But the big data centres required by AI are proving a hot potato overseas because of the huge amounts of electricity they consume.<\/p>\n
Last month, Ireland\u2019s the Journal reported that the South Dublin County Council had passed a motion calling for a moratorium on new data centres in the area unless they operated wholly from renewable energy sources.<\/p>\n
Most of Ireland\u2019s data centres are in Dublin, with at least 30 of them located in the South Dublin County area.<\/p>\n
In October, the Financial Times reported that the US power giant NextEra had agreed to reopen a nuclear power station in Iowa that would primarily provide power to Google as the tech firm races to secure clean energy to drive its AI data centres.<\/p>\n
Johns puts data centres into three categories.<\/p>\n
\u201cThe first is just a basic data warehouse, and that\u2019s like putting light bulbs into the electricity system,\u201d he said.<\/p>\n
\u201cThe second is a data centre with \u2018compute\u2019 capacity, and that\u2019s like putting houses onto the electricity system.<\/p>\n
\u201cAnd the third is AI data centres, and that\u2019s like adding towns to the electricity system.<\/p>\n
\u201cWhat we\u2019re seeing is that data centres are becoming sophisticated global networks, where the data moves around the world to the lowest-cost electricity. <\/p>\n
\u201cSo even though you might have physical data centres in your country, they still have the option of moving the data and compute to some other country, and then you don\u2019t sell any electricity to them.<\/p>\n
\u201cThere is a risk that data centres actually create an enormous amount more volatility in the electricity system of New Zealand but, equally, they are as essential to the future economy as oxygen is to living on Earth,\u201d he told the Herald.<\/p>\n
As New Zealand decarbonised its energy system, there were going to be some \u201csnakes and ladders\u201d along the way.<\/p>\n
\u201cWe just have to work out how we\u2019re going to accommodate data centres into the New Zealand system.\u201d<\/p>\n
He noted that some jurisdictions had capped or banned new data centres because of their potential power drain on the grid, and that some data centre operators were investing in their own generation.<\/p>\n
Whichever way people wanted to look at it, electricity would become more important in the future.<\/p>\n
\u201cElectrification of transport, electrification of light industrial heat, and data centres are going to be the three big drivers of demand growth.\u201d<\/p>\n
Johns has previously raised the alarm about the level of risk inherent in New Zealand\u2019s hydro-dominated electricity sector.<\/p>\n
\u201cI still think energy equals prosperity, and energy and infrastructure security in New Zealand is going to require some really big investments,\u201d he said.<\/p>\n
Genesis Energy’s coal stockpile at the Huntly Power Station. Photo \/ NZME <\/p>\n
\u201cAnd to do that, we\u2019re going to have to get really good as a country at competing for capital.<\/p>\n
\u201cIt doesn\u2019t matter whether it\u2019s electricity or water or roads, to build an economy that can support future generations and give them the resilience and the options that they\u2019re going to need, we can\u2019t keep pushing the photocopier button that we\u2019ve been pushing for the last 10 to 15 years.\u201d<\/p>\n
The electricity sector received a nasty wake-up call in the winter of 2024 when constrained gas supply and unusually dry, calm weather conspired to drive wholesale prices up to $820 per megawatt hour (MWh) compared with the winter average of about 160MWh.<\/p>\n
Johns said it felt as if the electricity system had since got its head around that episode.<\/p>\n
\u201cWhen I look across all of the [company] investor days this year, everybody is working hard on energy security.\u201d<\/p>\n
Last month, the Commerce Commission gave its seal of approval to a deal allowing the big power companies access to Genesis Energy\u2019s coal and gas-powered Huntly power station, in particular its steam turbine Rankine units.<\/p>\n
Genesis, Contact, Meridian and Mercury will be able to enter into a series of agreements referred to as the Strategic Energy Reserve Huntly Firming Option (HFO), giving them access to the station and to important backup for the grid when hydro power is stretched.<\/p>\n
In the energy sector, \u201cfirming\u201d ensures a constant supply of power to the grid, regardless of conditions at the time.<\/p>\n
The commission found the public benefits of the proposed arrangements, which last for 10 years, would probably outweigh any potential lessening of competition.<\/p>\n
The deal means all three of the ageing but powerful Rankines will be available to the system when needed.<\/p>\n
Johns said HFOs were a good example of the sector working hard to cover energy security.<\/p>\n
\u201cThere\u2019s no question we would have retired that machine [Rankine 2] and I think that would have been negative for energy security.<\/p>\n
\u201cWith 10-year HFOs, we can take a three-Rankine ranking approach, and that gives us much more resilience in the system.\u201d<\/p>\n
The arrangements were proposed to provide a commercial incentive for Genesis to maintain Rankine Unit 2 for use as \u201cdry-year cover\u201d when other forms, such as hydro, might not be sufficient.<\/p>\n
Johns said he was feeling better about New Zealand\u2019s journey towards energy security.<\/p>\n
\u201cI think … we\u2019re a long way further down the track on dealing with the short end \u2013 the minutes, hours.<\/p>\n
\u201cMore gas flexibility is critical to covering the system, and I think the HFOs and the Rankines give us 10 years to continue to work on long duration.\u201d<\/p>\n