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According to a recent report by Business Week, the costs of cooling data centres and providing them with operational power is growing, leading Iceland to become a forerunner in the industry.

The North Atlantic nation is currently courting Google and Microsoft to try and lure them across the Atlantic to where energy is inexpensive and the climate somewhat cooler. Iceland offers cheaper operating costs for data centres because of the abundance of hydroelectric and geothermal energy, undeveloped land and a climate which makes cooling considerably more cost-efficient than in the US.

Business Week reports that the cost of the energy required by data centres in the United States has doubled between 2000 and 2006. The US government predicts that the $4.6 billion expense could double again in the next three years.

“The digital economy is pervasive,” says Andy Karsner, Assistant US Energy Secretary for energy efficiency. “The demands for computing will grow exponentially, but electric consumption can’t grow the same way.”

The growing need for power coupled with its rising price has led corporations to seek out more creative solutions. So far Google, Microsoft and Yahoo! are among the many international companies who have expressed interest in establishing data centres in Iceland.

Business Week predicts that data centre energy efficiency may be the determining factor in the dominance of either Microsoft or Google in the Internet search business.