In a recent post, we took a look at the correlation, if any, between electricity price and data center locations. Part of these comments were based on price data for the medium standard industrial consumption band, as provided by Statistics Explained, an official Eurostat website.
The recent news about electricity price cut in Sweden for data centers is a new illustration of how tax policy can favor and shape businesses within each individual country and across the world. Manufacturing industry in Sweden was already supported by a lucrative tax break on its power needs (this tax break was included in the data of our post dated 25 October 2016 as this price data was for industrial consumers). The tax reduction for data center industry does not come out of the blue as it was suggested in the second half of 2015 by a study commissioned by the Swedish government (and underway since 2014). The 97 percent tax reduction is not seen by data center community as a special treatment but as alignment with other industries.
In the fourth quarter of 2016, the Parliament of Sweden has confirmed the change in the Swedish electricity taxation system; data centers are eligible for lower tax rate starting January 2017. More precisely:
- Data centers with an installed IT effect of 0.5 MW and more are included (power consumption for cooling is not included here);
- Only business in “IT, data processing or rental of server space” are included;
- If a data center qualifies by at least 0.5 MW installed IT effect, even the rest of equipment (e.g. cooling) is covered by the lower rate.
- The rate change enters into force on 1 January 2017;
- The new rate is 5 SEK / MWh (0.54 USD / MWh);
- The old rate (valid until December 31, 2016) was 195 SEK / MWh;
- The old rate will remain valid for all businesses but data centers and manufacturing industries.
This cut is extremely significant for data center industry because electricity makes up the bulk of the cost of running a data center; depending on data center location and design, electricity can vary between 30 and 60 percent of the total cost of ownership of a data center. As a result, this change is cutting off total electricity costs by up to 40% for existing and future data centers in Sweden, with large operators such as Facebook saving millions of dollars per year.
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(Photo credits: Statnett and Google)