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’s role in attracting foreign investment.

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.

He said Invest NZ would help accelerate the country’s 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).

Will it create jobs?

In an Overseas Investment Office (OIO) application, Microsoft said a new data centre in West Auckland would create “300 temporary FTE [fulltime-equivalent] jobs during construction … and 50 new FTE jobs once the data centre is operational”.

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’s aluminium smelter at Bluff; Datagrid’s original business plan was to take up the slack from the Manapōuri hydro power station with Rio Tinto’s exit).

The Invest NZ head said that, while transitory, the construction jobs were not to be sniffed at.

“The US would be in recession right now if it wasn’t for data centre construction,” Wall said.

He also saw indirect jobs supported by data centres. Datagrid, for example, could support a further 72 jobs through suppliers and servicing, he said.

Wall had not yet had the opportunity to directly view the various data centres around Auckland’s northwest, which typically have half a dozen cars in their respective carparks.

More broadly, he saw advantages for data sovereignty and helping to promote faster AI uptake.

NZ’s data centre advantages

Talking to media before an industry event to announce the investment push, Wall said he’d been talking to the global hyperscalers, pitching advantages including New Zealand’s mild climate, peace and stability, high percentage of renewable and “internationally competitive” electricity prices (at least when comparing NZ’s pricing against renewable sources in other territories).

The latter might surprise those who’ve 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 “socialise” that cost.

He added, “The capacity in other countries has been absorbed for data centres, so you’re reaching maximum level of capacity development in US, Malaysia and Ireland, and the demand is continuing at a fast rate.”

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.

Regardless, Wall points out that Amazon, Microsoft, Google and other data centre players have carbon zero targets, which they need renewables to hit.

And, ironically, New Zealand’s power prices have become more internationally competitive because of our relative lack of data centres, which today use around 0.6% of our capacity.

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.

As things stand, not all of the global players are getting the pitch.

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.

US cities, counties halt or ban data centre builds

He did not voice it, but it helps NZ’s cause that several areas of the US have suspended incentives for new data centres, or have even swung in the opposite direction.

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.

Last month, Seattle – the home town of Amazon and Microsoft – 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’s power.

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 – a mix of red and blue states.

It hasn’t helped that while data centres and AI might help ensure a brighter future, and key advantages for some early adopters, today they’re also associated with everything from “ramageddon” shortages that have added hundreds of dollars to the cost of game consoles to laptops, white-collar workers’ job-loss fears, software subscription price increases by Google, Microsoft and others, and a growing number of corporate budget blowouts.

Targets of popular protest

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.

“Those 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,” Wall said.

“In less regulated climates, they’ve also used evaporation cooling, which uses large amounts of water.”

New Zealand’s single power regulator and single national grid operator also made it easier for a more orderly build-out.

Water care

Wall said that while there has been little data centre opposition here, that would likely change as building intensified.

But he said the local setup could be more easily defended.

Microsoft, CDC Data Centres and others which have built “hyperscale” facilities in New Zealand use one lot of water, which is constantly recirculated for cooling, according to Tech New Zealand chief executive Graeme Muller.

Microsoft and others are also using air cooling.

New Zealand has stricter environmental standards than many countries, but it’s our temperature that makes water recirculation a feasible cooling option.

“We’ve got a moderate climate at 13.5C,” Wall said, referencing NZ’s mean annual temperature.

“That sets us up well.”

Wall also argued that a new wave of data centre construction would not push up power pricing.

Contact chief executive Mike Fuge and Mercury CEO Stew Hamilton featured on an Invest NZ panel to push that point.

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.

Both the data centre and the new capacity would take roughly the same time – two to three years – to construct.

Christie argues that big tech firms have captured NZ’s renewable capacity on the cheap to generate cloud services and AI for offshore clients, leaving us to top-up via coal-fired Huntly.

Hamilton counters that new data centres pay for new renewable power capacity here – and that if they’re not built, we’ll have to import more cloud and AI services from offshore, fossil fuel-powered data centres.

Christies says if you look to Europe, it just hasn’t worked out that way.

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’s investment decision to construct the Te Huka 3 geothermal power station.

Don Christie – the managing director of Wellington-based IT and cloud services firm Catalyst, and co-founder of now-defunct ginger group NZRise – is unconvinced.

“There should be an imperative for New Zealanders to get the benefits of Manapōuri being connected to the proper grid, so our power prices can actually come down and our manufacturing industries can be more competitive,” he said.

“We’re closing down our manufacturing industries right now, as [Associate Minister for Energy] Shane Jones knows, because our power prices are too high.

“To suggest that we can build an economy by exporting electrons is just fundamentally screwed,” Christie said.

The hyperscalers shifted revenue and profit offshore, minimising the local tax they paid.

“If we build data centres for New Zealand, on a New Zealand scale, which is what T4 Group and Datacom and others have been doing, that’s a completely different thing.”

Christie added, “We could be world-leading in this space [artificial intelligence] if we invest in start-up businesses that can be the equivalent of Rocket Lab, but in the AI space. This is completely different. It’s just nuts.”

A wave of data centres, then a stall

In 2020, there was a burst of enthusiasm among the hyperscalers for building data centres in NZ, after a trip by then Prime Minister Jacinda Ardern to Seattle.

Amazon and Microsoft both got OIO permission to build “hyperscale” data centres in Auckland’s northwest. Microsoft got the green light to buy big tracts of land at Westgate and Whenuapai, while Amazon bought a series of Westgate sections, forming a site the size of four rugby fields.

DCI, owned by Canada’s Brookfield, also got permission for giant data centres in Albany and Westgate, which were built, while CDC Data Centres (half-owned by NZX-listed Infratil) built hyperscale server farms in Hobsonville and Silverdale as part of the local data centre boom in the first half of this decade.

Microsoft spent around $1b on a data centre at Westgate that opened in December 2024. But its twin, in Whenuapai, never got past “go” and the tech giant lost its time-limited OIO consent.

Meanwhile, Amazon abandoned its giant Westgate site, just months after buying its final parcel of land and after contractor Naylor Love had carried out initial earthworks. It shifted to co-locating with existing operators.

Wall did not have an immediate theory on why Amazon (which makes 75% of data centres for its own Amazon Web Services/AWS) and Microsoft had stalled their efforts to build their own data centres.

Two other efforts – Datagrid in Southland and Spark’s “surf park” data centre north of Auckland (now owned by TenPeaks after the telco sold 70% of its data centre business to an Australian private equity company) – have also both been on the drawing board for years.

TenPeaks hopes to update later this year.

Datagrid has won a series of resource consents, but has yet to confirm funding for its own build or a companion new international cable to export its AI processing power, and has yet to gain Transpower approval for its 280MW first stage.

One solution would be to gradually increase Datagrid’s capacity as new renewable power plants come online, but that would undermine its ability to compete in the global or even global “AI factory” market, where there is an arms race and scale is everything.

Its owners ultimately want to upgrade it to 1000MW, which would be equivalent to 13% of NZ’s current generating capacity (data centres are described by their peak power consumption).

Notwithstanding that it’s yet to green-light Datagrid, after more than a year of direct engagement, the national grid operator says there is enough capacity in the pipeline to facilitate the $5b facility.

Mercury has signed an option (it has yet to make a final investment decision) to supply Datagrid with 140MW over 15 years in what is envisaged as a multi-supply agreement.

Wall said if the new private investment is landed, Invest New Zealand’s envisioned $25b to $30b for new data centres will create “one job per 1MW”.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.