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New Zealand is well-placed to build a green data centre industry providing cloud computing services to Australians, a report commissioned by NZTE has concluded.

But the report by management consultant Analysys Mason found high wholesale electricity prices could be a fly in the ointment, and that the country was likely to face competition from Tasmania, which shares much of the advantage of New Zealands cool climate.

Technology giants Microsoft and Amazon Web Services (AWS) have budgeted billions of dollars to build new data centres in Auckland that will allow them to serve more of their customers locally, instead of from Sydney and further afield.

AWS has estimated it will invest $7.5 billion in its New Zealand facilities over 15 years.

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But Analysys Mason also emphasised the potential for the South Island to become a hub for serving up cloud computing services to Australians from green data centres, following the expected availability of a new submarine fibre-optic cable network connecting Southland to multiple continents from 2025.

NZTE general manager of investment Dylan Lawrence said the report showed New Zealand, and specifically the South Island, are strong potential locations to build green data centres and serve overseas demand.

Data centres all over the world are power hungry. Building them here in New Zealand means investors and centre operators can take advantage of our renewable energy sources, he said.

In the South Island, they can also take advantage of the lower temperatures, which in turn helps lower the centres emissions.

Analysys Mason estimated that co-location data centres set up to provide services to third parties could be raking in annual revenues of $898m a year in New Zealand by 2030, almost double their revenues last year.

It also forecast the power requirements of data centres in New Zealand would grow from 81 megawatts last year to 303MW by 2030, which would be equivalent to a little over half of the demand of the Tiwai Point aluminium smelter.

Lawrence said the further development of the industry would have a number of benefits.

More data centres here will help support our businesses to move to the cloud, improve connectivity and decrease our reliance on offshore centres. And it will provide a potential export opportunity and therefore income.

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The data centre industry has been booming worldwide, creating weightless export opportunities for countries with cool climates and cheap renewable power.

New Zealand-founded technology company Datagrid is planning to build a huge data centre on a 43 hectare site in North Makarewa, near Invercargill, with an eye to serving the Australian market.

Its chief executive, Remi Galasso, is also the driving force behind the venture to connect Southland to Australia, North America and Southeast Asia with the Hawaiki Nui cable network, and is involved in a Chilean government initiative that could connect Southland to South America and potentially Antarctica.

Analysys Mason said Southlands 240 terabit-per-second connection on the Hawaiki Nui cable network would give it an advantage over Tasmania in becoming a hub for Australian cloud computing services.

Two existing internet cables connecting Tasmania had a limited capacity of 1Tbps each while a third cable had multiple reliability issues, it said.

Luke Tscharke/Tourism Tasmania

Tasmania is the obvious regional competitor to Southland in the bid to build a bigger data centre industry, but both may share the spoils a report suggests.

Those cables were also not connected directly to landing stations in Sydney or Melbourne.

But spot electricity prices were much lower in Tasmania at about 2.9 US cents (NZ 4.6c) a kilowatt-hour and all of its electricity was renewably generated, Analysys Mason said.

Spot electricity prices have hovered above NZ 20c/kWh in New Zealand for much of this year and spiked above 50c/kWh on Friday.

But data centres in New Zealand could still be competitive if they negotiated favourable supply contracts direct with generators, the consultant said.

Overall, it expected the South Island and Tasmania might share the spoils.

Galasso said Southland and Tasmania were the only locations in the region that had the advantage of large hydropower stations and cool weather.

The demand for electricity from the data centre industry was likely to be such that both would become hubs for cloud computing, he said.

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Hawaiki Cable founder Remi Galassos drive to get NZ better connected with subsea cables has been key to creating more opportunities for hosting cloud computing services in the country.

Analysys Masons estimate that Kiwi data centres would need 303MW of power by 2030 could be an underestimate if the Chilean governments Humbolt subsea cable progressed and New Zealand became an important data exchange between South America and Singapore, he said.

Datagrid was finalising its design ahead of putting in resource consent for its North Makarewa data centre, he said.

British data centre company Lake Parime plans to open a smaller data centre facility in central Otago by October, that will be powered by Contact Energys Clyde hydro scheme.

It is expected to be used in part for the environmentally-controversial practice of Bitcoin mining.

Another company, Grid Share, is involved in a similar initiative at Pioneer Energys Monowai Power Station.

A fourth business, local start-up T4 Group, is planning to build a mid-sized high-spec $50m data centre in Southland that would be used to house more critical cloud computer applications.

Read more:
NZ could become land of the long 'green' cloud, NZTE report finds - Stuff