[Viewpoint] Cheap power a double-edged sword

The government is aggressively courting Microsoft in hope of cajoling the U.S. technology giant into building a data center in Korea. Choi See-joong, chairman of the Korea Communications Commission, met with Jean Philippe Courtois, the head of Microsoft International’s global sales and marketing services, last week. Choi pitched Korea as the premium location for a data center due to its advanced information technology infrastructure, high rate of computer literacy and low vulnerability to natural disasters such as tsunamis. By all accounts, Courtois listened to the speech, nodded out of civility, and that was that. Choi made a similar request during his visit to the company in the U.S. in September.

Companies use data centers to store various kinds of information and technology equipment, such as servers or networking systems that back-up their Internet services around the world. They are basically libraries full of thousands of pieces of computer hardware that need to be continuously powered day and night. A huge cooling system is also needed to prevent the computers from overheating. Such facilities need to be kept at between 18 and 21 degrees Celsius, meaning they require vast amounts of electricity.

A data center used to power a cloud computing service needs around 60,000 megawatts per hour all year round. Just five such facilities would eat up the same amount of electricity as a city with a population of 100,000.

Internet data centers fell under the spotlight after Japan’s Softbank announced it will use one of KT’s data outlets in Gimhae, South Gyeongsang, shortly after a tsunami swamped a nuclear power station in an eastern region of Japan in May. Softbank’s Masayoshi Son made the decision because of Korea’s geographic proximity to Japan and the cheap cost of electricity here. Highly competitive power rates have become one of the reasons why foreign corporations are attracted to Korea.

This makes the unprecedented power outage that befell the country several months ago all the more unnerving, and there are concerns of a possible repeat this winter as operating reserves are inadequate. The cheap rates - electricity sells in Korea for 10 percent below the cost of production - have fanned excessive consumption, but the limited supply will not be relieved until new-generation grids are completed in the next three to four years. However, the government has been ignoring calls to raise the utility rates in order to rein in excessive demand and stave off an energy crisis, and has instead focused on luring foreign companies by selling electricity cheaply. These are believed to have given the government an advantage in its recent business discussions with Google, Intel, IBM and Microsoft. Also attracted by the favorable rates, Japan’s Toray announced it will build a plant to mass produce carbon fiber in Gumi, North Gyeongsang.

Meanwhile, the deficit at the state-run Korea Electricity Power Corp. continues to pile up. The power monopoly incurred an operating deficit of 1.8 trillion won ($1.6 billion) last year, while its overall debt exceeded 33 trillion won. The government hangs on investments of foreign capital these days, as it knows this can create jobs and raise tax income.

But while manufacturing bases can boost jobs, even large data centers require small labor forces and investments. Servers replace manpower, and most of the centers’ equipment is brought over from abroad, rather than being bought in Korea. If servers in one container go down, the entire container is replaced. In other words, data centers just guzzle power, and threaten to do the economy more harm than good. The only benefit is the positive publicity they bring the government, which is keeping an eye on next year’s parliamentary and presidential elections.

*The writer is an editorial writer of the JoongAng Ilbo.

by Shim Shang-bok