UK government recognises datacentre sector as a key economic contributor

UK datacentre industry has been officially recognised as a legitimate industry and a significant contributor to the economy, growth and jobs

UK colocation operators received government recognition yesterday as a Climate Change Agreement (CCA) for datacentres came into force.

The recognition will help the colocation industry become more energy efficient and increase its competitiveness.

“This is a significant and hugely exciting day for the datacentre industry. Gaining CCA legislation has been a challenge given the unique asset type of datacentres,” said Andrew Jay, Executive Director, EMEA Data Centres, at CBRE and Chairman of the Data Centre Council at techUK – the body that represents the UK IT industry.

“As an industry we do not provide a physical product nor recognisable ‘output’, so until today we didn’t have sector specific CCA targets,” he added.

There are 217 colocation datacentres in 56 areas in UK with as many as 67 of these facilities in London. The UK datacentre market is one of the largest in the world. By 2011, it housed up to 7.6 million square metres of datacentre space, a DCD Intelligence research showed.

“In contrast to other EU countries, the UK has been slow to recognise the importance of a thriving datacentre industry to a country’s economic health,” said Emma Fryer, associate director of Climate Change Programmes at techUK.

“However, that has all changed. The treasury has recognised the need to protect future investment and growth by, at least partially, levelling the playing field for UK operators competing with their counterparts overseas.” 

Climate change agreements (CCAs) are negotiated arrangements between government and energy intensive sectors. Initiated in 2001, approximately 50 sectors are currently covered and CCA participants are offered challenging energy efficiency targets with the incentive of  a reduction or exclusion from liability for specified carbon taxes (CCL and CRC).

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The aim is to ensure power-guzzling industries, such as datacentre and cloud sectors, are minimising energy consumption with energy efficiency measures and helping the UK meet its own carbon reduction targets.  

Datacentres have always been seen as an energy-intensive sector. The targets imposed by the CCA on colocation datacentres will do much to reassure in terms of growth in energy usage by the sector, according to techUK.

According to Frost & Sullivan analysts, demand for continuous power availability has become the most important driver for growth in European uninterruptible power supply (UPS) market. The UPS market will reach $2.3bn by 2015, from $1.98bn in 2012, according to analysts.

The CCA stipulates that operators will have to make a 30% reduction in their non-IT energy consumption by implementing a range of efficiency measures. This also has significant implications in terms of energy costs. Such a reduction in energy will in turn have a positive impact on the competitiveness of the UK colocation industry.

The recognition has been welcomed by the UK colocation datacentre sector.  “The CCA will give operators and investors greater certainty regarding the way that policy instruments are applied to the sector and this should lead to better confidence when planning investment strategies and expansion programs,” said Rob Coupland, managing director of TelecityGroup.

“If policy tools are designed and implemented intelligently they can deliver carbon reductions while encouraging growth. The government has recognised the contribution that technology makes to the UK economy,” Coupland added.

The CCA marks the start of full recognition for a sector that underpins the entire economy but is little understood by policy makers and government in general. It has taken four years to negotiate but today marks the start of a new era for the datacentre industry, said exoerts at techUK.

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