Microsoft's hyperscale data centre at Westgate, northwest Auckland, due to go online later this year. Photo / Chris Keall
Microsoft's hyperscale data centre at Westgate, northwest Auckland, due to go online later this year. Photo / Chris Keall
Power-hungry “hyperscale” data centres have begun springing up around northwest Auckland. And more - many more - are on the way.
Collectively, they’ll consume about 200 megawatts of electricity at peak usage - roughly the amount required to power some 200,000 homes. For context, average demand in Auckland today is about 1700MW.
These are huge “server farms” for the “cloud” in cloud computing. When you use the likes of Zoom or Microsoft 365, play Fortnite or stream Netflix, it’s served from a data centre.
Having giant data centres in Auckland - particularly northwest Auckland, close to the landing points of the major subsea cables that connect us to the outside world, and to New Zealand’s largest peering exchange, for pointing the data in the right direction - means faster performance. And for the likes of government agencies and banks, it smooths issues over data sovereignty - keeping New Zealand data in New Zealand. Previously, the closest hyperscale data centres have been in Sydney.
But how will these energy-hungry giants fit in with a power system already facing a surge in electric vehicle ownership that has outpaced every expert’s prediction?
Bear in mind that Singapore placed a three-year moratorium on new data centre builds in 2019 (it was lifted mid-2022), citing the strain on the city state’s power grid. And in August last year, the Greater London Council told developers in west London they might be prevented from starting new housing projects in the area until 2035 because a spate of data centre builds had left the grid without spare capacity.
Hyperscale data centres are described by their peak power use as they run computers and the huge airconditioning systems required to prevent all those computers from overheating.
For example, Canberra Data Centres (CDC) opened two 14MW hyperscale data centres in Auckland: one in Hobsonville and one in Silverdale, 28MW in total, for what it said was “an initial investment of more than $300 million”. And in January, the firm said it had bought land to add another 12MW of capacity.
So far, CDC’s twin centres are the largest hyperscale facilities in New Zealand - by default, given that they’re the first to build here in the supermassive hyperscale class - but competition is on the way.
Microsoft's hyperscale data centre at Westgate, northwest Auckland, due to go online later this year. Photo / Chris Keall
Microsoft is building a data centre “region” in Auckland, with its first hyperscale data centre now under construction in Westgate, northwest Auckland, on land bought from Mark Gunton’s NZ Retail Property Group. Like others, Microsoft’s data centre has no signage and the firm prefers to keep its exact location secret for security reasons - although it is searchable in public records.
The centre is due to go live this year, and Microsoft hasn’t put a price tag on the build, or detailed its specifications, other than to note that it’s above the Overseas Investment Office’s $100m threshold for approval. Anchor customers will include Fonterra, ASB, BNZ (which is taking the opportunity to move some 1000 apps to the cloud), ACC and Auckland Transport. The transport agency says the development will trim $2.5 million from its $50m per year IT budget and make it easier to add artificial intelligence capability to apps.
Another view of Microsoft's hyperscale data centre at Westgate. Photo / Chris Keall
And then there’s the big daddy: a $400m hyperscale data centre being built by Sydney-based DCI Data Centres at a 5.8 hectare site in Albany, bought for $66m from the Knight family, who once wholesaled to garden centres). Ground was broken late last year.
DCI says the facility, dubbed AKL02, will be a 40MW data centre, housing a staggering 80,000 servers.
And that will be followed by the 10MW AKL01, near Whenuapai.
CDC's 14 megawatt Silverdale 1 data centre, which went live in November as part of a $300m-plus build. Photo / Chris Keall
On top of all that activity, there is Amazon’s announcement that its Amazon Web Services division will spend more than $7.5 billion creating a “local zone” cluster of data centres in Auckland, with Netflix and potentially TVNZ and Spark as anchor customers.
Amazon says that head-spinning $7.5b total represents its planned investment over 15 years, including the cost of building at least three data centres and stocking them with hardware, plus operating costs including utilities and salaries. The tech giant says the project will create 1000 jobs. (If you’re wondering, Amazon has separately calculated its value to NZ’s economy at $10.8b, for what that’s worth.)
CDC's 14 megawatt Hobsonville 1 data centre in northwest Auckland, which also went live in November as part of the firm's $300m build. It's twinned with Silverdale 1. CDC said in January that it's bought land for the contruction of extra facilities to add another 12MW of capacity. Photo / Chris Keall
And on top of all that local contender, Datacom spent $52m upgrading its NZ data centres just before the pandemic hit. And in 2021, Spark unveiled a plan to supersize its Takanini data centre to 10MW (Datacom and Spark compete with the multinationals in some cloud hosting areas, put partner with them in a lot of others.)
Crossover
Calculating the total megawattage of the various hyperscale data centres isn’t as simple as adding together their individual published figures, because there is a degree of cooperation.
For example, DCI provides what it calls a “wholesale white space” and “shell and core” services for cloud service providers.
Will the firm be hosting AWS, Microsoft and perhaps another Big Tech peer on its AK02 Albany data centre campus? Its CEO Malcolm Roe can’t confirm or deny, but close watchers of Overseas Investment Office and property documentation will have noted the same street address appearing on different providers’ applications (including Microsoft and DCI in Westgate).
Then there’s the fact that Microsoft partners closely with CDC across the Tasman, meaning CDC’s Hobsonville and Silverdale centres could form the second and third facilities in Microsoft’s region - but again, neither party will comment.
