The $25b-$40b data centre investment would generate $70b of broader economic activity over the decade, capturing construction, data centre fit-out, IT equipment, ongoing operations, and indirect supply chain activityA build programme that \u201cwould peak in 2029-2030 as multiple data centre campuses are being developed concurrently across New Zealand\u201d, employing 3500 at its height<\/p>\n
Chief executive Robert Wall returned from 32 years offshore to take the reins of Invest NZ in February. The agency was set up last year to take over NZ Trade & Enterprise\u2019s role in attracting foreign investment.<\/p>\n
Wall spent eight years in civil engineering before shifting to investment banking, most recently in London as managing director, head of sustainable private infrastructure for global player Lazard Asset Management.<\/p>\n
Local industry advocate Don Christie says big tech firms operating in NZ send most of their revenue and profit offshore to lower-tax countries. He also argues that hyperscale data centres are largely automated and remote controlled, so only employ a handful of people. He also sees them harnessing our green power, then using it to service offshore clients – leaving us with Huntly’s coal.<\/p>\n
He said Invest NZ would help accelerate the country\u2019s artificial intelligence (AI) adoption, boosting our productivity, and create a new weightless export sector as excess AI compute capacity is sold offshore, particularly to Asia, which was possible at low latency (or lag, which gets greater with distance).<\/p>\n
Will it create jobs?<\/p>\n
In an Overseas Investment Office (OIO) application, Microsoft said a new data centre in West Auckland would create \u201c300 temporary FTE [fulltime-equivalent] jobs during construction … and 50 new FTE jobs once the data centre is operational\u201d.<\/p>\n
Mercury chief executive Stew Hamilton argues that long-term contracts from hyperscale data centres help pay for new generation capacity – which can be built at the new facilities are constructed. He says that without new data centres here, powered by renewable energy, we’ll have to import more cloud and AI services generated by fossil fuels. Photo \/ Dean Purcell<\/p>\n
In application paperwork, the Singapore-backed Datagrid said its $5b data centre proposed for Southland would create 75 jobs (compared with around 1000 at Rio Tinto\u2019s aluminium smelter at Bluff; Datagrid\u2019s original business plan was to take up the slack from the Manap\u014duri hydro power station with Rio Tinto\u2019s exit).<\/p>\n
The Invest NZ head said that, while transitory, the construction jobs were not to be sniffed at.<\/p>\n
\u201cThe US would be in recession right now if it wasn\u2019t for data centre construction,\u201d Wall said.<\/p>\n
He also saw indirect jobs supported by data centres. Datagrid, for example, could support a further 72 jobs through suppliers and servicing, he said.<\/p>\n
Wall had not yet had the opportunity to directly view the various data centres around Auckland\u2019s northwest, which typically have half a dozen cars in their respective carparks.<\/p>\n
More broadly, he saw advantages for data sovereignty and helping to promote faster AI uptake.<\/p>\n
NZ\u2019s data centre advantages<\/p>\n
Talking to media before an industry event to announce the investment push, Wall said he\u2019d been talking to the global hyperscalers, pitching advantages including New Zealand\u2019s mild climate, peace and stability, high percentage of renewable and \u201cinternationally competitive\u201d electricity prices (at least when comparing NZ\u2019s pricing against renewable sources in other territories).<\/p>\n
PPA \u2013 power purchase agreement \u2013 cost comparisons. Source \/ Invest NZ using BCG data<\/p>\n
The latter might surprise those who\u2019ve been grappling with higher power bills, but Wall said our wholesale electricity prices had been trending down. Transmission charges were to blame for rising prices. He saw an expanding number of data centres helping to \u201csocialise\u201d that cost.<\/p>\n
He added, \u201cThe capacity in other countries has been absorbed for data centres, so you\u2019re reaching maximum level of capacity development in US, Malaysia and Ireland, and the demand is continuing at a fast rate.\u201d<\/p>\n
According to the International Energy Agency (IEA), a fossil fuel, LNG, is the most popular way to power data centres in the US. But a Lazard Energy Report (not quoted by Invest NZ) says shortages have driven up the price.<\/p>\n
Regardless, Wall points out that Amazon, Microsoft, Google and other data centre players have carbon zero targets, which they need renewables to hit.<\/p>\n
And, ironically, New Zealand\u2019s power prices have become more internationally competitive because of our relative lack of data centres, which today use around 0.6% of our capacity.<\/p>\n
Wall said that beyond its natural advantages, New Zealand had a research and development (R&D) tax break, the recently introduced Investment Boost for accelerated depreciation and fast-track measures. He did not see a need for further incentives or red-tape cutting.<\/p>\n
As things stand, not all of the global players are getting the pitch.<\/p>\n
