Dozens of server farms have been at various stages of construction in Israel in the past year, in what has been marked out as one of the hottest, most profitable, and fastest growing trends in real estate in the country.
At least ten huge server farms will serve the world's biggest technology companies, such as Amazon, Google, Microsoft, and Oracle. The Israel real estate companies Azrieli, Yam Suf, and Electra, are already active in this area, and several others, among them Melisron, Bayside, and Amot, are warming up on the sidelines. The investment in this segment is estimated at NIS 8.5 billion, with operating expenses amounting to NIS 13.5 billion over the lifetime of the server farms.
The reason for all this is the move by technology companies, development centers of overseas companies, banks, insurance companies, and even the government, to transfer their computing infrastructures to remote servers hosted at server farms.
This has led to huge demand for the construction of server farms, which will see a greater and greater concentration of most of the personal, medical and financial data relating to our lives. The entry of foreign technology giants, together with the government's Nimbus cloud computing project, has only accelerated the process.
Regulation: Unlicensed server farms
According to consulting company 11Stream, demand for server farms today is four to five times the supply, and it is expected to grow nearly fivefold over the next three years, from 43 megawatts at present to 195 megawatts. The shortage is so great and the growth is so fast that the state is finding it difficult to keep up with all the planning and regulatory aspects of the phenomenon.
The ease with which anyone can set up a server farm and host critical information, with no supervision, and the regulatory difficulty of dealing with bureaucratic obstacles and a shortage of infrastructure, raise the question whether the time has not come for the government to regularize the construction and management of server farms.
"There are server farms operating in Israel with no business license," says Moshe Lasman, CEO and founder of Global Data Center, which is building and operating several server farms to host technology giants.
"An absurd situation has come about in which a new falafel stand on a street corner has to be able to produce a license, but no-one inspects a server farm holding sensitive information."
Whereas a telephony carrier or an internet service provider has to obtain the appropriate license from the Ministry of Communications, server farm operators in Israel need no special license, and there is no standard setting out specifications for a server farm, despite the sensitivity of the information stored at it.
Israel Electricity Corporation (IEC) regulations are not enforced. Among the server farms being built for the government cloud centers, there is a different specification for each center, and no uniformity.
The Israeli developers rely on foreign building regulations that meet international standards, among them the international Uptime standard, but there is no enforcement agency in Israel charged with ensuring that the standard is actually met, and in the end it is up to the customer to check thoroughly how the server farm is run before buying storage capacity at it.
All the same, it should be acknowledged that the server farms of the technology giants, such as Google and Amazon, bring with them technological innovation and international standards that were not here previously, and this has an impact in educating the market.
In the server farm sector, there is a need for a separate standard for the server farm operator and for the customer hosted on it who provides cloud services to other companies. Each has a different responsibility towards the customer and towards the operation of the installation, and in order to avoid breakdowns, or in order to ensure that breakdowns that occur are dealt with efficiently, this division of roles should be anchored in law.
Despite the lack of regulations, the developers' lives are not easy, and they encounter a long bureaucratic process when they come to apply for a building permit from the municipality or local authority, or from the District Planning Commission.
These procedures can take between a few months and two years, depending on who sits on the local council, and the local politics and interests involved.
Environmental impact: Noise and radiation
The petition filed by the residents of Moshav Bnei Zion against approval of the construction of the server farm that Yam Suf is building for Google close to their houses serves as a test case for the question whether server farms have impacts on the environment that mean that they should be regarded as polluting enterprises.
So far, server farms in Israel have been set up in office buildings and in industrial zones, such as the server farm for Microsoft in the Ligad industrial zone in Modi'in, and the ones for Amazon in the industrial zones at Har Tuv, Tnuvot, and Shoham. But the land shortage in the center of Israel - where all the currently planned server farms are located - obliges the developers to use land close to residential areas as well.
The Bnei Zion residents hired an engineering company that found that in order to avoid noise and radiation nuisances, it was necessary to live at least half a kilometer from the server farm. In its report, however, the company referred to existing server farms in Israel, and not to the one that is due to be constructed by Yam Suf. For its part, Yam Suf promised to use the latest technology that is already implemented in the US and Canada, and that includes silencers that muffle the sound of the chillers, which are the main source of noise from a server farm.
The environmental approval process for the server farm at Bnei Zion has not yet taken place. In order to advance the processes of obtaining a building license from the local authority and from the Ministry of Environmental Protection, the company will have to demonstrate, through acoustic and radiation experts, that the server farm does not represent an environmental hazard.
