Data centres redux

Someone asked about data centres in the threads.  The truth is that a bunch of us were pushing NB to get out front and become an early adopter of this sector almost a decade ago.  With the advent of large scale but not critical data storage (the banks always had ‘data centres’) like YouTube videos there would be exponential growth in this area.  I think the first formal briefing I did on this sector was in 2002.

But the truth is that it has always been about about cheap electricity.  A good sized data centre uses as much power as a small pulp mill and energy costs can be as high as 60%-70% of annual operating costs.

In the early 2000s New Brunswick’s large industrial power rates were reasonable but still above Quebec or Manitoba or BC not to mention 20 or so U.S. jurisdictions.  By 2010, they are completely out of whack for attracting this industry.

We have looked at alternatives such as incentives to allow these firms to produce their own power (Google is a federally regulated electricity utility in the US) or zany ideas about using Bay of Fundy water to cool the data centres (cooling is a huge part of the cost) but in the end if you have a power bill of $10 million/year in New Brunswick and it would be $5 million in Washington State or $4 million in Manitoba, where are you going to go?  Iceland – with its cheap geothermal – has been attracting them as well.

I think this is an important and instructive example, however, for at least a couple of reasons.  First, we need to be looking at potentially high growth sector opportunities that lie just over the horizon.  That is why we gained such traction with the customer contact centre industry.  It takes more than just identification, however, as New Brunswick was also among the first jurisdictions into things like aquaculture, GIS and eLearning and we never really saw those sectors blossom into real growth engines for the province.

So the value proposition for investment in these sectors is critical and we don’t have the value proposition for data centres.

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9 Responses to Data centres redux

  1. > So the value proposition for investment in these sectors is critical and we don’t have the value proposition for data centres.

    Well there’s the billion dollar question: where do we have the value proposition (please don’t say forestry)?

  2. Tom Rivington says:

    Since we booted out a government that tried to address the power issue and recent statements by Currie, Ganong and Theriault didn’t mention power, I have to wonder if anyone really understands this linkage. Or is everyone burying their heads in the sand?

    I assume that David is attending the Future NB meeting next week, it will be interesting to see if power is mentioned as the key driver of economic development.

  3. Derrick says:

    Value Proposition:
    – Public sector that could manage a population several times the size
    of NB’s.
    – NB Power training “what not to do “.
    – Video on “Fishing with 40 weeks vacation payed”.
    – Budget reduction ” When a 3 percent increase in Health Care is
    a 2 percent decrease, ( new math in school).

    It’s going to be a hard 10 years for all of Canada not just
    New Brunswick, as the Chinese have devalued labour to a level
    that no goverment that provides service can survive.

    Regards

  4. Scott says:

    This is one of many issues that need to be addressed. Longtime spending habits need to be addressed and/or changed (where money is allocated? and to who? what sector? who should be making the decision? etc) Also, political parties need to address the connection-deficit that exists b/t them and ordinary NBers. Why is there so much apathy? Tax code is something the province can now work off of though.

  5. Derrick, that’s not a value proposition. None of what you described produces income for the province.

    Carping about high taxes and big government does nothing to increase economic production. You can’t cut your way to growth. You just move the province to third-world status.

    This may suit the Irvings of the world, who really don’t need the people who live here. But it doesn’t suit the rest of us.

  6. Derrick says:

    Stephen,
    High taxes and big government push up the cost curve of any activity,
    the structure we have now is based on consumption, which is supported
    by debt. Every additional dollar of debt lowers us as a whole on the cost curve, as every dollar brought forward to support consumption at the present must be removed from future production ( as a cost ), including the debt carring charges.

  7. richard says:

    “High taxes and big government push up the cost curve ”

    On the other hand, low taxes and small government also push up the cost curve. I guess it depends upon what costs you are measuring – the ones that actually occur in a society, or just the ones that are convenient for you to include.

    There is no obvious relationship around the world between productivity (even given its unreliability as a societal measure) and taxation or government size.

    ” Every additional dollar of debt lowers us as a whole ”

    Anyone with a mortgage, or anyone who borrows to invest will point out that a certain level of debt can be a good thing. Its not debt, but the relative size of the debt that is important.

  8. yousaidwhat? says:

    What the hell does this mean. The old liberal double speak?

    Stephen,
    High taxes and big government push up the cost curve of any activity,
    the structure we have now is based on consumption, which is supported
    by debt. Every additional dollar of debt lowers us as a whole on the cost curve, as every dollar brought forward to support consumption at the present must be removed from future production ( as a cost ), including the debt carring charges.

  9. mikel says:

    “High taxes and big government push up the cost curve of any activity”

    Bull. First, NB has amongst the lowest taxes for business in the entire country-so people should not even be ALLOWED to say that. Second, big government has zero to do with your activity-unless you want to suck out the resources or are a big polluter. Do you think RIM is complaining about ‘big government’ pushing up its costs? What costs?

    Second, what is the “structure we have now”? Most parts of the canadian economy were doing fantastic until the recession, personal income taxes have PLUMMETED since 1995. Even NB was doing not too bad-until the price of resources collapsed. When zinc and minerals are high, the provincial government has lots of money.

    The rest of that comment, frankly, isn’t very well explained. If the point is that payment on debt is money you can’t ‘buy’ other stuff with, just say it.

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