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Nordic enterprises to enjoy cheaper datacentre costs

A reduced electricity tax rate for datacentres in Norway will give local enterprises a competitive option close to home

This article can also be found in the Premium Editorial Download: CWEurope: CW Nordics: February 2016

Data storage charges for Norwegian enterprises should soon fall following datacentre electricity tax cuts announced in the 2016 state budget.

The cuts in the rate of tax paid on electricity used in datacentres could help the region win more business and will offer local firms lower cost IT services close to home. The Swedish government is considering similar tax cuts.

Alongside the headline-grabbing cut in corporation tax from 27% to 25%, the Norwegian government announced a further tax incentive that could make a noticeable difference to every Norwegian enterprise with significant IT requirements.

Like any other service industry, Norwegian datacentres are currently subject to the standard electricity tax rate of 14.5 øre per KwH (about 1.4p). The government proposes a reduced rate of 0.48 øre per KwH for datacentres with more than 5MW power usage, bringing the datacentre industry in line with other energy-intensive industries.

As the cost of power now accounts for around 50% of the cost of a datacentre in most of Europe, Gisle Eckhoff from datacentre specialist Digiplex believes Norwegian enterprises will benefit from lower bills.

In recent years, Norway has lost major opportunities from the likes of Google, Facebook and Apple, which all picked other Nordic countries over Norway, he said.

“Together with Evry – a Digiplex partner – we have been lobbying for this for a long time and the news has been very well received by our customers and prospects,” said Eckhoff.

There has been a large question mark over the Norwegian economy since the oil price crash of 2014. Alongside the electricity tax cut for datacentres, the state budget includes a full programme of measures to stimulate innovation and entrepreneurship.

Einar Hoffart, who works in market operations and IT at state-owned Statkraft Energi, believes this is a clear signal from the Norwegian government that they want to attract the datacentre industry to Norway.

“Already Norway has one of the lowest electricity prices in Europe, mainly because of the subsidy regime for renewable power that we have together with Sweden,” he said. “That triggered a lot of investments in wind power.”

“Since the financial crisis, demand has slowed to the point where some external analysts say we are heading towards a position of over-supply. We are already supplying 20TW of power to Norwegian industry. The government is keen for us to work with the datacentre industry to help generate new jobs for the economy,” added Hoffart.

Since April 2014 large-scale datacentres have also enjoyed lower energy tax rates in Finland, while a Swedish government-commissioned study under consideration by the Ministry of Finance recommends a 97% tax cut for datacentres and data service providers, previously exempted from the lucrative basic industry tax scheme.

The proposal is an opportunity for Sweden to attract new investors, according to Anne Graf, investment and development director of The Node Pole datacentre cluster.

“We have already seen how our offering has been quite lucrative for global actors whom seek both high service and globally competitive costs when they invest in our region. Both those actors who seek complete datacentre solutions and those who aspire colocation solutions or cloud services from providers within Sweden will gain substantially from these lowered rates,” she said.

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Now this is a tax break that actually makes sense. Instead of freeing corporations from every possible public responsibility, here's a targeted effort that provides better profits for business and also encourages entrepreneurs. Both Big Business and Little Consumers have a chance to come out ahead.
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