Do Data Centres Need A Fracking Dash For Shale Gas?

The data centre industry might be feeling heartened by the Chancellor’s introduction of measures to support the fracking of shale gas in today’s Budget. Earlier this week, a report from 451 Research suggested that US leadership in that field might result in cloud facilities going to America, where cheap shale gas will keep energy cheaper.

George Osborne wants to keep energy costs down, and so he has introduced a “shale gas field allowance” to encourage the development of Britain’s shale gas resources. But the link between cheap energy and a healthy data centre market is not as simple as all that.

Shale gas isn’t green

Firstly, and rather obviously, shale gas is not a green form of energy. “Fracking” (hydraulic fracture) is just a way of extracting more of the same old natural gas, that would be uneconomic to get at by other means.

Fracking is in fact unpopular amongst the green sector, who feel that money should be spent on developing renewables instead. Fossil fuels may still be a necessity, but we have a target to reduce our emissions, so why is the industry getting subsidies?

The trouble is that, whether for lack of will and development at an earlier stage or not, renewable energy sources are still less economic than fossil fuels. The cheap resources of shale gas are available to us and to other countries. If we fail to exploit ours, the argument goes, industry simply moves to where the power is cheapest.

The end result would be the same emissions, only that UK industry declines at the expense of industry elsewhere.

“There is no reason not to believe that we could have an increase in gas availability and therefore reduction in market price in the UK although it will likely be smaller than the US,” says Liam Newcombe of Romonet. “Indeed, gas, due to the low fixed cost of capacity is used as the burst capacity on our grid to meet peak demand and supply shortfall from gusty forms of renewable energy.”

But it’s fracking good stuff

So shale gas is good? Well, it’s not quite that simple. The green sector argues that when budgets are limited, tax incentives for shale gas (or any form of fossil fuel) divert resources from renewables. And building a renewable sector is important, because industry based on renewable energy must take share away from fossil-based business, as the fossil fuels eventually fail.

Considering the specific sector of data centres, it may make sense not to panic about their energy costs as it may be that they are not quite so mobile as the British sector fears. Operators like Rackspace have assured TechWeekEurope that changes in the UK’s energy prices wouldn’t send them away.

“If power cost was the only factor, all European data centres would be in Iceland or Poland,” says Newcombe. In fact, location and latency are more important, and only a small amount of the capacity can go where it likes, he says: “Try and trade on the London Stock Exchange (LSE) from Seattle for example!”

In fact, data centres in the UK are often prepared to pay extra for their electricity to gain marketing benefits. “The majority of operators – the 12 largest ones in the UK – use 70 percent certified green power,” says Emma Fryer, climate change programme director at Intellect, the UK tech industry’s trade body. “They use it as a selling point.”

That says almost the opposite of what the 451 Research paper suggested.

Of course there is room for more than one strategy here. Some data centres may pay a green premium to boost their credentials with customers, while others may take the cheapest power they can get.

The availability of shale gas power will give them that choice – and ultimately, it’s the data centres’ customers who will determine whether green energy is a priority or not.

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