Many thanks, Larry, for directing the energy discussion towards wide-boundary thinking: “perhaps each story contains some truth when viewed in isolation” reveals what is an Achilles Heel of much of the energy debate. “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.”
While I welcome this advocacy for widening the debate, I venture that it needs to go a fair bit wider again than what you in essence frame as the logistics and financing of an expanded electricity supply.
A clue lies in “If New Zealand wants…” – i.e. when have we had a national discussion about our long-term energy security, about whether we even want large data centres, or about the energy-constrained future we are almost certainly heading for (and how a massive data centre with a 24/7 dispatchable electricity contract affects that)? Or, wider again, whether we are operating under “minerals blindness “ when it comes to sustaining our energy and other infrastructure, how a massive data centre might help our communities flourish, or help us stop trashing the future with emissions, resource depletion, and the like.
We are racing across the threshold of wholesale systemic change and are hardly discussing what that means.
Morning Lindsay, I agree this needs a wider discussion. At one level building the infrastructure required to support this new load would create a lot of jobs and opportunities. The procurement of this amount of energy will contribute to GDP. However, as you note the material constraints that are emerging are likely to derail these plans (I have a piece on materials in the pipeline). Then there is the question of data center value creation and offshoring of revenue streams which is an issue every country is grappling with.
Thanks for responding, Larry - I'm sure you're across the wider issues, and I know from my own Substack there's only so much you can do justice to in one post. I'll be interested in your materials piece when it comes through - hopefully including taking stock of the work of the likes of Simon Michaux.
The bit I don't get is that the power companies know that this doesn't work. So who is dumb enough to sign a contract to provide a GW of power? It certainly can't be cheap at that volume. That's bankruptcy level stupidity. I would guess that once the data centre proponents get consent and try to find power they will come unstuck.
They have a consent to progress the 280MW facility and have contracted 140MW of power from Mercury. So they are 14% of the way there. I suspect the next 86% will be a lot harder to procure unless Tiwai unexpectedly shuts down but aluminum prices suggest that's not on the cards.
Given the potential impact of large electrical demands on the entire country, logic surely dictates that consenting requires that a data centre comes with its own power supply, yes?
The RMA very explicitly doesn't consider impacts on markets. It is not an economic planning tool.
Otherwise you'd have people objecting new housing because it will drive down their property values. Supermarkets opposing new competitors opening because it will take away their customers etc.
Regardless, to secure power they have to come to agreement with a supplier who will willingly supply them. There is no guarantee and they have to pay the marginal cost of supply like everyone else.
There lies the gap, socioeconomic planning. The NZ public still own 51% of 3 of the 4 gentailers. The public paid for most of that infrastructure before privatisation. How does the public want those assets used?
I am not enamoured. A lot of people don't remember but the previous system was a disaster, lurching from ruinous megaprojects to supply crisis which called on for the public to take short showers every 5 years.
If the public wants cheaper power that's fine, the government could do something like release equity progressively and pay $20 of everyone's bill if they want. But the days of doing stuff like cross subsidising households from C&I customers are gone.
I am with you on the issue of cross subsidisation. I am arguing that it creates distortions that eventually come home to roost. Allowing large C&I customers like datacentres to come in and have a material impact on existing infrastructure is exactly the sort of cross subsidisation that will result in backlash from the community.
Someone new coming in and bidding up prices isn't a cross subsidy.
Although I don't think that a big new consumer will materially shift the market price much either way. There are things that work for the average household, ie another big user to share in paying transmission charges, as well as against.
That is exactly the sort of market distortion that will upset the public owners of those assets. Where it is cross subsidisation is where a new player gets access to assets that they didn't have to pay for in the first place.
Aluminium demand on Tiwai (Rio Tinto Zinc) and non-Gulf producers is huge atm because the 15-20% of the world's aluminium billet that used to come from Gulf smelters has stopped flowing because of the Iran war.
