Electricity Price Arbitrage In Cloud And Other Data Centre Location Decisions

Location, location, location are said to be the most important issues in choosing a retail store. In deciding where to locate a large data centre other considerations are also important, such as:

• The availability and cost of highly skilled staff to install and manage equipment
• The regional or country legislation which requires certain applications to be based in specific countries
• The cost and availability of property suitable for the proposed facility
• The availability and cost of networking pipes
• The ambient temperature of the site, especially if you’re considering fresh air or other alternative cooling techniques

I’m very grateful to David McCann, Microsoft’s General Manager of its Windows Server Division, who spoke at last week’s AMD Server Summit in Austin. He points to another important criterion – the cost of electricity. In a recent two day meeting in London he met with 6 customers running very large operations with tens of thousands of servers, who debated which countries were best to locate their future data centres. They decided that low cost fibre allows a distributed approach (although David himself mentioned that there is no ‘homogeneous latency’ and that there is some variation in countries such as Manila, India and Israel). Server prices continue to decline, or at least price/performance increases steadily with new designs such as AMD’s. Individual salaries for skilled staff can be high, but in some large ‘lights out’ data centres you don’t need very many (I discovered just 12 in HP’s Wynyard facility for instance). David believes that the USA has the cheapest electricity in the World, but other countries are more challenged. In the UK for instance the slowness in replacing coal-fired power stations is like to drive prices up by 25% a year for the next five years, according to the Economist. He claims quite rightly that the top 500 companies in the world need to think about the cost of power.

Obviously the price and availability of electricity has already played a role in building new facilities: Google’s decision to use hydroelectric power in Colorado wasn’t just about CSR and Iceland has been promoting its advantages in geothermal power and cool ambient temperatures. I believe David is right in predicting that electricity price arbitrage will play a growing role in decisions about where to place new data centres, whether for Cloud Computing or other purposes.