What is a data centre, anyway?

At its most basic level, a data centre is a large, cooled building that houses racks of servers and other IT hardware.

“You’ve got really compact computers in there that have air-conditioning units in them, obviously the chips for processing data and then you would have storage as well,” technology writer Peter Griffin says.

The crucial bit is the air conditioning, he says – the intensity of the processing heats everything up.

“That’s the big battle in data, is keeping everything cool.”

They’re also incredibly loud places. “You have to put on ear muffs [inside] because of the collective roar of not only the fans in the servers, but the air-conditioning units all around those.”

Some data centres are deliberately built in cooler locations, to limit the amount of artificial cooling that has to be done.

How long have they been around?

Despite the surge of debate and interest in data centres, they are not a new concept.

Griffin says data centres have existed in some form in New Zealand since the 1980s, with the advent of early forms of cloud computing (basically, storing files, data and other computing services on someone else’s server and accessing them over a network or internet connection).

He says Telecom (now Spark) was among the first companies to set up its own data centres, followed by other large companies and services, including New Zealand Post, The Warehouse, and various government departments.

These “on-premises” data centres are still being built – an all-of-government data centre that hosts the country’s most sensitive public data opened at Whenuapai air base last year.

As demand for cloud computing grew, third-party companies like Datacom built larger data centres – managing the infrastructure and leasing space to companies which needed it.

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“As a company, you might pay to put some racks of server hardware in someone’s data centre, and you would run your applications,” Griffin says. That could include billing systems, event ticketing – anything that requires sufficiently large processing power.

Most recently, the likes of Microsoft and Amazon Web Services (AWS) have been building or renting ‘hyperscale’ data centres, which provide cloud computing services to anyone who wants to pay for them.

Griffin says there’s a “latency” benefit from having these locally based data centres – previously, anyone in New Zealand using AWS or a similar service was accessing their data from servers hosted in Sydney or even further afield.

So if they’ve existed for decades, why is everyone freaking out now?

The crucial differences between any of these examples, and what is being opposed in New Zealand and globally, are scale and purpose.

The new data centres being proposed and constructed are AI data centres – to train and run proprietary AI models.

Datagrid – the large-scale data centre that’s been given permission to go ahead in Southland – is the first of these ‘AI factories’ to be constructed in New Zealand. [Although it has gained a series of resource consents, Datagrid has yet to be funded beyond $53m for earthworks. It’s also yet to get a green light from national grid operator Transpower.]

“They’re a different sort of data centre, very much more power-hungry, water-hungry,” Griffin told RNZ Nights recently.

The difference in scale to what has been built to date is enormous.

The Datagrid facility will use 280 megawatts of power, which will make it the country’s second-biggest user of electricity behind Tīwai aluminium smelter [Galasso told the Herald the final design, including megawattage, was not final. It would depend on how much was capital was ultimately raised. Datagrid last week revealed a downsized and yet-to-be-funded design for the Tasman Ring Network international cable that will be used to export its data centre’s AI compute processing power.]

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It also has consents to draw up to 600,000 litres of groundwater a day – similar to what a town the size of Kaikōura would use – though the company says it expects to mostly use rainwater.

While processing is getting increasingly efficient, the rapid uptake of AI across business and society means its overall global energy use is growing.

Both the International Energy Agency and a United Nations research group recently published reports estimating that data centre energy use will double by 2030.

The other difference is purpose.

Data centres in New Zealand have previously either been locally owned and run, or provided ongoing data-hosting and other services to local users. A data centre that exists purely to train an AI model doesn’t do that.

“That will mainly serve an international audience,” Griffin says. “It won’t serve New Zealand companies and New Zealand consumers … The Government has seen that as basically a digital export.”

What’s the backlash been?

Globally, opposition to the construction of AI data centres is heating up, and is especially strong in the US.

Data Centre Watch – a research project run by AI company 10a Labs – reported that in the first three months of 2026 alone, local opposition blocked or delayed 75 projects worth US$130 billion ($220b) in the US. Protesters there staged more than 140 demonstrations across 42 states during a co-ordinated day of action.

Most of the opposition clusters around concerns about resource allocation and environmental effects.

Energy use is a particular “bone of contention”, Griffin says. “These companies are so desperate to fast-track development of these data centres that they’re actually scooping up electricity and are competing with communities, and that’s a really bad outcome.”

