Proximity to new energies the key to DC profitability

Someone will have to remind me again of the benefits of deploying large data centres in the hearts of cities in this day and age. Abnormally high rents, soaring energy costs, a lack of renewable energy sources and limited space to choose from; the financial benefits of building a data centre within a city or thereabouts - compared to rural or regional areas - are close to nil.

Throw in the high dollar and a high minimum wage relative to the rest of the industrialised world and Australia’s competitiveness in the region from an ICT perspective is already under enough stress without the weight of rents and soaring energy costs to contend with.

So why is there never a mention of building data centres in rural or regional areas of low rent and high-renewable, low-cost energy potential? We are a land girt by sea, with a sunburnt centre and high winds galore. If there is one country that should be able to benefit from green energy, it’s this one.

We have rural areas struggling in perpetuity to maintain industrial competitiveness despite attractively low rents and proximity to renewable energy farms, yet we continue to build data centres in the places it’s prohibitively expensive to do so. It’s driving up costs unnecessarily for an ICT industry that faces significant headwinds amid the lower costs from competition in the region and beyond.

We are shooting ourselves in the foot from a costs standpoint, but why?

There actually used to be a very good reason for inner-city data centre builds. When the data centre was new to the industry, building in the thick of the action not only made sense, it was the only practical option.

Back then rents and energy costs were lower, but the biggest concern was latency. Thanks to our reliance on copper for networking, latency - the time delay between when a file is sent and when it is received - was high and as a result the network was slower the further you were away from the data you were accessing. We therefore actually needed those early data centres to be as close to the end user as physically possible.

Then, fibre became the connection that all but toppled the tyrannical reign of distance. We could suddenly send huge files great distances at the speed of light. Meanwhile, industrial rents began to soar across the country and energy costs skyrocketed. The data centre business became expensive and energy and rent became a significant OPEX that understandably drove prices up.

We are now firmly in the era of fibre, and no matter which direction the NBN heads, it’s still set to be a largely fibre-based network - and that does not preclude data centre operators from connecting their data centre to their private network with fibre, independent of the NBN.

With latency becoming an afterthought at best, the one reason we would build a data centre in the heart of the city is becoming less of an issue. Yet we still neglect to build in rural or regional areas because people can’t see past the tyranny of distance, despite everything we’ve just mentioned.

Companies with large-scale data centres in the United States have figured it out, at least the big-ticket companies such as Google, Yahoo, Microsoft and Amazon. These companies have built their large-content data centres in Washington State, with many of them located in a rural town called Quincy, Washington, where several hydroelectric dams exist to deliver low-cost renewable energy.

Further, Amazon built a data centre in Umtilla, Washington, so it could access the renewable energy of the Dalles Dam. These rural locations are up to 300 kilometres away from the closest regional points of presence in Seattle or Portland.

Distance, clearly, is not an issue for those companies when it comes to data - but it remains an issue with the transport of energy, and the closer we are to renewable energy, the better.

So why aren’t we seeing data centre builds announced for, say, near the Snowy Mountains or Macarthur?

The Snowy Hydro generates nearly 4500 gigawatt hours each year of clean renewable energy for the National Electricity Market. It’s in the Snowy Mountains, where rents are far cheaper than anything available in Sydney. And it’s 500 kilometres to Sydney, and just 211 to Canberra - distances fibre can manage with ease.

Macarthur is the home of the Macarthur Wind Farm in Victoria. It is able to generate up to 420 megawatts of renewable electricity. Rents, again, are lower than in the heart of Melbourne, which is just 300 kilometres away.

Data centres are necessary, but many of the costs that come with them are not. We need to stop driving up the cost of our networks by thinking outside the city box.

Image: Anthony McLachlan