Week in Review

The Tiwai Point ... data centre?

Analysis: The closure of the Tiwai Point aluminium smelter has left the door open for another electricity-intensive project to take its place at the south tip of the South Island, Marc Daalder reports

A continuous 572 megawatts of electricity thrums through massive, purpose-built power lines stretching 150km from a power station at Lake Manapouri in Fiordland to a spindly peninsula across the harbour from Bluff.

Right now, that peninsula is occupied by a 100-acre industrial site that has been running non-stop for 49 years: the Tiwai Point aluminium smelter.

In 14 months, however, the last of the smelter's 600m-long potlines will shut off. Around 1000 people directly employed by the plant - as well as up to 1600 workers reliant on it - may find themselves out of a job. And there will still be 572 megawatts of electricity - enough to continuously fuel nearly 32,800 Nissan Leafs driving at 100km per hour - pumping out of the Manapouri generator, looking for something to power.

Could that something be a data centre?

Finance Minister Grant Robertson raised such a possibility in comments around Tiwai's closure last week, saying, "As we have done in Taranaki, we will support a just transition to more job opportunities. We know the strengths of Southland and we want to build on them in areas such as agriculture, aquaculture and manufacturing. There is also an opportunity to support other energy-intensive projects like green hydrogen and data centres."

In comments to Newsroom, Minister of Government Digital Services Kris Faafoi seconded Robertson's remarks.

"Data centres are significant users of power and New Zealand’s renewable energy status makes our power profile very attractive for service providers wanting cleaner emissions. The establishment of new data centres and growth of existing data centre usage will result in increased power demand from the New Zealand grid," he said.

"These requirements may well make the infrastructure currently used by the Tiwai smelter an attractive proposition for data centres or other electricity-intensive ventures, as [Robertson] suggested last week, but the Government hasn’t yet had any discussions about such possibilities."

Why a data centre?

To start with, simply redistributing the electricity from Manapouri is likely to be a long and expensive endeavour. Already, Transpower, which operates the national grid, is putting $100 million into a lines project that would provide the option of redirecting some of the electricity from the bespoke power lines to Tiwai into the broader South Island grid.

In order to fully divert Manapouri's output from Bluff to the rest of the country, Transpower estimates that investments on the order of half a billion dollars will be needed. That's just the dollar amount they're quoting, however - the time to design, consent, build and switch on the lines could be years.

Given this, why spend that cash and eat that delay if there are a bevy of electricity-intensive projects that could take the smelter's place? Data centres stand among these - as Faafoi noted, they are massive hogs of electricity. They also thrive in cooler climates and some are increasingly using cold water to cool their systems, Professor Dave Parry, the head of AUT's department of computer science, told Newsroom.

"The big issues with data centres of course is the power consumption. They also need cooling water as well but again, that's no problem around there," Parry said.

"The bigger the geographical spread you have, the better, in many ways." Such distribution provided added security and solved issues with latency - or lag - that some customers might otherwise experience, he said.

Parry was supportive of the construction of a Tiwai Point data centre for a second reason as well: it could help New Zealand's transition to a low-carbon, digital economy.

With Covid-19 raging around the world, an economy rooted in the import and export of physical items - which require sea and air voyages from countries that have handled the pandemic less ably than New Zealand - seems less desirable than one that trades in high-value but digital and intangible products.

However, the data centre might not provide as many long-term jobs as something like the manpower-intensive smelter, although construction would create a short-term boost in employment. Faafoi said bringing data centres to New Zealand - like the massive Microsoft project he announced in May - would create initial construction jobs and about 20 full-time jobs directly linked to the centre.

The presence of the data centre would also, Faafoi said, kickstart New Zealand's IT industry, leading indirectly to hundreds more jobs.

"A greater impact of job creation will occur from local NZ businesses hiring IT talent and cloud developers to support accelerated cloud migration and infrastructure operations and software development. It’s estimated there could be hundreds of new technical IT jobs created over the next few years," he said.

"It's a great opportunity to start moving some of these high-tech jobs into areas which are not the city centre. I think it's a very good idea and we should be doing that as a country," Parry said.

That's something David Airehrour, an expert in green computing at Unitec, said as well.

New Zealand could, Airehrour said, transform itself into a country that specialises in building renewably-powered data centres. However, the centres would need to address the issue of "e-waste" - the electrical and often non-recyclable waste generated by frequent overhauls of hardware.

"My advice will be that they need to actually adopt green computing, right from the design stage of the data centre to the engineering stage. How will the equipment be disposed of? That way, the impact on the environment is going to be very, very minimal," he said.

Were that issue accounted for, Airehrour said he saw no reason why a Tiwai Point data centre shouldn't replace the smelter.

Christopher Cookson, a 24-year veteran of New Zealand's IT community with a speciality in databases, likewise told Newsroom that a data centre in Tiwai was a viable proposition.

"There's actually some merit in it because, apart from having a data centre close to generation, which reduces loss through transmission, Southland is a cooler climate so actually building it is going to result in less need for cooling to dissipate the heat," he said.

Stakeholders have been quieter on the matter. Big tech companies like Microsoft and Amazon are unlikely to make public comments this early in any potential process. Although Microsoft is committed to building a massive data centre in the North Island, a spokesperson for the company's New Zealand branch told Newsroom that the company had no comment at this time.

Likewise, a spokesperson for the Southland development agency Great South declined to comment, indicating that the organisation's current mission was still to convince the Government and the smelter to come to an agreement about keeping Tiwai Point running.

A spokesperson for Meridian Energy, which owns and operates the Manapouri station, was equally non-committal.

"There have been many stories of interest shown in the site over the years, including by data centres. There will likely be a number of innovative ideas for the site that could stimulate the Southland economy and provide high-skilled employment while harnessing New Zealand’s renewable energy advantage," the spokesperson said.

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