Similarly, data centres have faced criticism over the vast quantities of water needed for cooling.

As well as the pressure this might place on supply, there have also been reports that data centres have made water supplies undrinkable.

This is not because of the discharged cooling water from data centres – but because of contaminated run-off from construction and sediment build-up in water supplies disrupted by data centres’ off-take.

Griffin believes the opposition in the US is particularly acute because of existing pressure on water resources, and communities’ previous experiences with fracking and the environmental issues that created.

The lower proportion of renewable energy available means many centres in the US are powered using gas – augmenting carbon emissions.

There have also been complaints about noise, the consenting or permitting process, and a lack of transparency from data centre companies.

Should New Zealanders be worried about this, too?

Griffin says the issues US communities have faced don’t exist to the same extent in New Zealand – yet.

The most pressing issue is around the allocation and use of resources – particularly energy.

“We’ve had years now of feeling the pinch, particularly in dry winters when the spot price of electricity goes up.”

Datagrid has arranged a 140MW agreement with gentailers, but it’s not clear how the company will generate its remaining energy requirements.

“We need to be really clear if we’re going to have these big data centres, these AI factories in New Zealand, that they’re not going to compete with our existing industry,” Griffin says.

“How much water are they going to use? Will they use renewable energy? Are they doing a deal to ensure that they’re not going to compete with others for that energy?”

At the moment there’s no detail around any of that, or any particular rules requiring data centres to invest in their own generation, for instance.

Are there any upsides?

Yes, Griffin says, and one of them is the technology itself. “If we don’t embrace it, we are going to be less competitive than other countries.”

Invest New Zealand, an agency set up to attract foreign investment to New Zealand, “is targeting something like $25 to $35 billion in data centre investment in the next five years”.

Southland’s Mayor Rob Scott says he got over his initial concerns because of the economic opportunity and jobs the construction of Datagrid’s facility will create.

But once the centres are built, the financial benefits to New Zealand are “murky”, Griffin says.

The country might “clip the ticket” on the initial investment, but because the companies involved are mostly American or European, there’s no guarantee that profits stay – or even get taxed – here.

The energy requirements of massive data centres may have an upside, though, with gentailers saying the long-term, high-volume contracts involved will give them greater certainty to commit to major new renewable projects.

There might also be benefits available to universities, research agencies and other organisations with major data processing and modelling requirements, Griffin suggests.

“If you’re building all of this high-capacity computing, can our own businesses and our researchers, our scientists, have access to some of it, even if it’s two or three per cent of it, so that we can have breakthroughs in science and climate change and health?”

Okay, so if there are some benefits, then what are the solutions?

The Greens are campaigning on a one-year moratorium on new data centres while the country figures out the answers to some of these questions out.

Neither Labour nor National support that, but Prime Minister Christopher Luxon said last week that the country did need some “commonsense rules”.

Australia announced last month that it would set up an AI office, and Griffin says New Zealand should be collaborating with its neighbour on what sensible regulations could look like.

That could include “closed loop” cooling, which recirculates water, treats it, and returns it; instead of the more common evaporative cooling where most of the water taken is lost during the cooling process [CDC and Microsoft use recirculation and air-cooling in their Auckland data centres. Datagrid founder Remi Galasso told the Herald that despite his firm having gained approval to draw enough water for evaporative cooling, it planned to use air cooling and recirculation and would use less water than “a small dairy farm].

Some countries were also requiring data centres to only use grey water, rather than drawing from groundwater resources. Here, tech expert Dr Karaitiana Taiuru has suggested that seawater could also be used.

New Zealand could also mimic the Australian requirement for large-scale data centres to underwrite their own power supply, or require the energy used to be renewable, Griffin says.

“You can’t just draw from the existing grid without adding capacity … and you have to pay the full share of grid connection cost – that can’t just be carried on to existing customers.”

Rather than putting off companies, having a clear framework and rules could provide the certainty they need to invest here, he says.

He believes New Zealand should learn from the cautionary tale of social media before unquestioningly embracing either AI, or the data centres that power it.

“The utility of being on these platforms seems so beneficial to us that we didn’t really see the downsides til it was too late, and we were let down by regulators and watchdogs – they didn’t see what was happening either.”

If we take the same laissez-faire approach to AI, “the impacts are going to be so much worse”.

AI companies should take heed of the same lessons.

“If they don’t build that social licence now, it’ll come back to bite them”.

– RNZ