-health
innovation support
knowledge development in companies Finally, public institutions can play a role in financing R&D and committing resources private enterprises would not commit. A multi-national or even global investor will hardly require public funds for financing research. Nevertheless, financing R&D may create a certain level of activity in the region that may make it more attractive to an outside investor. More on this in the following paragraphs.
We can not say with full certainty that the potential investor will want to join the existing cluster, at least not in the initial stage where trust between companies and the investor has not been built, yet. Eventually, if the investor has established a certain level of trust and the cluster has made clear what it can offer to the data center operator, extended cooperation, or even cluster membership can be considered.
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optimization. Existing research projects and competences may be adjusted to create closer bonds with data centers. There are opportunities in E-health and welfare research, analysis of social media activity during disasters, natural disaster contingencies, etc., where today’s competences can be used to generate new knowledge that may be relevant to data center operators.
Promoting R&D When looking to Sweden and Finland, it becomes clear that local universities are strongly interconnected with the their clusters. In Sweden, a skilled workforce was one of the main reasons for choosing Luleå. In Finland, the local investment agency Cursor, Google and Aalto University cooperate in supporting promising startup companies.
Norwegian research- and development policy is less centralized than in the competing neighbor countries. This may allow for greater flexibility when awarding research stipends, but may at the same time lead to low availability of funds. In the long term perspective, this should be solved. There is however, a short-team solution that can be implemented relatively cheaply and quickly.
The universities profit immensely from the close ties to the American companies: Applicant numbers at Luleå Technical University have increased by over 100 per cent45, and Aalto University are making changes to their curriculum in order to meet Google’s and the surrounding IT-industry’s needs. We believe that the University of Agder can be integrated in a similar manner. This will serve in two ways: Firstly this is in line with the regional development plan’s goal to “strengthen educational and research environments in respect of all fields of energy and technology”46. At the same time, this will contribute to making Agder more attractive for investors47.
There are already a few grants for research and development available in the region. Examples are the Regional Research Fund, Competence Development Fund of Southern Norway, the Norwegian Research Council and Innovation Norway. We know that currently, companies and research institutions have not made use of the available grants and opportunities for funding. This can be fixed relatively easily. As a result, R&D activity in the region could increase, thus giving local enterprises and knowledge institutions better tools to adjust to a potential data center opportunity.
In order to maximize the effect for attracting data centers, the University of Agder should have relevant research- and education programs in place. This was the case when Ericsson had a presence in Grimstad: professors with specialization in mobile communication were hired, and there were close ties with the mobile phone producer. Concerning data centers, the existing competences are not as well-developed. This can be solved, however, by making adjustments and shifting focus in existing research projects, as well as making long-term commitments to the industry by hiring research and teaching staff with relevant competences. These may include data storage and transmission protocols, but also energy- and cooling
The region of Agder has seen radical shifts in the local industries. Traditional industry, such as represented in the EYDE-cluster, has faced tough challenges. Through innovation and development of new technologies, the industry has managed to remain competitive and relevant. This exemplifies the potential in the region to quickly adopt to new circumstances.
Digital Infrastructure and Economic Development. Boston Consulting Group, 2014. 46 Regional Development Plan Agder 2020, 2012
Regional dynamics in non-metropolitan hi-tech clusters, Teräs & Ylinenpää, 2012.
45
47
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A springboard for green datacenters in Southern Norway
5. Recommendations In this section, we present in short our recommendations to the counties of Vest- and AustAgder. These recommendations are based on the elements we discussed in the previous chapters and are inspired by experiences from regional development and investment and the cases of Facebook and Google in Sweden and Finland. The main recommendation is to stand as a unified region, and to act quickly.
Once this view is established, it will be easier to convince national politicians and officials to recommend and market Agder internationally. Lowering the electricity tax is one such step. Including fiber in the interconnector to would be the next step in distinguishing Agder from the competition. At the county level, this should be made a top priority. This includes active marketing of the region and using agents and facilitators. When meeting with potential investors, the region should send high-ranking personnel, which will underline the message that Agder is taking the issue seriously.
ACTING QUICKLY, COMMUNICATING CLEARLY
The Bulk-initiative in Vennesla may become the region’s magnet, the first actor to validate the Agder region, and to send a signal to potential investors that Agder is a suitable location for green data centers. Further development in data centers in Agder may be dependent on the success of the Bulk-initiative.
We believe that acting quickly is key. In order to do that, the municipalities, political parties and regional and municipal authorities need to reach a consensus about data centers and where to locate them, and work together in the same direction. We believe the whole region should be convinced of the value of green data centers, and contribute to realizing the ambition. This includes the University of Agder and Agder Energi and Sira-Kvina kraftselskap.
The communication strategy towards potential investors can be built around local success stories: established clusters and multi-national companies that have chosen to establish offices in Agder. Having them recount why they chose Agder in the first place, may validate the region in the eyes of potential investors.
Considering that affordable and available energy is key for green data centers, we recommend the local power companies take a proactive role towards energy infrastructure and potential investors. We understand that these energy companies have much to gain from green data centers, which represent flexible and reliable customers.
Another component in the communication strategy should be a clear message what Agder can offer potential investors: A thriving business region, an adaptive and innovative environment, with the University of Agder at its center, low hurdles for quick establishment, stable and cheap power supply, and quick internet connectivity.
We underline the importance of quick and decisive action. At the same time, we advise against acting solo. Municipalities should not take unnecessary financial risks.
In addition, the communication should be tailored to the potential investor’s interests. Some may prefer open contact; some may prefer a low profile. The
Potential investors need to perceive Agder as the number 1 location for green data centers in Norway.
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A springboard for green datacenters in Southern Norway
content of the message should be adjusted accordingly. In any case, the communication should make clear that there are no relevant bottlenecks for establishing data centers. We recommend making use of the industry’s own language, such as the language used in the Data Centre Risk Index, including power usage efficiency (PUE), latency and business friendly environment.
How can sceptics in the region and in municipalities be persuaded to support the green data center initiative? This includes finding potential opponents and entering into a dialogue with them long before such disagreements can become an issue that is detrimental to the process.
Financing fiber
QUESTIONS THAT NEED TO BE ANSWERED
As we see it, a fiber component in the interconnector to Germany may be one of the main advantages of the region, and is this crucial to positioning Agder as the number 1 region in Norway, and potentially The Nordic Region. At the same time, the Norwegian TSO Statnett has signaled a lack of interest in financing the fiber component. It is our belief that the investment should be made in order to realize regional development plan’s ambition to establish large scale green data centers in the region.
There are some unanswered questions that must be addressed in a future strategy. Among these are:
Who will be the initiator and main contact person for potential investors? This needs to be a person of high legitimacy both in the region and towards investors. The person must be able to create local, regional and national support for the initiative.
On possible model for financing would be to start up a joint company with shared ownership between the regions and possibly municipalities as well. This joint company would have the task of securing funds for the fiber component and operating the fiber connection. As we understand, the Skagerrak IV fiber component is in high demand48.
What resources are the counties and municipalities willing to commit? We recommend making available funds to initiate and sustain R&D in the region, establish a fiber connection (see below) and sustain clusters.
Datasentre – en ny norsk grønn næring, Regionplan 2020. 48
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