Already the UK arm of US-based colocation provider Sungard entered administration, due to spiralling energy costs that came on the back of the Covid pandemic.
Energy prices have been getting progressively ridiculous over the past year, with data from the UK government’s Office for National Statistics confirming that the wholesale price of gas was four times higher in January 2022 than it was at the start of 2021.
Datacentres’ largest cost is energy and providers are frantically trying to talk to energy wholesalers.
To be fair, Sungard’s issues included a decline in demand for its services for some time and certain datacentre and workplace facilities becoming unprofitable, with fixed lease and energy costs no longer being offset by customer revenue.
In other words, Sungard missed out on the benefits of Covid for the cloud because it has been primarily focused on enterprises and providing them with business. They lacked exposure to the hyperscalers, which have been driving growth in the broader market and been exposed to weaknesses in the business continuity market.
Some larger operators tend to pre-contract for power at fixed prices through brokers, which means they are less exposed to the risks of commodity price fluctuations for as long as those contracts are in place, but the rest could be in line for a hammering on the bottom line.
The biggest issue facing the industry in all this is the lack of certainty over how long energy prices will remain elevated. The UK has no gas storage to speak of compared to other European counterparts does not position us well in terms of being able to buffer short-term spikes in prices.