The solar and wind fabulists just cannot grasp the brutal physics and economics here… my focus is manufacturing for export… and that finally is all about base load…
On paper it could be made to work but with CAPEX numbers at around $3500/kW for wind and $1900/KW for solar plus several billion overall for Onslow its not going to be cheap power.
Why bother with Onslow? Build enough wind and solar, and use the exisiting lakes as the batteries of the system (see the David Keat interview I linked in a previous comment). This requires a restructuring of the electricity "market", which is long overdue in any case.
Bruce the Data centre they are talking about is in Invercargill, pretty close to Onslow. While building Onslow like some private investors now want to would cost a lot to build, the transmission losses wouldn't be great even if there would need to be more transmission investment.
Thats a good but complex question. The answer is more nuanced. This is just the cost of generation it does not include the wider system costs associated with intermittent and variable generation which includes storage, transmission and grid support services. When combined this may still be cheaper than fuel over 20 years but the trends to date suggest as the LCOE falls consumer prices rise. How much of this is an markets and how much is physics I'm not sure.
LCOE is measured at the generator’s gate… so ignores system costs… and that’s the problem… the lift in power bills over the past few years has mostly come from transmission and distribution cost increases… so blaming the big 4 sort of misses the mark… a better target would be the WAcC applied by the Com Com…
I know of a solar project in the far, Far North which is physically an ideal location… but you need about 100km of “string” to get just to Kaitaia… so how will that be funded? And then further south to Kaikohe to hook into the Transpower network…???
Hi Bruce, fully agree, you hit the nail on the head. I see this as Tainter's law of diminishing returns on complexity. A couple of links for you if you havent seen them already.
Actually Solar, Wind and batteries, with hydro for firming was exactly what I would suggest. However, funded by the data centre developer, not the NZ public. One misconception worth picking up on is that data centres can't/won't change demand to suit supply. They can and they do. It is a simple economic equation for them...does the revenue exceed the power cost at that point in time.
SP That was David Keat. He had an informed, broadranging take on NZ Energy. Definitely worth a look by those interested in electricity supply. Main point for me was it's not USA navy stopping oil tankers passing Hormuz; it is the ship owners insurance policies
The problem is not renewables versus Lng . The problem is that the gentailers are investing behind the price curve and using precious storage in the lakes as baseload rather than for dry years . Ie dry years is a false construct based only on the presence of gas and hydro .
The whole energy market was designed before renewables were a thing .
The gentailers control all private build out of generation capacity as it is impossible to build substantial generation of new without a a power price offtake
The energy market in NZ was formed when at least 60% of our electricity was from hydro and perhaps 10% from geothermal even if there wasn't much wind and negligible solar. It is a failed system because it encourages gentailers to keep supply tight so they "have" to burn gas and coal and get those high prices for all their power.
Hi John, Coordination is a term that keeps coming to the fore as e consider the future of the network. It will have to be far more coordinated and will be much more distributed. The characteristics of generation will be as important as the output. I'm not sure how the current market will achieve that.
Thanks for your mahi, linking the data center and fossil fuel terminal together in this way, may explain the current governments obstinacy in moving ahead with the terminal despite offical advice to the contrary. I wonder why the data center needs to expand? How is this expansion going to impact, the local environment in terms of cooling requirements as well, not just energy usage. Who benefits from a larger data center, a fossil fuel gas terminal ? Does any monetary benefits flow to kiwis or overseas ? Does this make NZ more resilient in facing the poly crisis we are in ?
I'm aware of a manufacturer who canned a huge new factory three weeks ago (worth circa $150m) because, in part, of the uncertainty around future security of supply of both electricity and gas. This is the story of New Zealand's industrial future - factory closures will get the headlines but cancelled capital spending will be hidden. It's not just democracy that dies in darkness.
Tony - don’t let them go the way of Germany with no industrial base. The results aren’t good and the cost of electricity and full time availability aren’t good.
The fools you refer to employ 750 people and another approx. 2,000 direct downstream, all of whom are really grateful for having a job. How many do you employ?
I believe the concerns about security of supply for gas.
