January 26 2022

Energy crisis, disastrous beginning of 2022 for datacenters.

How the costs of electricity will inevitably impact on the final costs of hosting services.

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Europe today is at the center of an international energy storm driven by turmoil in natural gas markets. Understanding the causes of this crisis - which is having serious repercussions on governments, businesses and households - and drawing the right lessons from it is essential for the transition to more sustainable, safe and affordable energy supplies in the future.

In recent weeks and months, natural gas and electricity prices have hit record highs, particularly in Europe and some major Asian markets, causing potentially significant economic impacts. These include multiple negative effects on power companies, other businesses and industrial sectors and consumers, which in some cases result in government action to limit the damage. These effects are likely to have a lasting impact beyond the market tensions we are witnessing this winter in the Northern Hemisphere. Rises in energy prices have also contributed to wider price inflation that is affecting many economies around the world.

It is obvious that the data centers that provide Hosting, Cloud and dedicated Server services that make a truly massive use of electricity, perhaps more than any other business activity, are affected in a very important way.

In our specific case, for example, the operating cost to keep a machine (server) connected to the electricity grid it went from € 15 / month to as much as € 35 / month with a cost practically doubled despite being supplied by wholesalers with prices calculated on large volumes.

This inevitably translates to either a loss of earnings on our part if we did not intend to increase costs to the end customer, or to an increase of about 20 euros per instance / server due to increases in electricity prices at the source.

Moreover, it is not even clear what the limit of the rise in prices that we Europeans are witnessing may be, nor how incisive the geopolitical crisis between Russia and Ukraine may be, which necessarily have a direct "specific weight" on the reasons for raising prices for power.

To date and until April 2022 we have decided to "absorb" the losses, without adding to the costs of services or surcharges to end customers, however it cannot be excluded a priori, if the costs begin to increase significantly and are no longer able to compensate for the liabilities with assets, which will not revise the list costs for both new and old customers, aware that they have not undergone any increase since 2018 and that this historical moment makes everything more difficult and unpredictable.

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