{"id":476475,"date":"2026-06-14T06:42:34","date_gmt":"2026-06-14T06:42:34","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/476475\/"},"modified":"2026-06-14T06:42:34","modified_gmt":"2026-06-14T06:42:34","slug":"great-southern-data-centre-is-this-the-end-of-the-world-as-we-know-it","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/476475\/","title":{"rendered":"Great southern data centre: Is this the end of the world as we know it?"},"content":{"rendered":"

Analysis:\u00a0As tech entrepreneur R\u00e9mi Galasso tells it, he was having dinner with \u201ca very famous New Zealand minister\u201d in Queenstown about 10 years ago, celebrating the final investment decision for his\u00a0Hawaiki Cable project, when he told the minister his plan to build a big data centre in Southland.\u00a0<\/p>\n

There was an echo of the Rolling Stones in the minister\u2019s reply. \u201cYou want to build a data centre in Invercargill? But R\u00e9mi \u2026 Invercargill is the end of the world!\u201d<\/p>\n

Galasso\u00a0replied: \u201cMinister, with all due respect, the world is a globe \u2013\u00a0so there is no \u2018end\u2019. And if you look at it from a sub-sea cable perspective, Invercargill actually sits right in the middle of the US-Singapore-India-Middle East route.\u201d<\/p>\n

Now, Galasso\u00a0says he\u2019s\u00a0ready to prove it: that Invercargill is the centre\u00a0of the world.<\/p>\n

You may well raise your eyebrows when I tell you, officials believe there\u2019s an opportunity for the South Island to become a green data centre\u00a0hub with its lower temperatures and high share of renewable energy sources. It\u2019s precisely this\u00a0that NZ Trade and Enterprise, and its new sister agency Invest NZ, have been successfully pitching to global investors.<\/p>\n

But hang on, I hear you say. Hasn\u2019t the Government just this week confirmed it\u2019s asking two big global gas infrastructure firms to pitch for the billion-dollar-plus contract to build a big LNG import terminal at Port Taranaki \u2013 and that\u2019s because we don\u2019t have enough electricity supply, especially in dry winters?<\/p>\n

Yet the proposed $5 billion Datagrid artificial intelligence data centre has obtained Overseas Investment Office sign-off to expand from an initial 280MW to an absolutely eye-watering 1GW\u00a0capacity, across a 49-hectare site in Makarewa, north of\u00a0Invercargill.<\/p>\n

That\u2019s a lot of\u00a0demand. It\u2019s twice the power consumption of the nearby Tiwai Point aluminium smelter, which already drains\u00a0so much power from New Zealand\u2019s grid that national energy strategies have\u00a0hinged on whether it stays or goes.<\/p>\n

\"\"From R\u00e9mi Galasso\u2019s chosen perspective, Invercargill isn\u2019t the end of the world, but sits in the middle of a subsea cable route from the West Coast of the US, to Singapore, India and the Middle East.<\/p>\n

\"\"<\/p>\n

Want to stay across stories like this? Start your day with Newsroom’s top stories and analysis in your inbox.<\/p>\n

The data centre was initially conceived as an alternative to Tiwai Point, when the smelter\u00a0was expected to close. <\/p>\n

But now, Rio Tinto has signed a landmark 20-year electricity agreement to keep the smelter in Southland \u2013\u00a0and at the same time, Galasso is\u00a0pushing ahead with his data centre. Like the smelter, it would have\u00a0two dedicated 220kV transmission lines running direct from the Lake Manap\u014duri hydro dam.<\/p>\n

New Zealand\u2019s\u00a0peak real-time demand\u00a0is about 6GW. But the smelter and the data centre, combined, will suck out 1.5GW \u2013 which begs some questions.<\/p>\n

With sufficient warning of a dry winter, the smelter can close down one or two potlines and sell the power back to the rest of the country.<\/p>\n

