The Math Ain’t Mathing

Scrolling the news this morning has me scratching my head.

This morning, while drinking my coffee and scrolling through the news, I came across three stories that, at first glance, seemed unrelated.

But when you put them side by side, something doesn’t add up.

First, we’re told New Zealand probably doesn’t need LNG imports. The argument is that we don’t really have a dry-year problem and that declining gas production can be managed through a combination of electrification, fuel switching, and demand reduction.

Second, Datagrid has received Overseas Investment Office approval to expand its Southland data centre campus to as much as 1 GW.

Third, we’re repeatedly assured that renewable energy can support growing electricity demand from data centres, industrial electrification, and transport electrification.

Individually, they have varying degrees of plausibility.

Collectively though, the math ain’t mathing.

The case against LNG implicitly assumes a relatively stable demand outlook. If gas-using industries progressively switch to electricity or biomass, and if transport gradually electrifies, then perhaps declining domestic gas production can be managed without importing LNG.

But a 1 GW data centre changes the equation dramatically.

A 1 GW facility operating continuously would consume approximately 8.7 TWh of electricity per year. New Zealand currently consumes about 40 TWh annually. In other words, a fully developed Datagrid campus would increase national electricity demand by around 21%.

All of this from a single facility. This demand isn’t flexible. It isn’t seasonal. It isn’t a peak load that appears for a few hours on winter evenings. It’s baseload demand. Twenty-four hours a day. Seven days a week.

The challenge becomes even more obvious when we consider how that electricity would be supplied.

New Zealand’s existing hydro system already provides the firming capacity that keeps the grid stable today. There is little headroom to take on a major new baseload demand, particularly in dry years, when lake levels are already stretched to cover existing needs. To reliably supply a load the size of the proposed data centre, a major new storage project such as Lake Onslow (pumped Hydro) would be necessary to back up the additional wind and solar generation required.

Roughly speaking, supplying 8.7 TWh per year from a combination of wind and solar would require something on the order of 2.5 – 3.0GW of new renewable generation in the form of wind and solar. For context NZ currently has about 1.5GW of wind and 0.4GW of solar farms.

This doesn’t include gas users switching to electricity. It doesn’t allow for electric trucks or growth elsewhere in the economy. It’s only the data centre.

This is where the conversation often jumps from engineering to storytelling.

One story says we don’t need LNG because electricity can replace gas. Another says electricity demand is about to surge because of data centres. A third says renewable generation can effortlessly accommodate all of this without thermal firming support.

Perhaps each story contains some truth when viewed in isolation, but they cannot all be true at the same time without confronting the scale of the infrastructure required and the limitations of the technology we are trying to do it with.

If New Zealand wants large-scale data centres, industrial electrification, transport electrification, and the retirement of natural gas, then we need an honest discussion about what must be built to make that possible, and what it would cost.

The generation, the transmission, the storage and the firming capacity, together with a realistic assessment of how long all of this will take to build assuming global markets can supply the equipment given the current commodity market turmoil.

Because before we debate solutions, we need to agree on the arithmetic.

And right now, based on these three stories, the math ain’t mathing.

P.s.

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Larry