The centre will have a dedicated substation and consume 280 megawatts (MW) of power, making it the country’s second-biggest electricity user after the Tiwai Point aluminium smelter, consuming about 6% of New Zealand’s total annual electricity demand.
Energy-hungry data centres are a boom industry in New Zealand, with international companies keen to reduce their climate impact by using the country’s renewable electricity.
Technology expert Mark Laurence said the term “AI factory” was coined by Jensen Huang, the chief executive of American technology company Nvidia. It describes a data centre that was built to serve AI technology, through training and inference.
AI training involved teaching a model by feeding it datasets to learn patterns, while AI inference was the application of that knowledge.
“Take ChatGPT, for example – whenever OpenAI decides to train their next version of ChatGPT, they essentially take mountains of data, give it all to their algorithms, throw it all into a data centre and that data is processed for months and months by the AI algorithm to create the next version of ChatGPT,” Laurence said.
“Every time we use one of these AI tools, like ChatGPT or Copilot, every time we type in something and press enter, that is called inference,” he said.
Laurence runs Ten Past Tomorrow, a strategic advisory and AI training company with the aim of increasing AI literacy and capability in New Zealand.
He said demand for training and inference was increasing as more people used AI tools, with New Zealand well-positioned geographically and climatically to host data centres to do that work.
“Data centres use a lot of water and because the massive computers inside them generate so much heat, they need to be cooled down as well,” Laurence said.
In Invercargill, the average annual temperature is around 10C, which means those centres can simply be cooled with the outside air, he said.
The Invercargill facility is not the first large-scale data centre in New Zealand. Microsoft opened a data centre in Auckland in 2024, while Amazon Web Services (AWS) spent $7.5b building a cluster of data centres in the city.
Laurence said to illustrate what the AI factory was capable of, once complete, it would have the capacity to process around 960 million ChatGPT conversations per day, which was between 5% to 10% of the conversations processed by the AI chatbot globally each day.
Who benefits from the data created in these centres?
Laurence said Microsoft and AWS were supplying output from their centres to New Zealand organisations and the public service, but output from the Datagrid centre would instead be piped offshore through a subsea cable to serve overseas markets.
Datagrid has not said who its customers will be, or how the information its centre produces will be used.
Laurence said he wanted to see a Government commitment that New Zealand was able to use and benefit from the technology that centres like the Datagrid’s AI factory were powering.
He said the country was at risk of becoming “AI-illiterate” and statistics showed New Zealanders were not being trained at the rate or the capability that most developed nations around the world were in terms of being able to use AI tools, which meant the country was falling behind in its ability to keep pace with the international market.
“We’re still a nation that’s using AI to change the tone of an email and summarise long documents, while the rest of the world is pulling ahead in terms of redesigning whole workflows and injecting agentic AI at the full edge of its capability.
“It’s exciting to have the infrastructure being built, particularly when it contributes to our economy, but what needs to go hand-in-hand with that is national-capability training programmes so that we can actually harness the outputs of this infrastructure and use it to the benefit of our people, our companies, our organisations and, ultimately, our economy.”
A project years in the making
Southland Business Chamber CEO Sheree Casey said the new data centre provided an opportunity for the region to broaden its economic horizons.
“Once operational, Datagrid estimates it could generate hundreds of millions annually in data-service exports and add approximately $60 million to GDP [gross domestic product] each year,” she said.
The construction phase alone was expected to create more than 1200 skilled jobs and inject around $4b into the economy.
Casey said Southland had a strong foundation in traditional industries and adding a “weightless export” sector, where the region delivers digital services globally, could be a natural complement.
Transpower said it was confident the national grid could meet the energy needs of the new data centre.
Executive general manager of grid development Matt Webb said while the centre required a big load, there was a lot of new electricity generation emerging and Transpower was responsible for facilitating a balance between the two.
He said the national grid operator had been in serious discussions with Datagrid for a year or more and a formal connection application process was now underway.
Webb said there were a number of significant Southland wind projects going through the consenting process with solar projects.
Transpower expected 1300MW of new projects (generation and battery storage systems) to be commissioned in 2026, increasing capacity by around 13%.
Webb said having a confirmed electricity load of that size gave investors confidence in renewable energy investments.
– RNZ