However you can go and buy very long dated power purchase agreements for electricity easily. Historically it has even been cheaper than taking the risk and going on spot as the market very much values stability.
Well aware of that, and the company has a 5-year power agreement at OK rates for its current operation. But there are plenty of outs in the agreement for force majeure etc.
Thanks Larry, any suggestions on how to have the conversation getting past the one liner opinion pieces, that are all about the neoliberal headline rather than the researched facts?
Hi David, thanks, that's what I am trying to do here to some extent. But helping the public develop a more nuanced wide boundary understanding is important to assess propositions like these.
The irony of having a humongous data center consuming massive amounts of electricity in the same area as the aluminium smelting plant seems to be avoided by this government. Can the Manapouri generate enough for both?
Because this government is beholden to big business, it’s unlikely to carry out a reasonable assessment.
The math that never maths is the assumption that the market will deliver. On the one hand our current govt is so enamoured by that idea that they refuse even to consider intervening in our long list of dysfunctional markets. Down to the point of not engaging in trying to define let alone untie the Gordian knot you so clearly identify. They have just reached for the solutions their funders call for; more drilling & LNG. Time to vote them out.
Hi Stephen, as much as I like the idea of markets, I struggle to see how the current system we have can deliver the outcomes we need to stop the widespread de-industialisation of NZ and create the conditions where we can be more than a low value commodity export economy.
Thanks Larry. Whatever the merits of the three projects, what they clearly demonstrate is that energy system strategy can't be left to emerge from a bunch of "free" market decisions, especially in a relatively small system like ours.
Of course, with a government unable or unwilling to do any joined-up thinking the problems only compound.
FWIW, I suspect that if we were to invest heavily in solar, wind and batteries we could live with two out of the three projects, and without building a massive and expensive pumped hydro scheme. Electricity market reorganisation would also be needed. I see Consumer NZ has chipped in with some ideas... https://campaigns.consumer.org.nz/end-high-power-prices-now
Hi Gareth, I agree it will take a lot more strategic planning and overall system coordination to make things like this work, and I don't see how the market as it is currently configured can achieve that. Thanks for the links.
I havent read it as Consumer seems to be captured by people that think that solar and wind will do the job along with the new batteries that will supply for the 8-18 hours a day there is no wind and solar. Apparently. They don't do any real thinking or modelling.
I have no concerns. Other than what happened in Spain and NZ relying on unreliable as our economy falters due to lack of firm power supply....and I know the market and this area in particular very well.
I wonder how much data storage New Zealand will require in the future?. If we don't have a data centre are we going to import this storage. In my mind, data and intelligence services will become our biggest import in the future , if we don't support local storage and services we sill be at the mercy of the likes of Google and space x.
Digital sovereignty is certainly a key issue, but this datacentre will be overseas owned and trading on a global data processing market so won't help much, if at all.
That, and as far as I can tell Datagrid is owned by Procore Technologies, headquartered in California (https://mergr.com/company/procore-technologies). Even putting the energy concerns to one side, this cannot by any stretch be considered a truly sovereign facility (thank you, US CLOUD Act; https://www.justice.gov/criminal/cloud-act-resources), and for that matter it cannot be considered a beacon of future high-tech employment (once built, apart from expansion and refurbishment, data centres required a few skilled professionals (potentially remote in some cases), and a moderately well/trained guard force).
I suspect Southland has far more important and pressing things to worry about than this data centre, particularly as [unfortunately] I fear that Fast Eddy isn’t far off the mark with regard to this possibly being moot with regard to the much bigger picture…
I suppose you’ve seen The Spinoff’s opinion piece claiming “No problem - we just keep building more dams to run AI data centres.” On whose rivers exactly?
No I haven’t seen that one but there isn’t a lot of easily available larger scale hydro, we’ve used the best stuff already. Also the last few water storage proposals on the west Coast, Nelson and Wairoa have all been fraught issues from an RMA perspective so yes I agree with you entirely on that one.