Photo / GEtty Images
There is some cross-pollination with ownership, too. CDC is half-owned by NZX-listed Infratil and Infratil, in turn, co-owns Vodafone NZ with Canada’s Brookfield Asset Management. Brookfield owns 100 per cent of DCI.
Simon Mackenzie, chief executive of lines company Vector, is in a position to see the big picture.
The CEO’s headline take: yes they’ll be power hogs, but we’ll see no west London-style moratorium on housing developments. “We don’t see that arise from any of our planning scenarios,” he says.
“As it stands at the moment, we are somewhere in the order of 200MW of data centres either under construction or committed or likely to proceed,” Mackenzie told the Herald shortly after Vector’s full-year earnings report last August.
“Obviously some of those are still in the pipeline, but that is a significant load on our network, recognising that our network demand is about 1700MW on average. So that’s a pretty big increase for us.”
An artist impression of DCI's AKL02 campus in Albany, Auckland, which will house hyperscale data centres for several of the multiinational players. Image / Supplied
But two factors will ease the impact of that big increase.
First, Mackenzie points out that the new data centres are being built in stages. DCI’s monster Albany plant, for example, will first go online in 2024, but only in stage one of several stages. That buys time for planning between Vector and national grid operator Transpower.
Data centre operators, like subdivision developers, are on the hook for 100 per cent of connection charges, but there is also the cost of upgrading “upstream assets”. Transpower is likely to add another grid exit point in Auckland’s northwest, which is also home to rapidly expanding housing developments. It would be “unreasonable” to “socialise” the cost of such upgrades, Mackenzie says.
Second, it won’t be simply a case of 200MW of demand being added to Auckland’s existing 1700MW. The cloud providers argue that housing tens of thousands of shared servers in one data centre is more efficient than the older model of every organisation having its own servers in its own office (although it’s also fair to say that for the next few years we’ll be in a messy transition period, with many organisations doing a bit of cloud, and a bit of old-school).
“We can see use of the datacenter region as an alternative to other, less energy-efficient technology, being helpful in managing overall pressure on the NZ electricity system at times of peak demand,” Microsoft’s Quesnel says.
Infratil's 48 per cent stake in Canberra Data Centres - bought for A$392 million in 2016 - has grown to be the NZX-listed firm's largest asset. It has been revalued upwards multiple times as CDC has expanded its business in Australia, and now NZ amid the cloud computing boom. The bounces have been so big they're visible every quarter. On December 30, Infratil said its CDC stake is now worth between A$3.24 billion ($3.5b), up from A$2.88b as of September 30.
With their tremendous thirst for power, there are limits to how green a data centre can be. DCI’s Roe says, “even if we covered the whole 5.8 hectares in solar panels, that would only generate a tenth of the power required by AKL02. Lots of the solar panels you see on data centres are just window dressing.”
Still, while it will definitely be on the grid, and indeed is likely to require upgrades to that grid, DCI has pledged to work with its providers to run its new data centres using 100 per cent renewable power. So have Amazon, CDC and Microsoft. In Microsoft’s case, it says that from day one it will work with Carbon Zero-certified retailer Ecotricity, majority owned by Genesis.
CDC aims to be carbon neutral by 2030, while Amazon has committed to reach net-zero carbon emissions by 2040.
Water hogs too?
Microsoft - which has set itself the goal of being carbon-negative by 2030 - also says its New Zealand data centres will be the first to be 100 per cent water-free - a key point, given data centres have traditionally been water hogs as well as power hogs.
“The New Zealand datacenters will be cooled using outside air only, requiring zero water for cooling and zero water for humidification. The new datacenter facilities will have a WUE (Water Usage Effectiveness) of 0.00 L/kWh [litres per kilowatt],” Microsoft Azure product engineering lead Patrick Quesnel says.
Transpower’s 2022 annual report says, “we are already witnessing growing demand for electricity in New Zealand. Our 10 highest daily peak loads over the past decade have all occurred in the past year, with six of the top ten occurring in 2022. Industrial load is also set to increase. Alongside the rise from process heat, data centres will be a key player driving this demand, as evidenced by projects from DCI Data Centers, Datagrid and Amazon.”
Datagrid, backed by rich lister Malcolm Dick and others, has plans for a 100MW hyperscale data centre in Southland, which would be 40,000sqm or the size of five rugby fields. However, that plan depends on funds being found for a new international cable and, more, Rio Tinto closing its aluminium smelter at Tiwai point, freeing up the necessary capacity from Meridian’s Manapouri power station - a development that is forever disappearing over the horizon.
Transpower says in response that it is supporting several renewable projects, including Contact Energy’s 168MW geothermal powerplant in Tauhara in the central North Island, due to open mid-year (Contact says 168MW is enough power for around 175,000 homes), and Meridian’s 176MW Harapaki wind farm in Hawke’s Bay, set to come on stream in 2024.
But another major project - a huge, $4 billion hydro-electric scheme at Lake Onslow in Otago, pitched by the Ministry of Business, Innovation and Employment as a South Island “battery” to help New Zealand move to 100 per cent renewable electricity - hangs in the balance. The industry is watching to see whether the project survives new Prime Minister Chris Hipkins’ cull of Government policies. Pundits say without that substantial government backing, no private player is likely to take it on.
