A scheme which cuts taxes on data centers in the UK will be closed to new entrants from later this year, something that will hurt the sector, according to industry body techUK.
The Department of Business, Energy and Industrial Strategy (BEIS) has said that from October, no new data centers can be added to the Climate Change Agreement (CCA) which grants a reduction in energy-related taxes for data centers, even though the scheme will run till 2023. The techUK body says this will distort the market, giving some players an unfair advantage, while at the same time putting the UK’s data center business at a disadvantage compared with the rest of the world.
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The ten-year scheme, which began in 2014, effectively reduces colocation data center energy costs by around ten percent (about 1.5p per kiloWatt-hour), in exchange for requiring facilities to reduce energy usage by the sector as a whole - so overall emissions go down.
Such schemes normally close to new entrants in the later stages, as anyone joining would be too late to reduce their energy use during the remaining period. However techUK’s associate director, data centres Emma Fryer says that, since it takes time to process a CCA application, the cut-off would be June - which is excessively sharp. She says BEIS has not listened to industry requests to relax the cut-off.
“I am surprised to see intransigence from a department that is supposed to be supporting business growth,” Fryer said to DCD. The CCA schemes are normally designed to support heavy industry sectors with a high energy demand. Most of these are not growing rapidly, and don’t have many new entrants, but data centers are expanding, she explained.
As it stands colocation data centers that open after the cut-off would be at a disadvantage for the remaining four years of the scheme, as they could not gain tax relief. It also means that existing members of the scheme cannot get tax relief on new facilities opened after the cut off.
“Does that mean providers should charge customers more in those new facilities?” Fryer asked.
techUK is complaining that the move will distort the market by making things cheaper for existing operators, and penalizing new ones; it will put UK businesses at a competitive disadvantage compared to those based outside the UK; it will discourage inward investment at a time when Brexit is already putting off long-term planning; and it “punishes” growth.
The Internet economy contributes around ten percent of UK’s GDP, and is growing at ten per cent each year, says techUK.