Thanks Dave I need to write more on this as its more nuanced. The depletion of Maui reserves is the issue here. Maui’s reserves update suggests its not economic heading into 2027. Maui’s production is only slightly less than Metanex’s demand. This means that the closure of Maui forces the closure of Methanex but add little to no additional gas to the remainder of the market.
I don't think 1GW comes at once or even at all, the penalty for getting permission from the OIO to build something bigger than you are planning is zero. Just good sense to be prepared for any possibility.
There are potential deep storage projects which are a lot cheaper and lower risk than Onslow. Raising plus allowing further drawdown of Lake Pukaki for one. Having a marginally larger stockpile at Huntly, Genesis's new gas storage project.
And we know generators are very willing to build peaking capacity with batteries.
Plus all of this only goes ahead if one or more generator enters into a voluntary agreement to sell them power on top of their existing supply obligations. Everyone's incentives are aligned, where is the failure or need for intervention?
Thanks Gibbo, Yes, it will definitely be phased and the OIO precedes further resource consenting. At this stage they have a consent for a 280MW center and have contracted 140MW of power from Mercury as far as I can establish.
I agree with you on the operating range of Pukaki as being something that offers less risk than Onslow. Tariki gas storage will also likely be necessary once Methanex ceases operations, and I agree will help with winter peaking capacity.
This piece was not so much to challenge the viability of the data center but more an observation of the disconnect nature of the various views, many of which are quite influential in shaping what we will ultimately end up with.
Many thanks, Larry, for directing the energy discussion towards wide-boundary thinking: “perhaps each story contains some truth when viewed in isolation” reveals what is an Achilles Heel of much of the energy debate. “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.”
While I welcome this advocacy for widening the debate, I venture that it needs to go a fair bit wider again than what you in essence frame as the logistics and financing of an expanded electricity supply.
A clue lies in “If New Zealand wants…” – i.e. when have we had a national discussion about our long-term energy security, about whether we even want large data centres, or about the energy-constrained future we are almost certainly heading for (and how a massive data centre with a 24/7 dispatchable electricity contract affects that)? Or, wider again, whether we are operating under “minerals blindness “ when it comes to sustaining our energy and other infrastructure, how a massive data centre might help our communities flourish, or help us stop trashing the future with emissions, resource depletion, and the like.
We are racing across the threshold of wholesale systemic change and are hardly discussing what that means.
Morning Lindsay, I agree this needs a wider discussion. At one level building the infrastructure required to support this new load would create a lot of jobs and opportunities. The procurement of this amount of energy will contribute to GDP. However, as you note the material constraints that are emerging are likely to derail these plans (I have a piece on materials in the pipeline). Then there is the question of data center value creation and offshoring of revenue streams which is an issue every country is grappling with.
Thanks for responding, Larry - I'm sure you're across the wider issues, and I know from my own Substack there's only so much you can do justice to in one post. I'll be interested in your materials piece when it comes through - hopefully including taking stock of the work of the likes of Simon Michaux.
The bit I don't get is that the power companies know that this doesn't work. So who is dumb enough to sign a contract to provide a GW of power? It certainly can't be cheap at that volume. That's bankruptcy level stupidity. I would guess that once the data centre proponents get consent and try to find power they will come unstuck.
They have a consent to progress the 280MW facility and have contracted 140MW of power from Mercury. So they are 14% of the way there. I suspect the next 86% will be a lot harder to procure unless Tiwai unexpectedly shuts down but aluminum prices suggest that's not on the cards.
Given the potential impact of large electrical demands on the entire country, logic surely dictates that consenting requires that a data centre comes with its own power supply, yes?
You would thing that should be part of it. I do not that the base 280MW plan has something like 32 diesel generators.
The RMA very explicitly doesn't consider impacts on markets. It is not an economic planning tool.
Otherwise you'd have people objecting new housing because it will drive down their property values. Supermarkets opposing new competitors opening because it will take away their customers etc.
Regardless, to secure power they have to come to agreement with a supplier who will willingly supply them. There is no guarantee and they have to pay the marginal cost of supply like everyone else.
