Do the growing criticisms of datacentre investments compute?
Saturday, 4 July 2026
Datacentre investments were once generally welcomed by governments around the world and the public alike.
Amazon’s as-yet unfulfilled commitment to invest $7.5 billion building datacentres in Auckland was regarded as such a positive development that it was famously announced twice ‒ in 2021 and last year ‒ in gushing terms by different governments.
French-born entrepreneur Remi Galasso, who is currently spearheading a drive ‒ backed by Singapore firm BW Group ‒ to build a $3.7b datacentre in Southland, once had undisputed underdog-hero status within the tech community.
That was after his previous business, Hawaiki Cable, broke a monopoly on fibre-optic subsea cable connections to New Zealand held by a Spark-led joint venture, in a development some credited with helping cement the transition to uncapped home broadband plans.
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But investments in datacentres have quite suddenly become a topic of controversy both here and overseas ‒ most commonly because of concerns over the power they use.
Earlier this month, Monterey Park, a town near Los Angeles with a population of 60,000, became the first in the United States to ban datacentres after a vote by residents that reflected a broad-based backlash in many states.
In New Zealand, the Campaign Against Foreign Control of Aotearoa has lobbied strongly against Galasso’s proposed Datagrid venture, arguing it’s “time to pull the plug on power-hungry AI data centres”.
Without businesses such as Datagrid and the Tiwai aluminium smelter, New Zealand could “use new renewable energy generation and better storage and management of its power supply to meet demand in dry years”, organiser Murray Horton argues.
“The reality elsewhere in the world is that people are up in arms about these things because the customers of the relevant power companies end up paying increased power bills to cover the insatiable demand from datacentres.”
Galasso says Datagrid could be consuming 280 megawatts of power by 2028, which he describes as “a similar amount as other large industrial users New Zealand has long supported”, and less water than a mid-sized dairy farm.
He indicates he is taking the criticism in his stride.
“It’s normal to be cautious about a development moving this fast ‒ exponential change can feel unsettling, and it’s healthy that people are asking questions. I’d rather have scrutiny than silence.”
But he and some energy experts argue concerns about power usage are overstated or misplaced.
Datacentre demand can encourage investments in renewables while reducing demand for fossil-fuelled generation by smoothing out the demand for power — making the market work better for everyone, they argue.
Key to that argument is the fact that power demand peaks in winter evenings and mornings, whereas datacentre demand can peak in the daytime ‒ or even at night if they are being used by customers in far-away time zones.
Essentially, some of the wind and solar farms built to power datacentres would not be used by them during periods of peak demand, so could be used to displace some expensive fossil-fuelled generation.
Battery-backed “AI factories” such as Datagrid process computational tasks in batches, so their power usage can flex up and down to “ease pressure on a strained grid rather than add to it”, Galasso says.
“Contracts like ours support new green generation, which historically means lower prices for consumers everywhere.”
That may sound too good to be true, and organisations such as Transpower and the Electricity Authority have warned about the challenge of electricity demand arriving ahead of new renewable generation and transmission.
But John Harbord, chairperson of the Major Electricity Users Group (MEUG), backs up Galasso’s defence of Datagrid.
Datagrid and Amazon are members of the MEUG, but so are 13 other big businesses in different industries that might be concerned about the growth of the datacentre industry if they viewed themselves as in competition for scarce electricity.
Harbord makes clear they don’t see it that way, and he sees no conflict in setting out the association’s stall.
“I can say ‘100%’ that our other members are very supportive of datacentres coming to New Zealand.”
Harbord forecasts the percentage of electricity in New Zealand that will be used by datacentres could get up towards the “high single digits” over the next 10 years.
It is understandable for people to ask “if these datacentres are going to use all this electricity, am I still going to get enough?”, he says.
“But when you actually look at when they’ll be using the electricity, you realise very quickly that’s not really a problem.”
Datacentres will be looking to enter into large, long-term power contracts that could underwrite investment in more renewable generation, he says.
“If we get more generation being built and get a net increase in supply, then that should lead to a price reduction over time.
“You can put in a lot of demand-side response into some of those long-term contracts and add flexibility and resilience into our electricity system and, again, that’s a really big net positive for the system overall,” he adds.
Harbord says he is aware of a couple of other datacentre companies that are considering setting up in New Zealand and argues that’s also “a really good thing” for other reasons.
“Otherwise they'd be setting themselves up in other countries where the electricity they would be using is much less renewable. From a global climate perspective, the fact that they’re looking at coming to New Zealand is a really positive thing.”
There is an efficiency argument, too, he says. Most of the electricity that datacentres consume is to cool ‒ rather than power ‒ their computer chips, which is why developers are being attracted to regions such as Iceland and Southland.
Prominent energy consultant Michael Liebreich ‒ founder of Bloomberg New Energy Finance and known for championing the inevitability of a rapid transition to green energy and EVs ‒ also suggests the datacentre industry is being unfairly demonised.
Datacentres currently account for about 1.5% of global power use, and 4% in the US, he said during a tour to Wellington last month.
“People are obsessed with datacentres,” Liebreich says.
Demand will grow, “but what’s really fascinating is to see the sort of moral outrage about datacentres, when really all they will do is grow electricity demand by maybe 1% to 3% per year for the next decade”, he says.
Electricity demand growth on that scale was perfectly normal up until 20 years ago and could be met by increased renewable generation, he says.
Concerns over power usage — whether or not well-founded — are not the only reason angst over the growth of the industry is on the rise, of course.
As in the case of the views of the Campaign Against Foreign Control of Aotearoa, that is often mixed in with more generalised concerns around the growth of AI, which is fuelling the current datacentre boom.
Horton referred to the “insidious nature of AI” in his most recent missive, and questions whether datacentres deliver the ‘best bang for the megawatt’ in terms of the jobs they create.
“It’s a groundbreaking, game-changing technology, exactly the same way the internet was, and there are good and bad applications”, he says, clarifying his views on AI.
But its use necessitates “a national discussion”, he says.
“We are setting up this massive infrastructure for the sole purpose of supplying this new technology without much indication of what it’s going to be used for,” he says.
“This is not a Luddite view, every time I do a search for something online, it gives me an AI overview, so I understand the good applications of it. But AI is increasingly being used for fighting wars.”
Harbord acknowledges the backlash against datacentres is based on a “diverse range of perspectives”.
“There is, in some quarters, a caution around AI, what it might be used for, what it might be able to do, and the impacts that might have on society.
“There’s that concern around what would be the impact of this on our electricity supply and prices. I don’t agree with those arguments, but I can fully understand why people might hold those positions or beliefs.”
Then there is the argument datacentres “use a lot of electricity, but won't necessarily create a very large number of jobs in the way, say, that a manufacturing site would”, he notes.
But he argues there is a “net positive benefit to society as a whole”.
“If we, as a country, made decisions on what businesses we have in New Zealand based on the number of people they employ, there's a slippery slope where you could end up only backing relatively unproductive labour-intensive industries.
“Data centres and the computing power that they bring can be absolutely transformative to our societies and to our economy. I think it’s pretty incredible, actually.”