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How energy price hikes affect Interact customers

Rich Kenny | Nov. 17, 2021

How energy price hikes affect Interact customers

November 2021 saw news of the first UK data centre passing rises in energy costs on to its customers. M247, an IT and hosting firm, announced a 161% increase in its colocation, networking and cloud services provision at its Manchester site. This was a fraction of the 550% rise in energy prices in the European domestic energy market over the previous 11 months, which the company had found impossible to absorb without impact to the customers.

Long-term bulk contracts have largely protected many data centre operators are from the energy price rises in the short term. However, it remains to be seen whether or not this will continue. Low storage levels of LNG, competition from the Asian markets and question marks over the supply from Russia have created a significant problem which has long-term effects. Non-domestic energy prices are less volatile than their domestic counterparts (and in fact decreased slightly in Q2 2021 according from data from the UK office of National Statistics) but are nevertheless on an upward trend.

Most consumers felt the bite of domestic prices peaking at over £300 per MWH in November according to the Nord Pool website, up from around £50 in April 2021 as reported in a recent article in Data Centre Dynamics. Whilst they appear to be on a downward trend from these dizzy heights, customers with energy contracts coming to an end now or in the near future could be impacted by the large disparity between prices at the end of the year and those at the start.

This is something we have been keeping an eye on at Interact, as you might expect. Our tool optimises the energy usage of the IT estate, which generates huge savings on the energy bill of the facility. At the moment, the calculated savings in our reports run on the market prices from before the energy crisis and have been used to inform decisions about the choice of IT hardware to optimise this. As we are comparing like with like, this makes sense. It also seems sensible not to jump on the bandwagon of rising domestic energy prices when we do not know our customers’ contract positions.

If we were to jump on this bandwagon, we would see astronomical numbers. For example, a recent report for a healthcare provider suggested replacing the current machines with more efficient versions would generate first-year savings of £3 million on operational energy costs and 11 million kilowatts in energy. If this was a domestic customer, we could potentially increase the cost proportion fivefold. However, the real figure will depend on an organisation’s contract and energy usage. Small users pay more statistically than large users, as you can see on this UK national statistics document.

All our reporting this year has been conducted with the prices that are available to us based on reported averages, but these can be and are over-ridden on customer request. We will be reviewing energy prices for next year and are always open to conversations about the particular contract positions of our clients. Balancing cost, energy and associated carbon is what we do – in the current climate, we are even more aware of how important this is.