Factor endowment theories of trade and investment

by on October 30, 2011 at 7:23 am in Economics, Web/Tech | Permalink

The northern Scandinavian landscape is dotted with fjords, lingonberries and, if you believe some locals, elves. But another sight is increasingly common on the Arctic horizon: data centers.

Drawn by the promise of lower electricity costs, a growing number of tech companies are harnessing the region’s abundant cold air to cool their servers, cutting expensive air-conditioning out of the equation.

Facebook, the latest tech company to take the polar plunge, announced this week that it will build a data center just south of the Arctic Circle in Lulea, Sweden, where the average low in January is 3 degrees Fahrenheit.

…There are “overwhelming financial advantages” to building in the far north, according to Rakesh Kumar, an analyst with Gartner. Utilizing free outside air can result in “tens of millions, if not hundreds of millions [of dollars], of savings per year” for each site, Kumar said.

The full story is here.  For the pointer I thank Steve Silberman.

1 cjc October 30, 2011 at 7:30 am

I suppose this means (without the CNN article touching on it) that it’s relatively cheap to run a big honking fiber optic cable from the arctic circle to Stockholm. Factor endowments aren’t useful if they can’t be exploited because of, say, geography.

2 Kit Sunde October 30, 2011 at 8:41 am

There are already plenty of fat honking cables in the ground all over Sweden that they can grab.:) Luleå in particular has one of netnods (http://www.netnod.se/) six internet exchange nodes.

3 Rahul October 30, 2011 at 7:37 am

Build in Iceland instead? Then there’s cheap power as well.

I wonder what wage-premium needs to be paid to systems administrators to relocate to the artic circle from, say, Cupertino CA. Silicon chips love 5 F but people sure don’t.

4 Ryan October 30, 2011 at 7:38 am

Most of the sysadminning can be done remotely.

5 Hasdrubal October 31, 2011 at 3:08 pm

Forget sysadmins, how long will it take telco to dispatch out and splice a cable that reindeer gnawed on?

6 Jan October 30, 2011 at 9:24 am

Much colder and cheaper in Scandinavia.

How many people actually need to be onsite to service the data centers? I would guess very few.

7 Michael October 30, 2011 at 12:35 pm

Maybe that’s a job the elves can do.

8 tkehler October 30, 2011 at 3:08 pm

Iceland isn’t cold enough? Also, I think it’s too rocky — laying the cable is too expensive.

In Denmark, admittedly not cold enough compared to Finland, Sweden and Norway, all transmission lines are buried. But the Danish soil is pretty loamy and soft compared to its rockier northern Scandinavian neighbours.

9 Patricia Mathews October 30, 2011 at 7:39 am

Let’s hope they can stay ahead of global warming.

10 EdwardBurke October 30, 2011 at 12:28 pm

–which would also be to ask: how much heat do these centers send into the atmosphere? Reducing the expense of power generation to equip air conditioners is a fine thing, doubtless, but the data centers still generate thermal radiation, no?

11 joshua October 30, 2011 at 3:34 pm

They’re going to generate that either way, no? It’s the lack of air conditioning that’s creating the marginal emissions savings here.

12 pjt October 30, 2011 at 3:47 pm

Quite. In warm places, say California, you both generate the heat that comes directly from computers *and* you have to waste electricity and generate more heat to generate the cooling. In Northern Scandinavia, you can simply blow the heat into air or water.

Additionally, the excess heat generated by a data center can usually be utilized directly as heat by surrounding houses.

This is why the EU light bulb ban is rather stupid for Scandinavia. The heat is used rather well most of the time when you need to heat up your houses 9-10 months in a year.

13 Ronald Brak October 30, 2011 at 7:09 pm

With reguards to light bulbs and heating, it can be several times more efficient to burn gas in a central heating system to warm a home than to burn it at a power station and then use the generated electricity to heat a house through a lightbulb or other means. And if the building has a heat exchanger it is much more efficient to run that than to use electrical resistance heating. That said, there may be a switch to electrical heating as smart meters make it easy to heat a home when electricity prices are low.

14 joshua October 31, 2011 at 8:14 am


Thanks. Was just wondering about that while feeling the heat from my “inefficient” light bulbs on this cold morning.

15 Tomasz Wegrzanowski October 30, 2011 at 7:49 am

> Data centers are among the most ravenous energy eaters around. They were responsible for about 1.3% of the world’s electricity use in 2010

That’s hardly “most ravenous” kind of percentage…

16 Steve Fritzinger October 30, 2011 at 11:01 am


Given all the things we use electricity for, for any one use to take 1.3% is pretty amazing.

One reason data centers use so much power is that most of them built through the mid-2000s were energy hogs. We’d build enormous empty rooms, refrigerate the entire room, fill it with servers running at 5% to 20% of capacity and then leave the lights on 24×7 and complain when we ran out of power and cooling. That resulted in a Power Usage Efficiency (PUE – basically how many watts of power you have to supply to get 1 watt to the servers) of 2.5 to 3.

