Iceland as the Infrastructure of The Future

The Icelandic data center Industry has been growing rapidly and the future is bright. Iceland has a big role to play in building the digital infrastructure of the future to support AI driven solutions in all sectors to make our world more efficient and sustainable. Data centers are crucial part of that journey.

Here at Business Iceland, we are feeling the growing demand and interest in this important part of today’s world.

The global data center industry is expected to experience significant growth over the next decade, driven by increasing demand for cloud computing, AI, and other data-heavy technologies. Progress in science, health care and other parts of the society, heavily rely on this process. Innovative technologies – related to deep-tech of many kinds and next generation computing – are part of the journey also. It is not an option not to participate in this development.

Growing fast – Iceland in the middle

Analysts project that the market will grow at a compound annual growth rate (CAGR) of approximately 10.9% from 2023 to 2030. This growth is largely fueled by the expanding use of cloud services, AI, and the need for data processing and storage capacity as more businesses undergo digital transformation.

This expansion also highlights regional trends, such as significant investments in renewable energy to address the high energy consumption of data centers, and innovations in cooling technologies to enhance efficiency​ (McKinsey, 2024).

In the middle of this global market trend is Iceland, with its vibrant and entrepreneurial self, driven by green and renewable energy.

The “green” Icelandic story?

Iceland is powered almost entirely by renewable energy sources (geothermal and hydroelectric), which aligns with the growing demand for sustainability in business operations. International companies, especially those under pressure to meet environmental goals (like carbon neutrality), find Iceland's energy mix a key selling point. Iceland is the go-to location for "green data" offering a carbon-free footprint for data centers and aligning with global environmental, social, and governance (ESG) goals.

The abundance of cheap (at least competitive), renewable energy in Iceland can translate into lower electricity costs, which are typically the largest expense for data centers. Iceland emphasizes the potential for significant savings compared to other markets.

A lot of wind and cold – and it helps

Iceland’s windy and cold weather is not bad at all. Cool climate drastically reduces the need for artificial cooling, a major operating expense for data centers in warmer climates. Data centers in Iceland can operate more efficiently, cutting energy costs by reducing reliance on air conditioning and cooling systems.

Despite Iceland's volcanic activity – like we have seen in Reykjanes over the last year - the country has strong engineering expertise in designing earthquake-resistant buildings and mitigating risk, including its data centers. And there is a good connection already in place, including cables linking Iceland to Europe and North America.

The Bridge for People and Data

Iceland's location between North America and Europe makes it a natural gateway for data traffic between the continents – just like in the tourism sector. This allows companies to reach customers on both sides of the Atlantic with minimal latency.

Iceland’s strategic position and connectivity makes it an ideal location for data backup and disaster recovery operations for European and North American companies. Iceland is seen as the perfect "offshore" location for critical backup systems that need to be stored in secure and remote locations.

Tech Giants and Cloud Providers

Iceland is open to form partnerships with major cloud service providers to establish Iceland as a critical hub in their cloud infrastructure. These partnerships can draw smaller companies that rely on the major cloud providers into Iceland’s ecosystem. And this is already happening.

Iceland positiones itself not just as a data hub, but also as an innovation hub for emerging technologies such as AI, machine learning, and big data analytics. Hosting the R&D centers of international companies could increase investment in both infrastructure and talent.

It is About People and Jobs

Adding high-value STEM jobs and building up stronger talent pool, for the long run, is the goal here. Other Nordic countries have all taken steps to attract data centers and campuses. Iceland has a similar Value Proposition to offer – even better.

The Icelandic government has been hugely successful in building an innovative economy over the last 5-10 years. Iceland has proven to be a great place to operate international companies – around strong “green” energy sector and competitive technical infrastructure.

Effective R&D initiatives and competitive regulatory framework, to support innovation and growth of STEM jobs, are part of the Icelandic story. That is why many companies in the data center industry do see Iceland as a location to grow and build new opportunities.

Although Iceland is facing challenges, when it comes to new energy production projects, the vision is clear. Iceland will be part of the infrastructure for the future – and is already building it.

For further information:

Magnús Halldórsson
magnus@businessiceland.is
Energy and Green Solutions

P.s. The Nordic Data Center Week is coming up September 23rd – 27th – showcasing the social impact of the industry in the Nordics and its crucial role in future developments. Data Center By Iceland is part of the Nordic picture.