The UK data centre market could shrink under the government’s Energy Bill, an American data centre power supply company has warned.

The Energy Bill is aiming to decarbonise UK businesses by making them switch from fossil fuels to renewables but this could drive up the cost of energy, as it has done in other parts of the world where governments have enforced similar policies.

Eaton Corporation are concerned that data centre providers will dismiss the UK as a viable destination for new facilities because the government’s green initiatives will drive up the price of energy, which can account for up to half of a data centre’s total running cost.

Data centre servers consume vast amounts of power while carrying out compute and storage operations, as do the cooling systems that are implemented to prevent the servers from over heating.

Cyrille Brisson, Eaton’s vice president of power quality for the EMEA region, told Techworld: “A 10 to 20 per cent rise [in energy costs] would mean a running cost increase of five to 10 per cent for a data centre.”

The cost of electricity in the UK – a country that currently draws on a mix of energy recourses – has been rising steadily over the past few years, from €0.145 in 2010 to €0.179 per kWh in 2012.

Looking elsewhere in Europe, the cost of electricity in France, which has a large nuclear energy sector, only rose from €0.135 per kWh in 2010 to €0.145 per kWh in 2012. Meanwhile, super green Germany saw its prices rise from €0.244 per kWh to €0.268 per kWh over the same time period, after it introduced green subsidies and built up power grids to transport renewable energy.

“If you compare the UK to other large countries, you can see that the gap between France and Germany is yawning in favour of France,” said Brisson. “The cost of switching to renewables is still high. The first technology that could reach grid parity would be solar but that is not ideal for England, while wind, especially offshore, is still costly and its connection costs are very high.”

Even though Brisson argues that the UK’s data centre market will suffer as a result of the Energy Bill, it’s worth noting that some UK companies will always need to have a data centre on their doorstep. For example, many financial service enterprises often need a data centre nearby so they can achieve the low latencies required for high frequency trading.


Brisson also warned that the government’s Carbon Reduction Commitment (CRC) Energy Efficiency scheme – an initiative that aims to cut emissions in large and private sector organisations – could drive data centre operators out of the UK and into countries with less of an emphasis on renewables.

The CRC scheme was intended to reward green businesses but it’s actually having a chilling effect on data centre growth in the UK, claimed Brisson.

Brisson claims CRC is preventing the consolidation of many small and mid-size server rooms into much more efficient, purpose-built data centres.

“The issue with CRC is simple: large data centres that host and run systems for multiple organisations are facing punitive taxes compared to other EU countries for consuming large amounts of energy,” said Brisson. “However, it is by most estimates twice as energy efficient for small and mid-sized companies to co-locate their IT in these shared facilities than host and run within their own premises.”

Organisations that participate within the CRC are required to monitor their energy use and inform the government what type of energy they are using on an annual basis. Participants must purchase and surrender allowances to offset their emissions, with the price of CO2 valued at £12 per tonne.

A spokesperson from the Department of Energy and Climate Change (DECC) told Techworld: “As the CRC will help make organisations more competitive through energy efficiency, DECC does not think that the CRC will encourage participants to offshore their operations.”

“ICT equipment is responsible for about 10% of the UK’s electricity consumption (a figure which is expected to grow), and data centres account for about a quarter of the ICT sector’s emissions. Therefore making our ICT systems more energy efficient is an important part of making the UK more energy efficient and it is essential that this sector is included in the Carbon Reduction Commitment (CRC).”

Meanwhile, global data centre provider Digital Realty, said it doesn’t believe that the CRC will limit growth in the UK data centre market but it does believe there are certain ways the UK government can make it more attractive for operators to open up facilities in the region.

Rob Bath, vice president of engineering at Digital Realty, told Techworld that the amount it costs to transport energy from the point of generation to the point of consumption is holding back the UK.

“This is the piece that is currently being disproportionately taxed in favour of taxing the energy itself,” said Bath. “Whilst the CRC represents a tax based on usage (promoting reduction in usage by usage based taxation) it represents a small proportion of the total energy cost base (circa six to eight per cent).”