Why Amsterdam Halted Data Center Construction

Data center developers have been caught in crossfire as local politicians duke it out over a troubled waste treatment plant.

Mark Ballard

October 3, 2019

8 Min Read
Amsterdam skyline, 2014
Amsterdam skyline, 2014Andrew Pini/Getty

The companies that run the internet should stop building their data centers in Amsterdam, according to a prominent internet industry figure. Their bloated presence there is hogging wealth that should go to other regions suffering after years of economic decline, said Clint Heiden, head of an industry campaign to restructure the internet before it breaks.

Furthermore, the global computing infrastructure has become so concentrated around just 10 or 15 major global communications hubs -- Amsterdam being one of the biggest -- that the internet itself has become brittle and bottlenecked, he said. This fragility has made it vulnerable to sabotage and natural disasters -- just the kind of upsets it was originally designed to be invincible against. The internet's founding fathers imagined it to be a network so distributed that its communications would always find a route round any bottlenecks or disasters. Instead, data centers are hogging resources needed to run services like schools and hospitals in the cities where they're clustered, the major hubs, Heiden told DCK.

"Amsterdam is screwed," he said. "Amsterdam has 30 percent of all data centers in Europe. You don't need another one."

The local data center industry lobby recently declared it would make concessions to the government in Amsterdam, which in July set a year-long ban on permits for new data centers to make companies help it cut carbon emissions and get more space for housing.

Data center operators have bought up a lot of real estate "and turned it into very ugly buildings" in a city that's always prided itself on its history, beautiful architecture, and landscapes, Heiden said. He also pointed out data centers' energy consumption, saying a single one can use as much power as 15,000 homes or several hospitals, and their water use.

Earlier this year, Heiden, chief revenue officer at the major US-based data center provider QTS Realty Trust, teamed up with internet founding father Vint Cerf to launch the Internet Ecosystem Innovation Committee, an industry group that vowed to make the internet less vulnerable to calamity by diverting its major network tributaries away from major hubs like Amsterdam. The internet industry should instead build infrastructure in old mining and industrial towns like Pittsburgh in the US, or Eemshaven, a port town 200 kilometers north of Amsterdam, to ease pressure on the hub cities.

This work began after Hurricane Sandy disabled power systems in New York and closed the New York Stock Exchange for two days in 2012, Heiden said. The disaster exposed the internet's -- and therefore the economy's -- vulnerability due to its reliance on trunk lines between major hubs like New York, London, and Amsterdam. In response the industry started diverting trunk lines to go not to Ashburn, Virginia, the world's largest data center cluster near Washington, D.C., but to Virginia Beach, 230 kilometers down the coast.

The IEIC wanted to create hubs in cities with "economies who have suffered, much like Pittsburgh, which lost its steel business", wrote Heiden in a manifesto in June. The internet was supposed to disrupt hierarchies and spread wealth, not create them and concentrate it.

"There Is No Crisis in Amsterdam"

Amsterdam took urgent action to control its data center development this summer. But a spokesman for deputy mayor Marieke van Doorninck, who imposed the ban on data centers, denied there had been an emergency that called for it.

"There is no crisis in Amsterdam", he told DCK. Amsterdam did have a problem with data centers, but it was nothing the government couldn't control. "There's not a lot of open spaces left in Amsterdam. And there's a big need for housing, especially social housing."

Instead of occupying floors in office buildings like they did 20 years ago, data centers today are huge dedicated buildings. "Permits are really easy to get. There's not much regulation of data centers."

Amsterdam is now drafting environmental rules for data centers, but the city isn't short of power, he said. There isn't a ban on data centers, just a temporary halt.

Business as Usual

The city had apparently called the halt with collegiate intentions, after it acquired a duty this year to set environmental targets by forming agreements with industry under the 2016 Environment and Planning Act.

Its planning system had been permissive before the Act, alderman Mariëtte Sedee complained when imposing the ban with Doorninck in June. It organised its planning by zones, each dedicated to some purpose. It gave permits routinely to applicants with proposals that complied with a zone's purpose. Amsterdam's data centers were thus erected liberally in business parks.

Year-long bans have been a routine planning instrument. Dutch cities typically put a year's halt on relevant planning permits while drafting rules.

The Environment Act made the planning system even more permissive and inverted it by removing prohibitions and setting instead environmental and social aims for different sectors. It assumed companies and others in the city would be trusted to act in pursuit of those aims, particularly if they helped draft them. The city would monitor compliance, but the system was based on the principal that when members of the city co-operated over the drafting of shared values, they could trust one another to act on them.