But an AI data centre of the scale proposed would have to run 24\/7, 365 days, every year. There\u2019s nobody else nearby to offload that much computing to.<\/p>\n

My colleague David Williams says, on The Detail podcast<\/a>: \u201cData centres need continuous power.\u00a0If they power down, it\u2019s actually damaging to their units or their processing centre. It needs to be a constant supply.\u201d<\/p>\n

So Datagrid plans diesel generation as an emergency backstop. That might be viable for a few hours, but not for the long months when the lakes are low.<\/p>\n

Fundamentally, it needs vast quantities of renewable energy. All the time. And it needs it to be cheap. That\u2019s the official pitch that brought it to New Zealand.<\/p>\n

\u201cNZ Trade and Enterprise believe New Zealand could emulate what Nordic countries have achieved through emphasising their natural advantages and commitment to green energy,\u201d officials briefed South Island Minister James Meager, ahead of a meeting with Datagrid leaders.<\/p>\n

\u201cIn doing so, these countries have attracted significant investment and driven the formation of AI superclusters in the region.\u201d<\/p>\n

So, here are three tests that Datagrid still needs to pass. If it fails any one of them then, frankly, it\u2019s not in New Zealand\u2019s interests for the project to proceed.<\/p>\n

1\/\u00a0The data:\u00a0Chorus had planned to partner with Datagrid to commission a $3.4b, 6000km\u00a0sub-sea fibre cable to digitally connect Auckland, New Plymouth, Greymouth and Invercargill with Sydney and Melbourne. <\/p>\n

But last\u00a0August, Chorus walked away, saying it would\u00a0have taken till 2030 to build.<\/p>\n

Galasso vows Datagrid will push on with the so-called Tasman Ring. <\/p>\n

Without it, New Zealand\u2019s existing cables simply don\u2019t have capacity to carry the additional data that would be processed through the giant AI centre.<\/p>\n

2\/\u00a0The heat:\u00a0The massive amounts of electricity that go into a big\u00a0AI centre like Datagrid are\u00a0emitted afterwards as waste heat.<\/p>\n

In\u00a0Finland, Google\u2019s Hamina data centre captures that heat and\u00a0supplies\u00a0about 80 percent\u00a0of the local heating network; another Microsoft data centre hub\u00a0will heat the homes and business of\u00a0250,000 residents across the districts of Espoo, Kauniainen, and Kirkkonummi. Here in Auckland, waste heat from a Spark data centre will warm the wave pool at a new surf park.<\/p>\n

South Island data engineer\u00a0Harvey Cao reckons\u00a0Datagrid is good for New Zealand. \u201cWe\u2019re a long way from everywhere, and distance has always worked against our exports, but computing power doesn\u2019t care about distance.\u201d<\/p>\n

Yet for it to justify its existence, there\u2019s a tight window of a few months in which it\u00a0must\u00a0design a heat recovery plan. <\/p>\n

\u201cIt will turn almost everything it draws into heat, roughly 1.5 terawatt hours a year, right next to big food processors and one of our coldest cities,\u201d he tells me.\u00a0\u201cReleasing that heat into the atmosphere would be a complete waste.\u201d<\/p>\n

3\/\u00a0The power:\u00a0As the economy electrifies, New Zealand homes and businesses need more and more electricity. We\u2019ve heard this week that we\u2019re struggling to meet even the existing demand in dry years \u2013 so any major new power user like Datagrid must not only finance the construction of new renewables and perhaps baseload to serve its own needs, but also to leverage new generation for the wider community.<\/p>\n

Datagrid\u00a0has signed a Power Purchase Option Agreement with Mercury Energy \u2013 a\u00a0contract that secures it the right, but not the obligation, to purchase a specific amount of power at a fixed price in the future.<\/p>\n

These deals are critical. They provide the big gentailers a degree of certainty of future revenue streams, giving them confidence to invest now in projects that may not start paying a return for many years. Datagrid has probably been aided by hiring Vince Hawksworth, Mercury\u2019s former CEO, as its head of power.<\/p>\n

