Bad Taxes May Slow Datacenter Power Efficiency, But Not in the U.S.

There are plenty of reasons to want to make a datacenter more energy-efficient—most of which come with dollar signs in front of them.

The power cost for a mid-sized datacenter pulling 2 megawatts of electricity is about $604,000, according to one recent study by 451 Research (PDF). That could be half a million dollars per year cheaper than the same facility in the U.K. and $750,000 less than one in Germany—which makes U.S. datacenters a bargain in comparison.

“Many data centres are now extremely efficient compared to small server rooms and the data centres of a few years ago,” Emma Fryer, associate director with U.K. technology-industry Intellect, wrote in a statement, “yet in many countries environmental legislation has been implemented in such a way that large efficient data centres are suffering ‘carbon taxes’ as though they were massive inefficient energy ‘wasters’ whereas small inefficient data centres and server rooms are effectively exempt.”

Tax incentives encouraging energy conservation might be spotty in most countries, but U.S. states competing to get their share of the lucrative datacenter-construction market are incenting almost anything that moves: At least 15 states have datacenter-specific tax breaks on the books, almost all of which have been created since 2008.

The tax breaks, which are intended to attract new datacenters, can equal 25 percent to 100 percent of property taxes, while exemptions for property and equipment from state taxes that can equal as much as $150,000 per million dollars of construction costs, according to real-estate services company CBRE.

Those taxes aren’t a one-time benefit, either. Property-tax incentives especially can last as long as 30 years, while equipment sales taxes can last until long after construction is completed. It’s not necessary that tax incentives be directed specifically at power-efficiency overhauls, so long as they encourage both large and small companies to concentrate their IT infrastructures in large datacenters that can be made far more energy-efficient than small datacenters or server closets, Fryer said.

Tax incentives may make that question less of an issue in the U.S. than elsewhere, but not without good reason. Having a datacenter construction project worth between $500 and $1 billion come to the state is a real economic boost that can encourage even more positive results, according to Rob McClintock, vice president of research at the Virginia Economic Development Partnership in the Post story.


Image: Kjetil Kolbjornsrud/