Stijn Grove, director of the Dutch Data Center Association (DDA), who has led industry talks with the government, said this was why data centers haven't caused a crisis in Amsterdam. "The Netherlands is a country where everybody's talking to each other all the time," he said. "There's constant dialogue between governments, between companies. We see what's coming. That's the strange thing about the announcement."

He said the industry has already been doing many of the things the government has been asking. "We're already one of the greenest sectors. Eighty percent of all contracted power in the Netherlands is from green resources. We've had an efficiency policy in Amsterdam for many years."

The halt was a complete surprise, DDA said in July.

But There Was a Crisis

Amsterdam did however have a crisis this summer, which raised its call to impose rules over data centers. The crisis was so dire that it threatened to break the governing coalition and forced resignations by a minister and the entire board of the city's flagship green power project, a municipal waste processing plant that produces heat for 35,000 homes.

AEB, the government-owned plant, had been forced to find a rescue buyer and emergency bank loans just as it was due to implement a €400 million upgrade of Amsterdam's heat distribution network. The minister who resigned, alderman Udo Kock, was a former economist for the international monetary fund who was reported to have insisted the AEB must be privatized to be saved from ruin. The ministers who opposed him, and remained in post, were said to be those of the socialist group whose deputy mayor called the ruling on data centers.

Doorninck said the rules would require data centers to give up the excess heat they produced as a byproduct of computing to feed the city's heat distribution network.

Amsterdam issued the data center mandate as the crisis reached its peak in July, when the AEB plant, tasked with processing 15 percent of Holland's rubbish, was partially shut down and piles of commercial rubbish piled up over the country. The Dutch Waste Management Association called it a national emergency. Truckloads of sewage sludge were being tipped into Amsterdam's North Sea canal because the plant could no longer process them. Waste was turned back to Britain and Germany. Landfill rubbish dumps were being re-opened. About 35,000 Amsterdam citizens were said to be at risk of losing hot water.

The data center industry had been offering the city its residual heat for the last three years, said Grove. But the city was unable to change its own rules to make it permissible.

Industry Cites Poor Grid Planning

The data center industry had also been telling the state-run power grid companies it didn't have enough power, he said. They had not invested in infrastructure needed to support the industry. But this hadn't yet become a problem. All Amsterdam still had enough power apart from Schiphol Rijk, the biggest of the three industrial parks where most of its data centers are.

One electrical substation serving data centers in Schiphol ran out of power, said Grove, but only on paper. Power companies buy reserve power at substations in amounts large enough to ensure they never run out when demand for computing power peaks. They have typically used only 40 percent of what they've bought. Schiphol ran out of allotments but still had plenty of power, and data centers reacted to the paper shortage by buying up all they could.

"Major data center operators reserved everything, so they still have room for growth," Grove said. "But for new market entrants that want to build new data centers, there is nothing administratively left on the substation."

Energy companies failing to plan for capacity increases has been a problem for many years, he said. "And if this industry continues to grow the way it's growing -- and it will -- there will be problems everywhere. Because grid companies have not designed the grid for this digital world and a large concentration of power in data centers."

Industry has been trying to find a long-term solution, but the state-run grid companies, Tennet and Liander, have not made it possible, he said.

Amsterdam's problem with data centers, however, was not power but perception. The government didn't understand the industry. Data centers brought 20 percent of foreign direct investment to Holland last year and powered 60 percent of the economy. Amsterdam is one of the largest global internet hubs in Europe.

When building a data center in Amsterdam five years ago, Heiden recalled, he had to pay to lay a cable to buy power in from a neighboring city. The same happened in Ashburn. Such electricity came at twice the price, and land in the major hubs was orders of magnitude more expensive than elsewhere.

Amsterdam planned to take underutilized industrial land back to help resolve its housing crisis. Steven McDowall, engineering director at contractor Deerns, said in the last year he had been refused permission to extend an Amsterdam data center into its unused car park, because rigid planning rules insisted space be reserved for parking -- even though data centers employ few people.

"The space is just wasted," he said.

The IEIC's initiative meanwhile coincided with efforts by cloud computing firms to lay their own cables to places like Virginia Beach and Eemshaven instead of Ashburn and Amsterdam. Google said in June it would put a €1 billion data center in Eemshaven. One of the undersea cables that made it a viable alternative to Amsterdam is called COBRA and partially owned by Dutch state-owned Tennet.

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About the Author(s)

Mark Ballard

Mark Ballard is an award-winning journalist who has been writing about technology and related business, law, and public affairs since 1993. Details of his work can be found here.


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