In the last several years, we have gotten much, much more efficient. In a modern data center, we only cool the individual racks of gear, take great pains to make sure hot exhaust air never mixes with the cooling supply and use ambient air whenever possible (hence the advantage of being at the Arctic Circle). That’s gotten PUEs down to 1.1 or less in a really well built/well run data center.

Plus we can now use “virtualization technology” to keep the servers running at 70% to 90% capacity. That means we have to generate a half to a third as many watts of power to get one watt to the servers and we get 3 to 5 times more useful work out of each watt.

17 joshua October 31, 2011 at 8:13 am

And don’t forget about the electricity savings from whatever physical activities the contents of the data centers are replacing.

18 Dennis October 30, 2011 at 8:00 am

103 million SEK (about 15 million USD) from the tax payers probably didn’t hurt.

19 Andreas Moser October 30, 2011 at 8:08 am

And you can ski to work.

20 Urso October 31, 2011 at 10:58 am

Only one way though.

21 IVV October 31, 2011 at 2:13 pm

Downhill! Both ways!

22 Becky Hargrove October 30, 2011 at 9:23 am

What does this say about the additional costs of air conditioning in the south? On a cool morning in the north sometimes all one has to do is put on a sweater, at some point the migration may start in earnest.

23 Tom Murin October 30, 2011 at 9:48 am

They save a lot on air conditioning. But how much do they pay for heat? I guess the heat from the servers probably cuts down on this a bit.

24 Peter H October 30, 2011 at 10:58 am

They don’t pay for heat. Computers run great in the cold. The only heat is for the 1 1000th of the datacenter where humans actually work.

25 Bill October 30, 2011 at 12:30 pm

A little curious here.

1. Do data storage centers get hotter based on usage (accessing), or is it just storage? If it is accessing which causes the heat increase, would data centers which store photos, for example, have a different heat profile (and or energy usage) than a center which does search, like Google. If there is a difference in energy usage and heat generation, will data centers specialize and locate based on end use…ie, will the photo data center (accessed infrequently) be located differently than a search data center?

2. Do data centers locate based on privacy laws or security protection. Would you want to have your data center in the EU, which protects privacy better than the US, or will governments begin to demand that data remain in their country, and not leave it to be stored in another country?

3. Will data storage costs at home continue to decrease, making offsite storage more costly, less convenient or less secure. Or is it the reverse.

26 Anon October 30, 2011 at 12:54 pm

They need to somehow capture the heat energy and turn it back in to electricity. They could use some sort of energy tower concept, where the heat energy is used to circulate water to drive a turbine.

27 clark October 30, 2011 at 11:16 pm

This has been happening for as long as there have been datacenters, since back when they were called “carrier hotels.” First the push was just to find securable space with big open floor plans near the main fiber trunks, so ratty industrial districts near telecom central offices. Then they had to build out new spaces with greater power density, still along the fiber trunks (for reasons of latency) so pretty much next to the bike path or the toll road (old railroad rights-of-way) in the distant suburbs of dc, atlanta, chicago, miami, los angeles. While that was happening everybody realized that tco of datacenter assets was mostly power cost, even after purchase of the equipment and construction of the building and payroll for the persons involved. So off to where power is cheap, next to the frozen-vegetable plant or the aluminum smelter or the nuclear plant (Oregon, North Carolina, Chicagoland respectively) and the last generation of bike-path and toll-road buildings turns into points-of-presence and peering locations for the big companies, and expensive entry-level space for the larger new players or the government. Now cheap power is priced-in so the next step is to Buffalo and points north for atmospheric cooling. After that, who knows? Probably the guys at Google, and they aren’t telling

28 EB Hansen October 31, 2011 at 9:09 am

….they start plugging in to human brains overnight to take advantage of “spare processing capacity” overnight while we are sleeping. Of course humans aren’t perfectly distributed across the globe so that large number asleep during times of maximum demand for storage and processing power. Maybe we see google moving lots of ZMP worker to optimal time zones or investing in sleep aids…

This thread needed more crazed dystopianism

29 Tom Grey October 31, 2011 at 1:01 pm

Why aren’t the data centers’ excess heat being used to heat swimming pools and hot tubs?

I would think heating the water in reverse radiators would allow very low cost aqua parks near a big data center — in Slovakia and Central Europe, there are lots of aquaparks newly constructed near thermal springs to get the low cost hot water.

30 Rahul November 1, 2011 at 1:53 am

It’s not always about the quantity of heat but oftentimes about the “quality” (i.e. temperature). Hot air coming out of a server is at most, say, 60 C. By the time it get’s to the HVAC exhaust ducting it’s much cooler. A typical heat exchanger needs a drop of at least 15 C to get useful heat transfer rates across the metal wall thickness. Heating water to anything more than 15 C would be challenging I suspect.

Overall, it’s hard to do things (economically) with low temperature heat.

31 Dirk Harms-Merbitz October 31, 2011 at 7:09 pm

Why not use sea water to cool? Its pretty chilly here in California.

32 John David Galt October 31, 2011 at 11:12 pm

Cray Research had the same idea back in the ’80s, when they built their HQ in Minneapolis with no heating system. It probably did save them money — until they moved and attempted to sell the building.

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