Finance Minister Nicola Willis says Ministry of Business, Innovation and Employment (MBIE) officials have advised her they don't expect data centres rolling out over the next 12 months to put upward pressure on electricity prices, given the arrangements they have in place.
Speaking on Monday at a post-Cabinet press conference alongside Prime Minister Christopher Luxon, Willis said after receiving that advice from MBIE officials, she has directed more work be done on what extra measures; “we might like to introduce to ensure that going forward, no future data centres would put upward pressure on electricity prices.”
She said that includes looking at some of the steps taken in Australia and other jurisdictions around the world to ensure "where data centres are coming, we are getting that additional electricity generation.”
Willis' comments come as the latest annual inflation figures, as measured by Statistics NZ's consumers price index (CPI), show electricity prices rose 12% in the June quarter.
Luxon said he has also asked the Department of the Prime Minister and Cabinet (DPMC) to get involved as well and canvass what was happening in Australia.
Recently, concern has been raised about potential water and electricity use by the Singapore-based Datagrid NZ facility, with estimates electricity use at its maximum could reach almost 6% of New Zealand's total usage.
In July, Australia rolled out an AI roadmap, with a legal obligation for new large-scale data centres to underwrite new power supply and pay their share of grid connection, so no costs are passed on to homes or businesses.
“I’ve spoken to Prime Minister [Anthony] Albanese about wanting to be aligned in some of the stuff that we do around data centres, and equally also with industry," Luxon said.
Luxon wanted to bring that all together into some “common sense guidance” and if they could get other parties on board with it, “that would be awesome”.
“New Zealand is well behind the curve in terms of data centres that are in the country … We’re well behind. So the key thing is I want to get this advice. I really want to get some sensible rules around it.”
Luxon said he thought NZ had a competitive advantage in terms of AI data centres due to our temperate climate and access to land.
“There’s also national security, there’s sovereignty issues, there’s productivity and economic benefits that come from it all,” he said.
Luxon acknowledged the Green Party had a differing view as they have called for a one-year pause on consenting new AI data centres so regulation can be developed.
“I don’t think the 12-month moratorium is the way to do it … I’m sure there’s common ground that we can find with them and others,” he said.
Datagrid’s NZ facility
Datagrid is aiming to have the Southland data centre operational by 2028, where it will support high-density IT and AI workloads.
A briefing paper to the South Island Minister James Meager from June last year said the proposed data centre was expected to consume 280 megawatts in phase one, and one gigawatt upon completion, "almost double the consumption of the Tiwai Point New Zealand Aluminium Smelter."
The Green Party estimated that with an initial Datagrid nameplate capacity of 280MW, its percentage at 100% load would be 5.58% of the country's electricity use.
But a spokesperson from Energy Minister Simeon Brown's office provided Electricity Authority estimates that the centre would use only 4.25%, or 1.7 TWh.
They also noted Datagrid had signed a 15-year power purchase agreement with Mercury for 140MW from a wind farm in Gore in March, which would cover about half of the data centre’s energy needs. Mercury NZ acquired a 12.7% stake in Datagrid NZ for $53 million (US$30 million).
Brown previously said; "AI data centres will be large users of electricity... But the reality is, AI data centres in New Zealand use around 0.6% of New Zealand's power at this stage."
He wanted investors to know New Zealand was; "open for businesses, but actually, the rules need to be clear that we want to see that leading to more generation."
18 Comments
I don't have much of an opinion on whether or not we should be building data centres but if anyone thinks it's not going to have an impact on our power prices over the next decade or so needs their head read.
The only way it won't, is if the chip technology advances can exceed the power demands of the existing ones.
Electricity prices converge to the marginal cost (plus a return) to bring new generation to market.
Another 5% of load will just mean another 2 or 3 wind farms get built and prices will still end up at (pretty much) the same $/MWh. They also use otherwise wasted transmission capacity and share in transmission costs so there is a small saving to consumers there.
The idea of data centers is that they use a lot of power. We can export electricity as we export lamb and milk powder. There is a bunch of economic activity and upside for NZ companies in providing said electricity.
Enough of the positivity. Much better to complain about new exporters while also complaining we don't have any new exporters.
Yes, I keep forgetting building things is bad and selling things is bad. Capital intensive high productivity industry? Begone
Oh the transmission capacity we currently have is wasted? Great we can cancel all the transmission upgrades and get a refund of the increased transmission charges we all started paying in April?
Bunch of places do have (a lot of) spare capacity.
Happy to be convinced transpower are overbuilding though. Iirc the biggest part of the increase in charges was the WACC going up
So an increase of 6% in electricity usage will not put upward pressure on prices???
Would a 6% increase in bread demand result in higher bread prices, or would they just bake more bread?
Alternative headline:
"Officials give Minister advice she wants to hear"
Willis is Second Officer on the Titanic.
If having data centres means no upward pressure on electricity prices, does this mean no data centres will put downward pressure on electricity prices?
Well we have a lot fewer sawmills, plywood plants, pulp & paper mills than we did 3 or 4 years ago as they couldn't afford the power costs.
Their absence and reduced demand hasn't resulted in cheaper power prices, at least on my bill anyway
Yes. Once everyone is unemployed and we have no businesses left, electricity will be cheap.
At the moment there is just over 1000MW of data centre connection at all stages requested to Transpower.
There is 18900MW of new generation, connection in the pipeline at all stages.
Am I missing something?
If you want cheaper personal power install solar. Ive had it for 3 years and the numbers are great. Just added to industrial property I have and its even greater. Easiest investment Ive ever had to manage - theres nothing to manage and no staff!!! The sun keeps on giving and rises every day, brighter some days than others sure, but if it dosnt come up nothing will work!!
Do the numbers with a clear and open mind.
Is New Zealand now in the business of selling electricity to foreign owned companies that pay very little tax in NZ? Google and Microsoft etc.
Why is the government promoting this? NZ Energy sector is building capacity for the future New Zealanders not anyone else. If we wish to export our energy we should build an undersea cable, but only once ample year-round energy surplus electricity is achieved.
Why not export electricity, we have some big advantages, and it's becoming the new oil. And AI data centres are a very simple mechanism to do it.
In terms of power prices increasing, doesn't that apply to anything we export? Dairy would be much cheaper if we didn't export it, but we would be much poorer
Simply because once it becomes tradable it is priced on the international market and any possibility of competitive advantage is lost...much like the dairy products you alluded to on another thread....except this time it is a critical input to ALL outputs....why shoot ourselves in both feet?
Anyone know what actual measures MBIE has put in place to ensure power prices do not rise? I can't find any evidence online.
Will Datagrid be required to reduce power consumption during grid emergency events so that domestic consumers and small businesses will still have power? Think middle of winter, customers with at home medical needs.
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