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Associate Prof David Eyers of the University of Otago’s department of computer science has offered a layman’s guide to data centres. PHOTO: CHRISTINE O’CONNOR

The rise of the data centres.

They can use enough electricity to power Dunedin.

The largest of them will use 150MV — that is enough to supply 120,000 households with their electricity needs. Whether you are for or against their introduction to New Zealand, or don’t really have an opinion, most would agree that is a lot of juice to supply just one centre.

To find a power source that can supply that kind of electricity, companies, both domestic and international, are looking to the South.

The reason they are looking there is simple.

The South Island may have excess power courtesy of New Zealand Aluminium Smelters (NZAS).

That remains a case of: will or won’t NZAS’ massive Tiwai Point Aluminium Smelter remain open beyond 2024? NZAS is the joint venture between majority stake-holder and the world’s second-largest metals and mining corporation Rio Tinto Group and the Sumitomo Corporation Group, a Japanese "sogo shosha" (general trading company), and is due to close in 2024.

In February, Rio Tinto indicated the smelter could keep operating past its previously signalled closure date off the back of spiralling prices for aluminium.The smelter is powered exclusively by the Manapouri Hydro Power Station, the largest hydro-electric power station in New Zealand.

That leaves its owner, state-owned electricity generator Meridian Energy, potentially looking for business elsewhere.

Meridian is not alone — other power generators are looking to this market.

Regardless of the future of Tiwai Point, those behind the development of the data centres are forging ahead.

Of the four centres two plan to mine cryptocurrencies.

Those data centres focused on cryptocurrencies are not without critics, who see virtual currencies’ price volatility and high energy consumption for mining activities as causes for concern.

It is simply that need for energy — in the form of electricity — that is both the reason and driver for the South being an attractive proposition for such ventures.

The players

DataGrid

One of the first to step up to the plate was DataGrid, which announced plans to build a hyper-scale data centre in North Makarewa near Invercargill in December 2020.

The build carries an estimated price tag of up to $2billion.

DataGrid is founded by Hawaiki Cable’s Remi Galasso and Malcolm Dick, the founder of CallPlus Ltd. Both have a business pedigree.

Hawaiki Cable is a 15,000km telecommunication cable connecting 356 million consumers in Australia, New Zealand, American Samoa, Hawaii and the continental US while CallPlus was a telecommunications company providing phone, calling, internet, mobile and advanced connectivity services to New Zealand businesses.

As DataGrid, the company has bought a 43ha site in North Makarewa with a view to building up to 10 modules each 6500sq m in size (which will house the main components of a data centre — the IT infrastructure) and consume about 150MW — all from the Manapouri station.

Mr Galasso has said he is hopeful of getting resource consent from the Southland District Council to forge ahead with the build in the second half of this year.

Photo: Getty Images

Also eyeing Manapouri’s power is the newly formed Kiwi company T4 Group, which has plans for a $50million hyper-scale centre in Southland, the exact location of which is yet to be disclosed.

Established in 2021, the company has a vision of providing regional New Zealand with "access to collocation data centres and reliable, secure, green and economically viable data network solutions".

However, the company also plans to take electricity from the Pioneer Energy-owned Monowai Hydro-electric Power Station.

Using power from both stations, the company will provide a tier 4-quality data centre, New Zealand’s first, which will have 100%-effective up-time, in addition to its current tier 2 and tier 3 operations based in the North Island, which are not operational all the time.

T4 Group director David Simpson says the design of the tier 4 centre will maximise cool natural airflow to significantly reduce reliance on powered cooling systems, while warm air will be extracted and used by a large local business.

Combined with its use of hydro power, it will also be the country’s first carbon-neutral data centre.

"T4 Group is not greenwashing its operation. Currently, data centres in New Zealand rely heavily on coal as a secondary power source, which companies offset by purchasing carbon credits," Mr Simpson said.

In a further commitment to the South the T4 Group head office will be located in Southland.

GridShare

Energy generated at Monowai is also central to energy start-up GridShare’s plans for a data centre performing bitcoin mining.

Beginning operations this month, it is backed by an initial $2million capital raise to launch the project .

It will potentially use up to 30% of the power station’s generation capacity.

Started by three Kiwi entrepreneurs, Tom Algie, Sam Kivi and Craig Lusty, the company has ambition.

Their vision is to accelerate renewable energy growth and become the premier green blockchain and digital currency infrastructure company for New Zealand and abroad.

Its facility is a 2MW data centre that can be transitioned into cloud-based high-performance computing in the future.

Working with Pioneer Energy is a step towards supporting the transition to 100% renewable energy in New Zealand, GridShare chief executive Tom Algie says.

As he tells it, the company will use the opportunity to test technology to ramp power consumption up and down in real time, which bitcoin mining is suited for.

This will provide a powerful solution to the problem of integrating renewable generation with the electricity grid.

"Renewables need a customer who can buy power when the grid doesn’t need it and turn off during peak periods."

He believes GridShare is that customer.

Lake Parime

In Central Otago, construction has begun on a crypto-mining facility to be built in the shadow of the Contact Energy-operated Clyde Dam, UK-based digital infrastructure start-up Lake Parime citing the area as an ideal base.

Made up of eight containers housing nearly 3000 servers, Contact’s 100%-owned subsidiary Simply Energy is managing the project and work on it began late last month.

Its cost has not been disclosed.

Lake Parime will operate the data centre under a lease agreement with Contact Energy and it is expected the facilities will operate only intermittently, when variable renewable energy sources mean there is excess power to use.

Lake Parime pitches itself as using excess renewable energy by shifting that power into one of its modular "Powerbox" data centres, and using that to run high-performance computing applications such as machine learning, visualisation and modelling, blockchain and cryptocurrency.

What did you just read?

Dissecting the "tech talk" is possibly one of the biggest challenges for the uninitiated.

Cue the University of Otago’s Associate Professor David Eyers, who can be found in the university’s department of computer science.

According to Prof Eyers, a data centre is just a large number of co-located computers.

That is energy hungry.

The co-location provides economies of scale in terms of cooling systems and power management, he says.

The latter includes back-up power, and potentially connection to multiple independent parts of the electricity network.

A final ingredient is communications and usually data centres will be sited to have multiple independent routes of internet connectivity.

"Hyper-scale" is simpler than it sounds.

"Hyper-scale essentially just means extremely big, although usually hyper-scale facilities will also be more highly efficient than smaller data centres, and easily expandable than smaller data centres, again based on economies of scale."

The uses of a data centre are varied, Prof Eyers says.

"The computers within the data centre are going to be used for something. It could be storage and databases, but often it is also that those computers create the responses that you receive when making requests from your computer to the internet."

When it comes to cryptocurrency mining, he has reservations.

"The potential use of data centres to ‘mine cryptocurrency’ involves computers burning through power in a race to solve computational puzzles that themselves have no inherent value.

"Winning such a race bestows the right to add a block of transaction records into proof-of-work blockchain ledgers such as for bitcoin."

He says proof-of-work was designed paying no attention to its environmental effects.

"My view is that promoting use of proof-of-work is environmentally irresponsible at a time when the planet collectively has more important uses for energy, renewable or not."

Low-energy alternatives to proof-of-work are on the horizon, although he is not aware they have been used successfully in a bitcoin-scale cryptocurrency as yet.

Prof Eyers’ concerns about the energy use of cryptocurrency are not without merit or justification.

Last year, the Central Asian nation of Kazakhstan suffered a series of power outages after its post-Soviet era national grid fried — unable to keep up with demand from cryptocurrency.