Iceland Attracts New Business With Clean Energy0

Mark Halper | Thu Apr 19 2012 |

Fishing has long been a vital industry in Iceland. It’s so imprinted on the national psyche that it’s hard to find anyone untouched by it among the tiny population of 320,000. Even Foreign Minister Össur Skarpherdinsson likes to say, “I consider myself to be an old fisherman.”

Skarpherdinsson now hopes his angling skills will come in handy as he and Iceland cast about for something decidedly different from the customary haul of smelt, herring, cod, mackerel, and other creatures.

The North Atlantic island is trying to reel foreign industry on to its shores to prop up an economy still recovering from the 2008 banking collapse. For bait, it is dangling what no other country in the world can—100 percent renewable electricity.

Renewable unleashed

Iceland generates all of its power from hydro and geothermal sources. There’s not a coal- or gas-fired station in sight. No nuclear reactors, either. In a global economy that increasingly values green, Iceland hopes to lure businesses from across the metals, chemicals, media, agriculture, and IT industries.

“This is the beginning of a new chapter in the industrial life of Iceland,” says Skarpherdinsson. “The greatest advantage in the future will be green, renewable energy with no carbon.” He was speaking to journalists in Reykjavik in February while saluting an early catch: British data hosting company Verne Global.

By locating in a climate where annual average temperatures range from around freezing to 56 degrees Fahrenheit, Verne is slashing the amount of electricity it uses to cool its data center.

Verne recently opened a data center in a sprawling former NATO munitions warehouse on a windswept lava plain in Keflavik, 29 miles southwest of the capital, connected via subsea fiber lines to Europe and the U.S.

Verne is just the sort of foreign presence that Iceland hopes will alleviate an unemployment rate of 6 percent—astronomical in a land accustomed to one percent.

That’s cool

But “green” is just part of the power play. So, too, is the price of electricity, which CEO Hordur Arnarson of state-owned utility Landsvirkjun calls “the most competitive price in Europe.” Landsvirkjun intends to keep it that way too. It locks in rates for a dozen years or more—enticing amid volatile fossil fuel prices.

It all helped bring Verne.

“We are able to serve the international community from our 100 percent renewably powered data center,” says Verne CEO Jeff Monroe. “What we have done as a first mover here in Iceland is we have secured a long-term power contract with Landsvirkjun that is substantially better than what you’ll see as the published rate—and you get green without paying the premium.”

For Verne, Iceland also literally provides a chillingly good natural advantage: year-round natural cooling.

By locating in a climate where annual average temperatures range from around freezing to 56 degrees Fahrenheit, Verne is slashing the amount of electricity it uses to cool its data center. That delivers a financial benefit as well as an environmental one. Verne is able to cool its computers using only natural air circulation, eliminating the refrigeration systems that can account for over half of a data center’s power usage.

But creating growth isn’t as simple as it sounds. Growth in general contends with Iceland’s strong environmental movement.

Verne itself is beginning to sign customers. UK telecommunication and network services firm Colt is building a “point of presence” at the data center, tying it into its private network for companies in 21 countries. Other Verne clients include Jersey City-based Datapipe, an IT services firm that supports financial and technology industries in New York and London; CCP Games, the Icelandic creator of the popular game EVE Online; GreenQloud, a Reykjavik cloud computing services firm; and Opin Kerfi, an Icelandic systems integrator.

The company is expecting business to continue to perk up late in the year, when Iceland is scheduled to fire up an additional—and faster—subsea fiber line to join those in place and run by Icelandic firm Farice. While the Farice connections to Europe and North America are fast enough for many applications, they cannot support certain super fast transactions, like derivatives trading.

Raging debates

This isn’t the first time Iceland has attempted to lure foreign business. The country has had limited success diversifying away from fishing, aluminium, and tourism—their three big industries.

But creating growth isn’t as simple as it sounds. Growth in general contends with Iceland’s strong environmental movement.

Icelanders don’t agree on how much more energy they can tap from the country’s vast geothermal and hydro sources. Many people believe it’s at least two times more and could be much higher. Even among growth enthusiasts, strong-minded localities fight each other to land new business. Politics is as fiery as the volcanoes on this island where Jules Verne sent his explorers to the center of the earth.

One grand Landsvirkjun vision calls for exporting electricity to Europe via a sub-Atlantic high voltage line. For now, Iceland is focusing on hooking in foreign companies.

“We will do everything within our means to make this a story of great success,” says Skarpherdinsson. The old fisherman hopes that his vision turns into a tale of the big one, not of one that got away.

Photo from Flickr by Pocius.