Data Localisation and the Growth of Data Centres - Amelia Seymour

Across the world we are seeing a huge growth of data centres. The reasons for this are numerous; generally, they are being built at a considerable rate in response to two things: data production and data localisation. It should not surprise anyone that data is being generated more abundantly than ever – an astonishing 2.5 quintillion bytes every day – nor will it be a shock that we demand instantaneous data (low latency). However, what might not be common knowledge is that governments are responsible for a considerable number of data centre construction projects, due to data localisation laws. This huge surge in data centres has enormous consequences for the community. When thinking of data centres, it is likely that your first thought will be of the ginormous amounts of power and energy they consume. Aside from being a huge drain on the national grid, data centres have a far-reaching impact on the society; not only providing jobs, but also indirectly providing education, healthcare, and better infrastructure for local and global communities. Why do we need data centres?

The most obvious reason for an increased demand for data centres is due to the world producing more data. Data can be generated in three forms: machine, human and organisational[1]. Machine-generated data refers to all the sensors, cameras, satellites, and activity trackers that people use constantly. From smart watches to smart doorbells, these sensors and monitors are rapidly dominating local markets across the globe. Human-generated data comes predominately from social media. In 2012, 100,000 tweets were sent per minute – in 2020, the number has become 350,000. This is staggering; with a continued use of social media and the rise of social apps, it will continue to climb. Organisational data is also increasing in volume, with hospitals, travel companies and retail giants generating data about their consumers, stocks, and market demands. Consequently, the increased demand for data storage will result in data centres popping up everywhere. Similarly, people want access to their data instantaneously. Meaning, latency (delays) in the processing of network data is unacceptable. To reduce latency, one of the easiest and most far-reaching solutions would be for countries to house their own data centres. India, in particular, is reacting to this demand by adding approximately 10 million sq ft of data centre space across the top 8 cities, over the next 2-3 years. This digital push has been catapulted by COVID-19, increasing the demand for data centres at an unprecedented rate. Another key driver is the rise in data localisation laws – the legal requirement for data to be stored or processed within specific national or regional borders. Thus, multi-national companies are required to establish local data storage facilities in order to ‘better’ protect their data from malicious foreign businesses and governments. Data localisation laws ring-fence the ‘value-in’ and ‘profits derived from’ relevant data in the domestic market, which is considerably important as big data and data analytics market is estimated at USD 139 billion in 2020. Ring-fencing of profits is not the only economic driver; data localisation laws prevent ‘data sharding’ – where data is split into pieces and stored across multiple systems, minimising costs and improving redundancy mechanisms. This patchwork can create complex compliance and transparency problems for global organisations incurring substantial costs. The approach which nations are taking to ‘data localisation’ varies significantly. China, for most data, has incredibly invasive and restrictive data localisation laws, whereas Australia requires only its healthcare data to be processed within Australia. These data localisation laws are of the utmost importance for organisations producing data, such as TikTok. They announced they will invest EUR 420 million in their first European data centre, to be built by 2022 in Ireland. Selecting Ireland complies with European GDPR laws enabling information to be moved between countries freely within the EEA. The transfer of information between member states and the USA has been greatly restricted by the Schrems decision, invalidating the EU-USA Privacy Shield. Although the GDPR has not explicitly outlined data localisation requirements, organisations will be under pressure to use data centres located in Europe. On the other hand, some organisations are choosing to sell their operations in certain countries. This is a decision that TikTok is currently considering as Trump is attempting to ban TikTok in the USA, unless the $50 billion TikTok US operations are sold to an American company.

Whatever approach a particular organisation chooses, or however restrictive a certain nation’s laws are, these data localisation laws are on the rise, and thus data centres are required in more countries. Consequences

Data centres have a huge impact on the environment, due to their large energy requirements (a very large data centre may consume 30GWh annually). Typically, this power has been provided through a connection to the electricity grid, which is used on running and cooling the IT equipment storing the data. In total, the power demand of the UK data centre sector is between 2-3TWh per year. The grid is not reliable, therefore to avoid the astronomical costs of a data centre shutting down, diesel generators are used as a back-up.

Powering data centres from renewable sources on site is problematic due to the requirement for a constant and reliable power supply. With increasing environmental restrictions on the use of diesel generators and potential liabilities under emissions trading, data centres are having to review their energy sources.

A positive from data centres requiring a large physical presence is the provision of space for rooftop solar panels. For instance, the 10 largest data centre operators within the UK are willing to pay a premium for green power which provides 72% of their energy. Therefore, as renewable sources become cheaper and more reliable, data centres will be able to move to green energy. Aside from their environmental impacts, data centres also influence their community. In order to run and keep them secure (cybersecurity and physical security), data centres create a substantial number of jobs. In 2017, it was estimated that within the USA, the average data centre added $32.5 million to its local community annually. In comparison, in the UK in 2018, it was estimated that the national data centres were worth £73.3 billion. Furthermore, a US report in 2017 calculated that during construction, the average data centre employs 1688 local workers, providing $77.7 million in wages. Therefore, data centres have the potential to lower unemployment rates whilst gentrifying nearby areas. Data centres provide the very foundation for innovation, with developments in science, manufacturing, and healthcare relying on the ability to store and process data. In this way, data centres can facilitate distanced learning (significant during the pandemic), encourage healthy lifestyles, and enable the creation of gene therapies. Data centres are the cornerstone of our future. Society is becoming more digital, with the advent of AI, automation, cybercurrencies and blockchain – hence the importance of data centres. Conclusion

In conclusion, global construction of data centres has expanded. The volume of data generated by machines, humans or organisations is staggering. However, the greatest demand for future data centres may come from governments and data localisation laws, to negate the increasing expense and complexity of overseas data storage. With the rise in regulations, data centres will continue to be constructed, becoming a feature of national or regional communities.  Data centres are perceived as carbon consuming factories. However, with a focus on renewable energy, the high numbers of employees, and the subsequent facilitation of science, education and healthcare developments, these data centres are vital for the continued growth of society.


[1] IOSR Journal of Computer Engineering, Big Data: How it is Generated and its Importance by Asst. Prof. Mrs. Mugdha Ghotkar and Ms. Priyanka Rokde

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