U.K. Colocation Data Center Environmental Tax Incentives Begin

U.K. colocation data centers are now able to take advantage of a climate change agreement that allows them to opt out of green taxes for electricity use. The data center tax incentives program, which began in July, will exempt shared data centers from the Climate Change Levy – an environmental tax included in energy supplies – and opt out what is left of the CRC carbon reduction scheme. Many colocation data centers will be able to save around 3 cents per kiloWatt hour of power under the new agreement.

Good for the economy
The climate change agreement aims for industries that use high levels of power- such as data centers and cloud providers- to reduce electricity consumption through energy efficient measures and to help the U.K. meet its own carbon reduction goals. The deal gives recognition to the data center industry for the role it plays in Britain’s economy, as many other energy-intensive sectors have already been benefiting from CCAs for some time.

The U.K. data center market is one of the world’s largest, with more than 200 colocation data centers in the region and as many as 67 in London alone. This new CCA will allow the British colocation industry to become more energy efficient and help increase competitiveness.

“In contrast to other EU countries, the U.K. has been slow to recognize the importance of a thriving data center industry to a country’s economic health,” said Emma Fryer, head of climate change programs for TechUK. “However, that has all changed. The treasury has recognized the need to protect future investment and growth by, at least partially, leveling the playing field for U.K. operators competing with their counterparts overseas.”

Joining the CCA
The colocation data center CCA is a tri-party agreement between the Environment Agency, industry body TechUK and the individual data center owners. First, an agreement was signed between the EA and TechUK which set the overall energy targets. Second, individual data centers agree to specific terms with the agency. Third, the data center operators sign a separate agreement with TechUK to join the CCA as a whole.

To become a part of the CCA, colocation data center operators must submit plans for eligible facilities, as well as provide a written description and chart of business processes describing their energy inputs and outputs. The agreement specifies that operators must reduce their non-IT energy consumption by 30 percent by instituting various efficiency measures. The CCA measures efficiency using PUE ratings. According to Fryer, only colocation data centers are eligible for the CCA because the cost of their energy makes up 10 percent of turnover, something enterprises are not able to achieve on their own.

“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 TeleCity Group. “If policy tools are designed and implemented intelligently they can deliver carbon reductions while encouraging growth. The government has recognized the contribution that technology makes to the U.K. economy.”

Currently there is no comparable law in the U.S. on a federal level, but Greenpeace has been putting pressure on the country’s data centers’ reliance on coal power. President Obama’s latest Climate Action Plan focused mainly on limiting carbon emissions, promoting development of clean energy sources and training an alternative energy workforce.