UK Carbon Tax May Force High Tech Companies Abroad

Just when you think you are doing your bit to keep the economy moving you find another barrier slapped in your way, and this one could add to the jobs and investment drain in a key UK sector – technology.

It is less public facing than the hospital and public sectors, and uses less energy than the exempt transport sector – at 6,000MWh/yr — but when it comes to business and carbon emissions, the data centre industry has received little mention, despite being one of the most affected by recent changes to the UK’s Carbon Reduction Commitment (CRC).

The announcement by the UK government last week that rebates would be turned into a fee could put the UK data centre industry at risk, according to some data centre specialists.

The industry has since warned rising energy prices without incentives could send data centre business offshore, where nuclear and renewable power is readily available, and change the face of the industry as we know it.

The UK Government said it was scrapping plans to offer rebates to companies found to hit the top of a league list created under its original plans to highlight businesses that had made large moves towards efficiency.

Instead, the government said it will hold on to the £1bn worth of funds expected to be raised in 2014 and 2015 as part of what is now being called a ‘stealth tax’ by the industry.

Data centre operators will now face a direct tax on energy consumption at £10 to £15 per tonne of CO2 allowances and 1 tonne of CO2 equating to roughly 500kWh of grid electricity (which will raise the price of energy by about 10%), according to reports.

Britain’s data centres produce 2% of the total amount of greenhouse gas emitted in the UK each year – the UK Government’s Carbon Reduction Commitment (CRC) scheme affects those industries which make up 10% of overall emissions.

UK-based Romonet, which researches energy and cost points within the data centre, has said that the changes could have wide implications for the data centre industry. Romonet CTO Liam Newcombe said the large collocation and hosting data centre operators would be most affected, having to find a possible additional £500,000 in OPEX costs. “The change in the recycling payments will clearly have a substantial impact on the UK data centre sector,” Newcombe said.

“No longer is CRC simply a complex regulatory burden that will cost a lot of money in compliance and reporting. It is now an expensive tax as well. A medium-sized collocation data centre can expect to add £500,000 to its annual OPEX for the purchase of allowances in addition to the compliance costs.”

For some operators, this could be enough to halt new projects in the UK, and for some businesses, it could lead to a drop off in business, as clients investigate offshore options offering lower energy costs.

“This change to CRC will, in combination with the already high cost of electricity in the UK, cause some operators to build new facilities in other countries instead. This is likely to be particularly true for outsourcers and cloud (computing) providers who are able to deliver services from remote data centres with little overhead,” Newcombe said.

“Instead of leading the development and delivery of new technologies and services that generate service and IP exports, this displacement drives the UK towards being a consumer and importer of such new developments.”

The UK is not immune to criticism regarding energy policy and provision. Last year, representatives from Digital Britain said that data centres in the country already struggled when it came to acquiring physical connections and installing cables, switches and transformers to the regional grid. A Digital Britain report also showed that data centres had issues accessing distribution and generation capacity across the grid. The report said that the South East of England and London – the UK’s financial hub which houses data centre reliant on low-latency connections for financial trading – pose particular challenges that jeopardize the UK’s standing against the world’s more accessible data centre markets.

According to Thomson Reuters Global Head of Energy & Sustainable Technology, Content, Technology & Operations Harkeeret Singh, the uncertainty surrounding last week’s announcement could be enough to cause a blow for the industry.

“The initial cost and the uncertainty are not a good mix for those considering placing data centres in the UK, especially if another country is a bit more stable in its energy and tax options,” Singh said.

This comes at the same time as a report (http://bit.ly/9d4RqW) of huge new breakthroughs in the production of fossil fuels, that will vastly expand the available resources and extend the availability of such energy resources far further than anybody could have predicted just a few years ago. So do not let anybody tell you these tax measures come out of necessity to drive the replacement of dwindling energy resources, and with each passing day the evidence for carbon dioxide being complicit in any climate mishap shrinks ever smaller.

This is purely the result of a desperate establishment saddled with the debt from a decade or more of excesses and needing to find new ways to extract money from the inevitable victims – you and me. In both Spain and Germany the “green” jobs and environmental legislature has been an economic disaster, and yet true to form as others turn away from this mistake the UK decides to gold brick these failed policies and add to them.

How UK Plc is ever going to be able to drag itself out of this mire I do not know but one thing is for certain; hurt the technology industry and your best hope for recovery will evaporate.

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One Response to UK Carbon Tax May Force High Tech Companies Abroad

  1. The trouble with energy policies of the governments is that there is very little democracy in the decision making process.

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