Support for data centres goes back 40 years
There are more than 60 data centres in New Zealand, but a new report says growing concerns over their proliferation could harm the country's potential to become a regional hub serving Australia and the Pacific.
Concerns are rising regarding the increasing number of data centres, potentially hindering New Zealand's aspiration to become a regional hub for Australia and the Pacific. A Fitch Solutions report highlights New Zealand's small yet rapidly expanding data centre sector, driven by robust cloud adoption, data sovereignty demands, and enhanced international connectivity.
The nation's regulatory and policy framework remains a significant competitive advantage, bolstered by political stability and a predominantly renewable power system. However, this favorable environment is now facing increasing scrutiny of the sector's impact on the grid. Tighter scrutiny of grid usage, power contribution obligations, and local opposition to large-scale projects may delay the construction of the largest developments.
The BMI report notes that there was a perception that the current framework did not necessitate data centre operators to contribute proportionately to grid infrastructure, although this practice was taking place. This juxtaposition of active investment promotion and emerging grid-contribution requirements underscores the challenge of attracting globally mobile digital infrastructure investment while preserving domestic social license.
According to Transpower, the National Grid operator, any new large loads, such as data centres, must pay their own costs for grid connection, along with incorporating new generation to offset their own demand. Prior to any new large load connecting to the grid, Transpower emphasizes ensuring system stability and capacity to safely manage the new connection, thus necessitating careful assessment of large projects like data centres before their connection.
Despite the existence of the TPM and standard practice, the Green Party has called for a moratorium on data centre development. New Zealand currently hosts 62 data centres, primarily in Auckland, with Wellington, Christchurch, and Hamilton gaining prominence. The BMI report anticipates local cloud spending to increase to $3.11 billion, bolstered by government cloud-first policies and the presence of AWS and Microsoft's hyperscale data centres, which facilitate regional services.
This growth is predominantly propelled by co-location providers like CDC, Datacom, NEXTDC, and TenPeaks, alongside New Zealand's renewable energy grid and submarine cable investments, which further enhance its allure. Data centres have been integral to New Zealand's technology landscape since 1967, when the country embraced the decimal currency system, leading to the rollout of computer banking systems and the establishment of Databank, a shared electronic data processing service for major banks.
New Zealand's data centre market is anticipated to remain primarily Auckland-centric in the near future, but regional diversification is expected to accelerate as Christchurch, Wellington, Hamilton, and Southland attract additional enterprise, government, and hyperscale-related demand.
Written by urgent.news from RNZ Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
