Iceland, with its glaciers and volcanoes, is often dubbed as the “Land of Fire and Ice”. The nickname is not only an illusion to this island nation in the north of the Atlantic Ocean, but it can also be easily used to describe the current data centre market. JSA Europe media consultant João Marques Lima offers a closer look.
The hosting space in Iceland has been technically “on fire” for a few years now as data centre investors and developers continue to expand footprints to serve clients not only with a national background, but also international brands and logos.
As for “ice”, as IBM’s country manager for Iceland Niklas Lyng Pedersen, explains, the low temperatures the country experiences due to its latitude create the “ideal data centre conditions and enable the appliance of natural cooling all year round, which lowers costs significantly”.
Despite its small population of just under 400,000 people, Iceland has some of the most advanced ICT usage worldwide. For example, according to the World Economic Forum (WEF) Global Competition Index (GCI), Iceland is ranked 26th out of 141 economies worldwide – with a score of 74.7 percent out of 100 (a fall of two place rankings worldwide).
In terms of ICT adoption Iceland is ranked 7th out of 141 economies (including factors such as mobile subscribers, Broadband subscribers, Fixed broadband, Fibre internet & overall internet users). And for digital skills Iceland is ranked second out of 141 economies worldwide.
Iceland has become a major destination for bitcoin mining and HPC (High Performance Computing) users with data centres built to cater for high density applications, benefiting from free air cooling and low-cost renewable power sources.
International connectivity has been an issue with latency due to Iceland’s distance from other European countries making Iceland less attractive for low latency applications but highly attractive for high-density HPC applications.
“Iceland has the perfect weather conditions for data centres, and favourable access to its two primary sources of generating renewable electricity for the data centres, i.e. geothermal and hydroelectric power,” Pedersen says. “Such circumstances improve the [Icelandic] landscape for sustainable energy greatly. Besides promoting sustainability, these two renewable energy sources also facilitate high-cost efficiency and competitive, stable energy rates due to the Icelandic government’s policy in this area.”
The Iceland Offering for Data Centres
Iceland sponsors a favourable business environment, with low corporate tax rates, abundant land for development, and 100% green energy at competitive prices within the tightly regulated European legislative framework.
Iceland adheres to EU regulations, and it is fully compliant with GDPR. New direct investment projects in Iceland are eligible for an investment agreement with regional incentives. EU regulations allow general incentives for SMEs, R&D, and environmental protection.
Additionally, foreign experts hired to work in Iceland are eligible for personal tax incentives where only 75% of the income is taxable for the first three years under certain conditions.
Iceland also possesses the world’s oldest parliamentary government (since 930) and is a politically stable country that adheres to the EU legal framework and has NATO membership — despite having no standing army. The country has one of the lowest crime rates globally and no terrorism.
As mentioned, energy is also a huge advantage on the island. According to Data Centers by Iceland, 100% of the country’s electricity is a sustainable mix of geothermal (30%) and hydroelectric (70%) power generation, and free cooling thanks to the naturally cool climate make for an industry-low PUE range of 1.05 – 1.2.
“A data centre in Iceland will minimize your carbon footprint and reduce long-term costs,” the investment body explains.
Iceland’s state-owned transmission system operator (TSO), Landsnet, distributes power throughout the country.
The country’s favourable location to host data centres has gained a place on the US Government’s International Trade Administration website where Iceland’s data centre economy is earmarked as a “leading sector for US exports and investment”.
The Marketplace
The digital infrastructure monopoly in Iceland, although quite technically advanced, is fairly small compared to other Nordic countries and beyond.
For example, telecommunications service provider Farice has only recently begun work on IRIS, the third submarine cable between Iceland and Europe. IRIS is designed to ensure and further diversify connection security between Iceland and the mainland with a direct connection to Ireland.
The Icelandic and Irish parts of the cable are scheduled to be merged when the cable from Galway in Ireland meets up with its Icelandic counterpart in August of this year – somewhere midways in the North-Atlantic. IRIS is set to be fully operational at the beginning of 2023, taking Iceland’s connectivity to the next level.
When it comes to data centres, the country has three locations which currently house hosting facilities, with the capital Reykjavik being the largest at five sites. The city is followed by Keflavik with three data centres and Vestmannaeyjar with one.
Iceland has a hand full of data centre operators including Verne Global, atNorth, Borealis Data Center, Thor Data Center, DataFarm, and Datacell.
Beyond offering colocation services, one of the biggest selling points of Icelandic providers is the ability to host GPU, CPU and IPU-intensive applications and therefore they attract some of the most data intensive industries to their halls such as financial services, car manufacturers and life sciences.
Verne Global, whose shareholder Triple Point’s Digital 9 Infrastructure (D9) has recently integrated UK operator Volta Data Centres into the Icelandic provider’s portfolio as well as Finland’s Ficolo Oy, and atNorth are the two largest players on the island with their respective portfolios accounting to several dozens of megawatts of IT capacity.
Firstly, D9 acquired Verne Global in September of 2021 for £231 million (US$320 million) and has since announced US$93 million in follow-on expenditures to support the business’ growth.
The company has one 40-acre campus in Keflavik which in 2023 will comprise 40 MW of constructed capacity up from today’s 24MW, out of a possible 100MW on this initial site.
The company’s infrastructure supports some of the world’s most demanding industries, including AI with the most extreme algorithmic workloads.
Secondly, Pan-Nordic data center services company atNorth, acquired by Partners Group in 2022, operates two facilities in Iceland with a combined power capacity of 83.2MW. A third 12MW location is under construction in the north of the country.
Following a similar model targeted at high-intensive workloads, atNorth offers AI and HPC‑as-a-Service solutions that power innovation globally.
In September, the company announced that world class visual content studio, RVX, was tapping into its facilities in Iceland to create on-demand IT and data services. The studio specialises in visual effects and content for film, TV, game and VR projects. Their recent work on The Witcher — Series 2 won a BAFTA and was nominated for an Emmy Award for the ‘Outstanding Special Visual Effects in a season or a movie’ category this year.
Having been involved with producing visual content for major film and TV projects such as Gravity, Harry Potter and the Deathly Hallows, Clash of the Titans, Sherlock Holmes and Everest, RVX’s business growth has been exponential. Continued growth in immersive visual experiences rely on data-hungry applications, which need efficient and sustainable computing power.
This is yet another example of the industries moving into Iceland. With data hosting and processing demand not expected to decline any time soon, business for the Iceland operators will be plenty in the long run.
Elsewhere, Vauban Infrastructure Partners-backed Borealis Data Center’s has recently acquired all shares in Reykjavik DC (RDC) from Íslandsbanki. The RDC data center is one of the most technologically advanced data centers in Iceland covering up to 7.000 square meters when fully developed.
With the addition, Borealis will operate three data center locations in Iceland, in the northern part of the country in Blönduós, at Fitjar in Reykjanesbær, and now in the capital city of Reykjavík and is increasing its capacity to over 60MW available for its clients.
At the end of the day, the abundant supply of power, associated with the fact that this is fairly cheap and produced through climate-friendly means, has Iceland ranking high on green incentives, something crucial in any funding deck.
Its stable government and economy, highly educated population, and overall business friendly and attractive landscape for the setting up of digital infrastructure is set to continue to attract more data centre investment in the foreseeable future.
