The data centre dilemma: How Scotland can set its own path
Minister Hannah Mary Goodlad has an opportunity to make Scotland a model for how small countries can navigate between China and the US
When Hannah Mary Goodlad launched her successful campaign to be Shetland’s next MSP in Holyrood, her manifesto said that the northernmost part of the UK was “not a copy-paste of what happens in Scotland”.
“We need something Shetland-specific,” she said, listing lessons that could be learned from the Faroe Islands on the rollout of 5G and tunnelling – an ambition that this week started to move forward with initial approval by the Shetland Islands Council of plans for tunnels to Yell and Unst.
This week, Goodlad used the same phrase to describe the approach she wants for Scotland as she weighs up how to tackle something far bigger: data centres. Scotland would not “copy-paste” from the US or China but would “do this in our own way”.
Exceptionalism may end up being a career-defining asset as Goodlad, minister for public finance, grapples with what has become the biggest business policy issue to confront the Scottish government since it was formed four months ago.
Does Scotland need large, so-called hyperscale data centres. And if so, why, how many, and where?
A data centre rush has seen as many as 30 data centre plans emerge from developers such as Apatura, DataVita and ILI Group, most dotted across the Central Belt. Twenty-three of these are hyperscale facilities, with 21 already in the planning system.
As much as 20 per cent of the UK’s future data centre demand could be located in Scotland, according to the National Energy System Operator (NESO), taking advantage of its cooler climate and renewable energy, and soaking up power wasted through curtailment payments.
Attitudes from campaigners in communities affected – often in or next to farmland – range from those implacably opposed to others who want a strategic approach to data centres, taking into account noise, heat generated, job creation, and energy consumption.
It’s hard enough to make sense of all this without the additionally polarising effects of US-China tech rivalry and the spectre of rogue AI bots.
Yet how Goodlad approaches data centres could make Scotland a model for how small countries could thoughtfully navigate this increasingly acute dilemma as the US and China face off over the future of AI.
On the rationale for data centres, Goodlad was clear in a parliamentary debate last week. The world was becoming ever more dependent on digital infrastructure. Data centres supported cloud computing, research, advance manufacturing, financial services and the delivery of public services.
This matters because it fits a new narrative of a Scottish economy moving from legacy sectors like oil and gas, petrochemicals and steel to a digital industrial base.
As Glasgow Labour MSP Paul Sweeney pointed out at that debate, data centres are “economic enablers, [underpinning] everything from the national health service to our world-leading university research, as well as the day-to-day operation of Scottish businesses”.
Moreover, a small nation – whether devolved or independent – now needs to have a strategy for data and AI sovereignty. This could mean harnessing data centres for both domestic UK purposes, including reducing reliance on vulnerable subsea cables, and offering yourself as a regional hub.
New Zealand, with a similar population to Scotland’s and abundant renewable energy, offers one model. Consultancy BCG suggests that the country could capture $70 billion over the next decade by attracting a share of international investment beyond domestic demand and offering itself as a regional data centre hub.
Data sovereignty also means hosting data centres for specific industrial purposes critical to national security, chiefly defence. David Green, Liberal Democrat MSP, told parliament: “Data sovereignty is [ …] a matter of national security, and outsourcing our data infrastructure overseas risks leaving our defence and intelligence capabilities vulnerable”.
All this points to having an ecosystem made up of the right mix of data centre types, from hyperscalers like AWS and Google to data centres populated by smaller so-called “neo-scalers” with specialised, domestically developed computing capability, such as London-based Nscale.
“Having this type of mix is based on a trade-off. You can’t obviously replicate Google here. But we also need to have our own thing so by doing this we get towards a more sovereign ecosystem,” says Steven Drost, co-founder of startup accelerator CodeBase.
Some backers argue meanwhile that Scotland risks missing a window to attract global capital that has plenty of options elsewhere.
Goodlad, a former executive at Norwegian energy group Equinor, recognised this last week when she rejected calls from campaigners and the Greens for a data centre moratorium, saying it “would send the wrong message to anyone looking to invest in Scotland”.
Yet recent wobbles in the global debt markets and their effect on data centre financing show that policymakers may not be under as much pressure as they fear. Banks are starting to farm out the risk on trillions in data centre lending, wary of how much will actually be built. A popular anti-data centre backlash in the US is becoming politically toxic to the business case.
Echoes of that backlash in Scotland mean that getting data centre policy right is key, says Professor Shannon Vallor, Baillie Gifford chair in the ethics of data and AI at Edinburgh University. “From the public standpoint, these large [data centre] corporations have a very poor record of being honest and transparent in the deployment of these systems. So the public is right to be cautious.”
For her part, Goodlad’s no “copy-paste” philosophy indicates she recognises that balance. “This is an opportunity to get things right from the start … to ensure we bring communities with us. I was once taught the phrase that you measure twice and you cut once – and that is exactly what we are doing.”
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