Construction of Google's EUR600 million hyperscale data centre in Norway
For a number of years, the Norwegian government has worked internationally to position Norway as an attractive nation for data centres. Data centres, which contain components for organising, processing, storing, and transporting large amounts of data, are becoming increasingly important in our digitalised and technologically advanced world. As part of this effort, the government launched its own data centre strategy in 2018, the first of its kind globally.
The strategy, which was updated in 2021, aims to attract investments to data centres and other data-based industries that can create jobs and increase value creation in Norway.1 The strategy highlights Norway’s advantages as a data centre nation, including access to renewable and competitive energy, stable framework conditions, and a solid infrastructure. Since the strategy was launched, investments in Norwegian data centres have increased, and new measures are planned to stimulate growth in the data centre industry while ensuring sustainable development.
Google’s recent announcement of the establishment of Norway’s first hyperscale data centre, valued at EUR600 million, is a good example that the government’s strategy has been successful. The data centre, which is to be operational from 2026, will be one of the largest data centres in the world and handle a substantial part of Google’s global data storage, including images, videos, music, emails, and search history. The construction costs for the data centre are estimated by Deloitte2 at about EUR189.5 million. Google has already entered into a major contract for the groundwork with the consortium of Skanska Norway and its wholly-owned subsidiary Marthinsen & Duvholt, valued at NOK 1.1 billion (approx. EUR94.7 million).
The operation of the data centre will demand a significant amount of electricity, estimated to be 5% of Norway's total electricity usage. The construction of the data centre will, as a consequence, demand a significant need for expansion of the Norwegian power grid. In addition, it raises the question of whether Norway, as well as other countries, should to a greater extent introduce statutory requirements for the utilisation of surplus heat to promote energy efficiency and sustainable power production development.
This article delves deeper into the main construction contracts utilised in Norwegian data centre projects and the need for an expansion of the Norwegian power grid.
Collaboration contracts in Norway
Land-based construction projects in Norway have traditionally been executed using negotiated standard contracts (agreed documents) where the risk between the parties is reasonably balanced. When constructing data centres in Norway, these standard contracts are also used as a basis, combined with more tailor- made conditions. In addition to these sets of rules, there is a growing tendency for parties to enter into collaboration contracts (NO: samspillsentreprise). A collaboration contract is characterised by early involvement of the contractor, dialogue, trust and transparency. Opting for this type of contract offers numerous advantages, such as making use of the contractor's knowledge and experience, enhancing value creation and quality, as well as reducing costs and construction time.
Collaboration contracts are typically carried out in two phases. In the first phase, the parties work together to develop the project by exploring opportunities, risks, and optimised, cost-effective solutions. The aim of this phase is to establish collaboration between the client and the contractor at an early stage, preferably before the client has decided functional requirements and other requirements or solutions. In phase 2, the contractor performs the construction work. During this phase, it may vary whether the close collaboration from phase one continues, or if the construction phase is carried out as a traditional construction contract.
If the collaboration is to be continued in phase 2, the remuneration format is usually based on cost-plus with an agreed target price. The target price is an estimated cost for the project that the parties determine in consultation in phase 1. If the total cost turns out to be lower or higher than the estimated target price, the savings or additional costs are to be distributed between the parties based on an agreed distribution key. The experience of this model has so far been that it gives both contract parties incentives to focus on a common goal, and that it is less likely that disputes will arise during the project.
In data centre projects and other construction projects where the end customer’s needs can be affected by technology evolving at a high pace (such as battery factories etc.), the collaboration model also has the benefit of being more flexible in terms of allowing the design and scope to be adapted during the construction phase.
Expansion of the Norwegian power grid
Google aims to meet the demand for the enormous amounts of power by using renewable energy, in line with the company’s goal to become fossil-free by 2030. This is one of the reasons why Norway is an attractive location for this project. Mainland Norwegian power production is virtually emission-free. Hydropower accounts for most of the electricity production in Norway (88 %)3, along with the increasing development of wind power (11%)4. Google has already been granted 240 megawatts for operation of the centre but has applied for access to a total of 840 megawatts. Such power consumption will make the data centre the largest consumer of power in Norway and will demand a significant expansion of the Norwegian power grid, involving the expertise of international stakeholders.
Data centres consume cast amounts of electricity and generate heat that can be reused. To achieve better energy efficiency, questions have arisen in Norway as to whether there should be legal requirements for utilising excess heat from data centres. In Norway, a legislative proposal for cost-benefit analysis regarding excess heat utilisation has been developed, although this has not yet been adopted. The environmental challenges facing the world today suggest that countries should focus to a greater extent on reusing excess heat, which reduces the burden on the environment and is a more cost-effective energy source. In Google’s announcement of the facility in Norway, the company has stated that there are plans to reuse excess heat, potentially reducing the need for power grid expansion.
1 Norwegian Ministry of Local Government and Modernisation, "Norwegian data centres – sustainable digital powerhouses"
2 Deloitte, Norway Data Center Economic Impact Study
3 Numbers from the Ministry of Energy
4 Numbers from the Ministry of Energy