The dispute with the server farm owners over whether a "Form 4" certificate from the local authority, certifying that a structure has been built in accordance with the building permit, is sufficient, or whether a government agency is needed to inspect the pollution emitted from the farms, is a continuing one. From a bird's eye perspective, a switch of computing resources from server rooms scattered among individual companies to centralized server farms reduces the overall amount of pollution emitted from them.
Power consumption: High-tech, or polluting plant?
Many people tend to see server farms as high-tech offices, but the truth is quite different: these are installations that employ few people, and mainly contain servers, huge computers that emit a great deal of heat, surrounded by chillers designed to keep the temperature low. Server farms are therefore significant consumers of electric power.
Server farms in Israel currently consume over 40 megawatts out of the 17,000 megawatts produced by IEC. The sharp growth in the number of server farms already presents a challenge to the national grid. Within a year or two, the large server farms being built for companies like Amazon and Microsoft will consume power at a rate similar to that of whole neighborhoods.
To provide service, server farms need to be constructed close to many power lines and receive uninterrupted power supply, at least ten kilowatt hours for each rack of servers. Infrastructure of that standard is hard to come by in Israel, and the developers are dependent on IEC's rollout plans.
Lasman believes that IEC or the Ministry of National Infrastructures, Energy and Water Resources should collaborate with developers like him in the periodic plans for deploying the power grid. "Transparency on places where high-quality power infrastructure will be deployed could lead developers to plan for construction in these areas, unlike what happens today, when you choose a location and then ask whether power lines will reach it," he says.
"IEC ought to provide a power production forecast for several years ahead, in order to provide certainty for server farms, which are consuming more and more power. "
To ensure continuity of power supply, the large server farms of the major corporations, such as that of Amazon, build their own local power plants to generate electricity, which is not only costly, but also takes time: a two-year wait for government and local permits.
Not all server farm developers can afford this, nor are they obliged to do so. Several years ago, the government announced that factories would be connected to the natural gas transport network, which could significantly reduce the costs of operating the server farms, but server farm managers around Israel to whom we spoke report that they have yet to obtain access to the network. Only a few months ago it was reported that the total number of factories so far connected to natural gas supply was 113, far from the target of 450 factories that the government set for itself six years ago.
11Stream co-founder and consultant Yonit Goldberg, who specializes in business development for server farms and communications infrastructures, that opening up the power market to direct connections to power producers, rather than via IEC, is of supreme importance. "Combined with extensive rollout of fiber optic cable, this could accelerate the siting of server farms in outlying areas as well, and considerably reduce power costs," she told "Globes".
Furthermore, in order to deal with power shortages during emergencies, a suitable mechanism needs to be found for checking the quantity of power sold to server farm customers in order to avoid situations in which customers are left without power that `has been ordered.
Location: Between Beit Shemesh and Tirat Carme
Since the reserves of land in central Israel are small and expensive, the right thing would be to construct server farms in outlying regions, but, as mentioned, a shortage of reliable power and communications infrastructure in these areas casts a shadow over such initiatives. So it comes about that all the server farms currently under construction are located between the Sharon in the north and Beit Shemesh in the south.
According to 11Stream's calculations, constructing server farms in the outlying regions, in current conditions, could add 22,000 jobs during construction, and 3,000 jobs thereafter in day-to-day maintenance.
It's true that the customers who visit the server farms from time to time for maintenance purposes don’t like travelling long distances, and for server farms that provide service to many customers it's important to remain in the center of the country, but it would be right to encourage server farm construction further away, through tax and other incentives, if only to support employment, deployment of power and communications infrastructures, and also to encourage technology companies looking for very fast connections and low latency, such as fintech companies and market trading platforms, to move to outlying areas.
Places like Ashdod and Ashkelon, where there are power plants and seawater, have plenty of power and cooling water to offer. In the Sharon area, where server farms are being built for Amazon, the server and telecommunications companies help in connecting residents to high-speed internet.
"The best solution for regulating all the construction and activity in server farms, and at the same time helping developers and operators in order to encourage further construction, is to set up a dedicated committee involving the relevant government ministries, to make recommendations and to plan five to ten years ahead," Goldberg says. "Such a committee would discuss the many aspects of constructing server farms in Israel, from forecasting demand and estimating power and communications needs, finding suitable reserves of land, encourage server farm construction in the periphery, adherence to international standards on constructing and operating server farms, down to supervising the sale of electricity by server farm owners."
Published by Globes, Israel business news - en.globes.co.il - on November 1, 2021.
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