'Data storage in East Siberia is one of the cheapest options due to the availability of power and land'. Picture: Denis Belevich

Siberia’s abundant hydropower could be harnessed to transform the region into one of the world’s leading technology giants. Russian billionaire Oleg Deripaska, who made his fortune selling natural resources, has ambitious plans to create a string of data centres using the cost-effective energy source.

President Vladimir Putin has ordered through a new law that requires all companies to store electronic data on their Russian users from September.

But with energy accounting for almost a third of operating costs for the new data centres, Deripaska sees an opportunity to utilise the economic advantages of the Siberian region. Historically power prices in East Siberia have been cheaper than in the rest of the country, in part because of the collection of hydropower plants, and the availability of coal.

Deripaska’s first new data centre is set to be completed later this year in Irkutsk, beside Lake Baikal where the billionaire’s En+ Group already operates three dams.

With a geographical location closer to China and Mongolia than Moscow, he insists he will seek customers from both within Russia and Asia, which fits in with the Kremlin’s recent strategy of looking eastwards for business instead of to the West and US.

However, many analysts say there are risks, particularly with reducing water levels at dams forcing power prices upwards. Then there are concerns that the 5,000km distance from Russia’s main business hubs in Moscow could work against the data centres.



Irkutsk, Eastern Siberia. Picture: The SIberian Times

With speed critical for many businesses, such as banks, who need their web pages to work quickly the Siberian centres might be better placed only for data back-up services. But Mikhail Popov, a senior analyst at Moscow-based technology and research consulting company IDC, said: 'Data storage in East Siberia is one of the cheapest options due to the availability of power and land'.

Mr Putin signed the new data storage laws on December 31 amid a push to make more industries more self-sufficient following the recent sanctions from the US and Europe. As part of this, Moscow is tightening regulations on foreign companies and many major firms, such as Facebook and Twitter, will need to rent as many as 1,500 new server racks to comply with the new Russian legislation.

That alone could see overseas firms paying out as much as $45million (2.9billion roubles) a year to Russian data centres. Recent figures show the market for commercial data centres already stands at about $456million (29billion roubles) a year, with growth of as much as 20 per cent expected in 2015.

Deripaska, who made much of his wealth from aluminium in the 1990s, is Russia’s 13th richest man with a net worth of more than $8billion (524billion roubles).