With a population the size of Cardiff, Iceland is never going to make it onto the global economic stage.

But Thordur Hilmarsson, the man in charge of promoting the northerly country as a destination for business, believes that Iceland has an unrivalled opportunity to play a role as the powerhouse behind many of those global economies by setting itself up as a prime site for next-generation data centres.

Environmental advantages

Iceland’s key selling point as a data centre location, says the managing director of Invest in Iceland, is its environment.

Managers of data centres in the UK – especially in and around London – are having to source increasingly scarce power capacity while dealing with the excess heat that such facilities generate – all while trying to improve IT’s carbon footprint. But Iceland’s natural resources promise to ease each of these three headaches.

The country is unique in that 100% of its power is provided by a mixture of hydroelectric and geothermal power plants, converting the natural energy of its waterfalls and hot-water geysers and springs into electricity.

“We have 100% carbon-neutral renewable energy sources at competitive prices,” Hilmarsson explains.

Furthermore, it goes without saying that Iceland is cold. Assuming a design that uses external air, this means that cooling data centres is “almost free”, Hilmarsson claims.

Moreover, the existence of electricity-hungry industries such as aluminum smelting means the power infrastructure is already in place.

It was these power and cooling benefits that led to the finding from consultancy PricewaterhouseCoopers (PwC) that in terms of cost, Iceland beat the UK, the US and India as a prime data centre location.

The same report did put Iceland below the UK and US in terms of quality of service. But the main reason for that – that it was unproven – has since disappeared, Hilmarsson says.

Until recently it did not have a functioning commercial data centre on its shores. But in early 2009, Verne Global announced plans for a data centre covering 10,000 square meters. As a measure of pent-up demand, most of that space has already been booked by clients from around the world.

Another shortcoming identified by the PwC report was the lack of high-speed cabling connecting Iceland to the rest of the world.

This is also soon to be remedied. There is now a firm commitment, says Hilmarsson, to provide an extra submarine cable connecting Iceland to Denmark, which will boost data connectivity substantially.

Tackling misperceptions

Despite the forthcoming improvements to Iceland’s data centre viability, Hilmarsson explains, there are still some common misperceptions that might prevent UK businesses from taking the plunge.

“The first misperception is that Iceland is a cold and dark place,” he says. “In fact it is a temperate and stable climate thanks to its proximity to the Gulf Stream.”

“Another misperception is that we are remote,” Hilmarsson continues. “In fact we are just two hours from Europe, and five hours from the US.”

There are real shortcomings to the Icelandic economy, however. The cost of labour, especially for low-skilled workers, is high and the working population small. The cost of living is also relatively high, and as a very small currency the Icelandic krona is vulnerable to fluctuations.

But these are balanced by economic factors such as its stability – the country has enjoyed 15 years of economic growth of around 4.5%. Iceland’s corporation tax is simply a 15% share of profits with no exceptions, and the country is recognised as one of the least corrupt in the world.

Furthermore, the country is eager to host the world’s data centres. It believes it can do so in an environmentally friendly way, while attracting skilled jobs and economic opportunity to its shores.

“Iceland can certainly become a centre for locating next-generation data centres,” says Hilmarsson.