Claude maker Anthropic has asked Australian data centre operators for proposals to build 1.4 gigawatts of capacity, with half-Infratil-owned CDC Data Centres on its shortlist. But a well-placed insider says that despite CDC operating on this side of the Tasman, too, the Anthropic build will be Australia-only<\/a>.<\/p>\n US cities, counties halt or ban data centre builds<\/p>\n He did not voice it, but it helps NZ\u2019s cause that several areas of the US have suspended incentives for new data centres, or have even swung in the opposite direction.<\/p>\n Some states continue to offer aggressive tax breaks for data centres – which is how the hot and swampy but relatively cheap and unregulated Louisiana became the location for a 5GW Meta hyperscale facility, the size of 1700 football fields (or a good chunk of Manhattan), which is now under construction.<\/p>\n Last month, Seattle \u2013 the home town of Amazon and Microsoft \u2013 put a year-long moratorium on the construction of new data centres after fears that five proposed new hyperscale facilities would use a third of the city\u2019s power.<\/p>\n Baltimore, Reno, Minneapolis, Tulsa and Denver are among cities that have put similar temporary bans in place, as have counties in Georgia, Michigan, North Carolina and Ohio \u2013 a mix of red and blue states.<\/p>\n It hasn\u2019t helped that while data centres and AI might help ensure a brighter future, and key advantages for some early adopters, today they\u2019re also associated with everything from \u201cramageddon\u201d shortages that have added hundreds of dollars to the cost of game consoles to laptops, white-collar workers\u2019 job-loss fears, software subscription price increases<\/a> by Google, Microsoft and others, and a growing number of corporate budget blowouts<\/a>.<\/p>\n Targets of popular protest<\/p>\n The bans come at a time when data centres, blamed for rising power and water bills, have become targets for community protests in the US, Britain and, more recently, Australia.<\/p>\n \u201cThose are all good things to be concerned about. In markets with lower regulation, data centre operators have been able to move quickly and absorb significant amounts of power, which has driven up prices for consumers,\u201d Wall said.<\/p>\n \u201cIn less regulated climates, they\u2019ve also used evaporation cooling, which uses large amounts of water.\u201d<\/p>\n New Zealand\u2019s single power regulator and single national grid operator also made it easier for a more orderly build-out.<\/p>\n Water care<\/p>\n Wall said that while there has been little data centre opposition here, that would likely change as building intensified.<\/p>\n But he said the local setup could be more easily defended.<\/p>\n Microsoft, CDC Data Centres and others which have built \u201chyperscale\u201d facilities in New Zealand use one lot of water, which is constantly recirculated for cooling, according to Tech New Zealand chief executive Graeme Muller. <\/p>\n Microsoft and others are also using air cooling.<\/p>\n New Zealand has stricter environmental standards than many countries, but it\u2019s our temperature that makes water recirculation a feasible cooling option.<\/p>\n \u201cWe\u2019ve got a moderate climate at 13.5C,\u201d Wall said, referencing NZ\u2019s mean annual temperature.<\/p>\n \u201cThat sets us up well.\u201d<\/p>\n Wall also argued that a new wave of data centre construction would not push up power pricing.<\/p>\n Contact chief executive Mike Fuge and Mercury CEO Stew Hamilton featured on an Invest NZ panel to push that point.<\/p>\n Hamilton said once a data centre had consent, it would sign a 15-year power purchase agreement with a gentailer, which could then use those funds to build new power generation capacity.<\/p>\n Both the data centre and the new capacity would take roughly the same time \u2013 two to three years \u2013 to construct.<\/p>\n Christie argues that big tech firms have captured NZ\u2019s renewable capacity on the cheap to generate cloud services and AI for offshore clients, leaving us to top-up via coal-fired Huntly. <\/p>\n Hamilton counters that new data centres pay for new renewable power capacity here – and that if they\u2019re not built, we\u2019ll have to import more cloud and AI services from offshore, fossil fuel-powered data centres.<\/p>\n Christies says if you look to Europe, it just hasn\u2019t worked out that way.<\/p>\n There had already been examples. In 2023, Amazon signed a deal with Mercury to buy 50% of the electricity generated from its 222MW Turitea South wind farm, which was opened two years later, while a 10-year contract with Microsoft supported Contact Energy\u2019s investment decision to construct the Te Huka 3 geothermal power station.<\/p>\n Don Christie \u2013 the managing director of Wellington-based IT and cloud services firm Catalyst, and co-founder of now-defunct ginger group NZRise \u2013 is unconvinced.<\/p>\n \u201cThere should be an imperative for New Zealanders to get the benefits of Manap\u014duri being connected to the proper grid, so our power prices can actually come down and our manufacturing industries can be more competitive,\u201d he said.<\/p>\n \u201cWe\u2019re closing down our manufacturing industries right now, as [Associate Minister for Energy] Shane Jones knows, because our power prices are too high.<\/p>\n \u201cTo suggest that we can build an economy by exporting electrons is just fundamentally screwed,\u201d Christie said. <\/p>\n The hyperscalers shifted revenue and profit offshore, minimising the local tax they paid.<\/p>\n READ MORE<\/p>\n