Five high energy use data centres could be dotted across the South, including one in Cromwell, under plans supported by a government investment agency, the Otago Daily Times can reveal. In March, an AI data centre being built near Invercargill by Datagrid was the first in New Zealand to get the go-ahead in a consent process that did not require public consultation. In response to a query from the Otago Daily Times, the government agency Invest New Zealand, which promotes overseas investment in New Zealand, including from data centre developers, said Twizel, Ohau, Geraldine and Cromwell were four possible locations for data centres. Consumer NZ Powerswitch manager Paul Fuge said heavy demand for renewable energy from AI data centres could put further pressure on New Zealand’s grid and energy prices. “We could shoot ourselves in the foot if we are not careful … data centres would need to fund [the power] generation they require, rather than just eating into the capacity.” An Invest New Zealand spokesperson declined to reveal data centre building sites, saying it was “third-party commercially sensitive information”. The four towns are in Central Otago and the Mackenzie District, areas Invest New Zealand calls “advantaged data centre zones”. Invest New Zealand did not rule out other, additional locations for data centres in these areas. The spokesperson said the zones were indicative of areas where there was “a convergence of existing grid capacity, energy infrastructure, proximity to back-haul fibre and further renewable energy development potential”. The Datagrid centre will require 280 megawatts (MW) at start up and chief executive Remi Galasso expressed a goal to ramp up its capacity to 1000MW. An internal Ministry of Business, Innovation and Employment (MBIE) briefing last year to Minister for the South Island James Meager explained the goal was “almost double the consumption of the Tiwai Point smelter”, New Zealand’s largest single electricity user at present. The Electricity Authority (EA), which is responsible for managing supply of electricity to meet demand, said it had so far only allowed for the Datagrid centre to use 280MW. An EA spokesperson said the authority had “not been informed” of the data centre’s final capacity. The agency had logged 12 other data centres likely to come on stream across New Zealand. However, it was unable to say if these would be AI data centres nor where they would be located. “Due to confidentiality requirements, we can only provide details for individual projects that have already been made public which, in this case, is only the Southland data centre.” The EA said it knew of eight renewable energy generation projects in the South Island that had been consented to provide additional power. Five were solar power projects and three were wind power projects, collectively contributing 857MW. The Invest New Zealand spokesperson said the Datagrid centre, which included the first international subsea cable connection to the South Island, was the catalyst for the other centres’ development. “Without a subsea cable landing, data centre development becomes more challenged when compared to the North Island,” they said. Datagrid has so far shored up 140MW from the grid by signing a 15-year power purchase option agreement with Mercury. Mercury chief executive Stew Hamilton said such agreements gave his company confidence to keep investing in renewable electricity, which homes, businesses and communities would need in the future. “For example, our expansion of Kaiwera Downs Wind Farm was confirmed following the signing of a long-term agreement with New Zealand Aluminium Smelters [which runs the Tiwai smelter]. “Having more generation in the market also helps build resilience and keeps downward pressure on prices for everyone.” However, Mr Fuge said New Zealanders’ energy bills were already too high. An outmoded wholesale pricing system, which set the price of grid electricity at the price of the fossil fuel-powered electricity entering the grid, was keeping consumers’ energy prices high, despite more than 90% of New Zealand’s grid electricity coming from renewable sources, he said. Consumer NZ was petitioning the government to change the system, he said. The government is also planning a liquefied natural gas (LNG) storage facility for imported gas. University of Waikato research associate Earl Bardsley said New Zealand could avoid having to use LNG in the grid if it did not have the additional pressure of extra load projects — such as data centres — demanding a high, stable, baseload of green power supply. Without such projects, the country could likely cope by requiring its hydro lakes to be full before winter — to ward against dry winters causing low-water levels — and by consenting a fast-tracked Lake Onslow hydro project that could store water and release it during dry times. However, Mr Bardsley said the Lake Onslow and other hydro schemes had a limited capacity compared with hydro schemes in Norway and onboarding energy-hungry data centres now would mean trouble because New Zealand’s hydro lakes, even when full, could not store a lot of energy. ©Allied MediaA small wetland on Taylor road marks one boundary of the proposed Makarewa wetland north of Invercargill. Photo: Stephen Jaquiery “So, if we have a dry winter then the hydro lakes must get drawn down faster to provide green firming power for all those new centres. “That translates to higher winter wholesale power prices as coal or gas must then kick in. “I doubt the data centres would like to have power from LNG and it would be rather ridiculous for us anyway to import LNG for expensive power for data centres, which only employ a few people.” EA general manager wholesale and supply Hayden Glass said the authority kept a “close eye” on large loads coming into the system and “neither data centres nor new generation [could] be built overnight”. “We expect the market framework to support investment in new generation and firming as conditions change, including if growth in demand is higher than current expectations.”