His successor at Mercury, Stew Hamilton, tells me that having guaranteed customers buying a significant amount of generation means the power company can continue to invest significantly in new renewable generation for New Zealand, helping meet future demand growth and build resilience.<\/p>\n

\u201cThat is particularly important for large new electricity users,\u201d Hamilton says. \u201cOur intention is to build new renewable generation to match new demand, so growth from customers like data centres does not come at the expense of supply for the rest of New Zealand.\u201d<\/p>\n

Mercury has recently switched on stage 2 of Kaiwera Downs Wind Farm near Gore, and its\u00a0next anticipated wind farm build is stage 2 of Mahinerangi Wind Farm in Otago. That would add up to 190MW of renewable generation in the South Island.<\/p>\n

Mercury is expecting a fast-track\u00a0decision on the wind farm\u00a0imminently, with a final investment decision by September.<\/p>\n

Contact Energy isn\u2019t saying whether it\u2019s negotiating any deal with Datagrid, but it\u00a0has\u00a0announced plans for a 380MW Southland wind farm nearby.\u00a0Chief executive Mike Fuge says a final investment decision is expected next year.\u00a0<\/p>\n

\u201cThe wind farm will contribute around $400m\u00a0to the economy during construction, much of which will stay in Southland,\u201d he argues. \u201cWe are always looking at ways to grow demand for our renewable energy in regions where we are developing power stations, but in this case it is very early days.\u201d<\/p>\n

There are still questions\u00a0about whether the maths of such\u00a0data centres works out in New Zealand\u2019s favour. Harvey Cao says it would put a lot of pressure on the country\u2019s power network that might be slightly offset by harnessing its waste heat; Waikato University hydrologist Dr Earl Bardsley is even more\u00a0dubious.<\/p>\n

\u201cI do get a bit frustrated when politicians et al blather on about abundant renewable energy,\u201d says Bardsley, the architect of the Lake Onslow pumped hydro scheme for dry years.\u00a0\u201cThe problem is, just about all the new renewable power over the next decade will be wind and solar \u2013 not the baseload that data centres and aluminium smelters\u00a0need.\u201d<\/p>\n

So I went back to Invest NZ to ask why the agency is still pitching New Zealand\u2019s \u201cabundant renewable energy\u201d.<\/p>\n

Chief executive Robert Wall confirms they\u2019re still encouraging new investment in productive growth companies\u00a0excited by New Zealand\u2019s renewable energy potential \u2013 like the new $100m\u00a0Olam Food Ingredients dairy plant in Tokoroa. \u201cThese industries add value to our economy through export revenue and jobs.\u201d<\/p>\n

He believes New Zealand\u2019s renewable generation capacity can grow with the\u00a0demand, providing the opportunity to attract data centres and other new industries.<\/p>\n

According to the Electricity Authority there were 288 generation projects in the pipeline last year, with a combined total capacity of 44.3GW. That\u2019s a lot of power supply\u00a0still awaiting consents, finance or sign-off to be built\u00a0\u2013 but Wall sees that as an opportunity. \u201cCurrently the Transpower connection queue has more than double New Zealand\u2019s current generation capacity \u2013 and the thing that will underwrite the build of that is new demand.\u201d<\/p>\n

This analysis was first published in the Newsroom Pro subscriber newsletter. If you\u2019re interested in seeing more content like this, you can subscribe here.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Analysis:\u00a0As tech entrepreneur R\u00e9mi Galasso tells it, he was having dinner with \u201ca very famous New Zealand minister\u201d…\n","protected":false},"author":2,"featured_media":476476,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,11220,1667,111,43,7439,139,69,145],"class_list":["post-476475","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-comment","tag-energy","tag-new-zealand","tag-news","tag-newsroom-pro","tag-newzealand","tag-nz","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/476475","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=476475"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/476475\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/476476"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=476475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=476475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=476475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}