The European gas price has skyrocketed due to the Russian–Ukraine gas dispute. Europe gas price surge has led to data center cost rising. The current high price of natural gas has caused the cost of power generation and electricity to rise significantly, leading to a surge in data center and I.T. failure costs. This has caused panic among telecoms, financial institutions, and other businesses with high data demands.
Europe Gas Price Surge Continues in 2023
In the first half of 2022, the highest increases were registered in Malta (271%), Cyprus (117%), Greece (62%), and Ireland (36%). Europe’s energy users are bracing for the latest gas price hikes as the holiday season approaches. The latest data from Eurostat showed that year-on-year non-household gas prices in the first half of 2022 increased in all 25 E.U. Member States that reported those prices. The increase ranged from 67% to 271%.
According to a recent U.S. Energy Information Administration report, Europe’s gas price surge will continue in 2023 and will lead to rising data center costs. When data center operators are forced to pay higher energy bills, they’ll need to find ways to offset that cost by becoming more efficient with their energy usage—and this will affect both their facility design and the hardware they purchase.
This is a significant reason many companies have decided to move data centers overseas. The infrastructure already exists in these countries. There is plenty of power available at a fraction of what it costs in Europe or the U.S. What’s more, Indonesia has some of the best connectivity to North America—some of the cheapest bandwidth can be obtained from specific locations there.
Relocating Data Center to Indonesia
The cost of the data center is a serious problem. The cost will be too high because of the electricity, the land, and the labor. Most of the time, companies use air-conditioning to solve this issue. The air-conditioning is expensive and will consume a lot of power. The main reason for the rising cost is the price hike of natural gas in Europe. Natural gas is one of the leading resources used for power generation in Data Centers.
As data center costs rise in Europe, companies quickly discover that a quick move to Indonesia can save them a lot of money. There’s no doubt that the cost of energy is a significant consideration for businesses looking to expand or relocate their data centers. Electricity is one of the most considerable costs in operating a data center. The quickest and easiest way to reduce costs is to use cheap energy.
In response to the rising energy costs, Germany will be moving some data centers across the sea to Indonesia, where it will save money on fuel and taxes. According to Telehouse America chief executive officer Adrian Cox, based in Frankfurt, Germany’s rising electricity costs threaten to eat up half of the country’s I.T. budget.
The data center is in Jakarta and houses companies like AIG, Amazon Web Services, and IBM SoftLayer. These companies are paying about $0.10 per kilowatt hour for electricity compared to $0.45 per kilowatt hour in Germany. Although Indonesia has been trying to diversify its economy by attracting foreign investments, it’s also been battling corruption issues over the years.
Green Data Center Investment in Indonesia
Green data centers are described as facilities that are built, operated, and cooled to minimize the environmental impact on a host of factors, including energy use, consumable water use, air emissions, and solid waste production. In practice, no universally accepted definition or list of characteristics must be met to determine whether a particular data center is green. The closest thing to a consensus standard is the Uptime Institute’s Tier certification program which specifies levels of energy efficiency requirements.
According to the most recent projections, Europe will continue to experience unusually high gas prices in 2023. The main issue is the continued instability of the European oil market, which has already been trending towards instability.
Indonesia’s need for green data center investment can be attributed to several factors, including a lack of industry knowledge about green data centers and the absence of policies for sustainability. To encourage green data center investment in Indonesia, industry stakeholders need to work together to create awareness and implement procedures to ensure sustainability in the country’s growing economy.
European investors are interested in the Indonesian market, where they see the profit potential. The demand for more data centers has grown significantly in recent years, with the number of internet users in Indonesia reaching 220 million users.
As a result, there is a growing need for more green data center investments. Indonesia has emerged as one of the most appealing destinations for data center operators looking to expand their activities due to its strategic location as a gateway between Asia and Europe. Investors expect the demand for investment capital in Indonesia will continue to rise rapidly.
Key to takeaway
The world’s attention has recently been caught by the dramatic rise of natural gas prices in Europe. The cost of natural gas has tripled over the last two years in several markets, and some individual prices have reached unprecedented levels in historical data. This is already having a significant effect on energy-intensive businesses, but this is also starting to increase the cost of cloud computing services provided to European consumers.
The European gas price surge is not just causing inconveniences in the daily life of European citizens and companies. Still, it may also raise data center costs, as more and more data centers choose to locate in Indonesia to take advantage of low-cost and reliable power supply.
Despite the steep rise in the cost of energy consumption, data center in Indonesia is still a lucrative opportunity for European investors. The future looks bright for data center owners who decide to invest in Indonesia now: not only will they save money immediately by building a new data center abroad, but they will also likely save money when they renew contracts next time due to factors such as bandwidth costs.
The move towards cleaner energy sources is good for Indonesia’s economy and long-term energy planning and development goals.