There lies the gap, socioeconomic planning. The NZ public still own 51% of 3 of the 4 gentailers. The public paid for most of that infrastructure before privatisation. How does the public want those assets used?
I am not enamoured. A lot of people don't remember but the previous system was a disaster, lurching from ruinous megaprojects to supply crisis which called on for the public to take short showers every 5 years.
If the public wants cheaper power that's fine, the government could do something like release equity progressively and pay $20 of everyone's bill if they want. But the days of doing stuff like cross subsidising households from C&I customers are gone.
I am with you on the issue of cross subsidisation. I am arguing that it creates distortions that eventually come home to roost. Allowing large C&I customers like datacentres to come in and have a material impact on existing infrastructure is exactly the sort of cross subsidisation that will result in backlash from the community.
Someone new coming in and bidding up prices isn't a cross subsidy.
Although I don't think that a big new consumer will materially shift the market price much either way. There are things that work for the average household, ie another big user to share in paying transmission charges, as well as against.
That is exactly the sort of market distortion that will upset the public owners of those assets. Where it is cross subsidisation is where a new player gets access to assets that they didn't have to pay for in the first place.
Yes, that would work. Say, a one GW diesel genie. The whole thing is absurd.
Buy Tiwai Point and close it down, for a start. That gets you halfway there.
Isn't aluminium demand surging at the moment.
Aluminium demand on Tiwai (Rio Tinto Zinc) and non-Gulf producers is huge atm because the 15-20% of the world's aluminium billet that used to come from Gulf smelters has stopped flowing because of the Iran war.
Ordinarily it's a low value-add, generic commodity. I'd like to think we could do better.
Aluminium is used in munitions (explosives) and chemtrails (fuel enhancer)? It is energy dense J/kg
Yep… probably diesel generators… cis how else do you get the base load???
The solar and wind fabulists just cannot grasp the brutal physics and economics here… my focus is manufacturing for export… and that finally is all about base load…
On paper it could be made to work but with CAPEX numbers at around $3500/kW for wind and $1900/KW for solar plus several billion overall for Onslow its not going to be cheap power.
Why bother with Onslow? Build enough wind and solar, and use the exisiting lakes as the batteries of the system (see the David Keat interview I linked in a previous comment). This requires a restructuring of the electricity "market", which is long overdue in any case.
Yep. Too much thinking about the last 5% when we should be planning the next 30% to 50%.
Does that take into account the transmission investment required or just the on property costs? Onslow is probably $10 billion on a good day…
Bruce the Data centre they are talking about is in Invercargill, pretty close to Onslow. While building Onslow like some private investors now want to would cost a lot to build, the transmission losses wouldn't be great even if there would need to be more transmission investment.
Aren't these figures you quote above extraordinarily cheap compared to LNG electricity prices?
Thats a good but complex question. The answer is more nuanced. This is just the cost of generation it does not include the wider system costs associated with intermittent and variable generation which includes storage, transmission and grid support services. When combined this may still be cheaper than fuel over 20 years but the trends to date suggest as the LCOE falls consumer prices rise. How much of this is an markets and how much is physics I'm not sure.
LCOE is measured at the generator’s gate… so ignores system costs… and that’s the problem… the lift in power bills over the past few years has mostly come from transmission and distribution cost increases… so blaming the big 4 sort of misses the mark… a better target would be the WAcC applied by the Com Com…
I know of a solar project in the far, Far North which is physically an ideal location… but you need about 100km of “string” to get just to Kaitaia… so how will that be funded? And then further south to Kaikohe to hook into the Transpower network…???
Hi Bruce, fully agree, you hit the nail on the head. I see this as Tainter's law of diminishing returns on complexity. A couple of links for you if you havent seen them already.
https://newzealandenergy.substack.com/p/system-costs?r=ubsbu
https://newzealandenergy.substack.com/p/the-curious-case-of-kaitaia?r=ubsbu
Thanks…. I’ve previously seen those two posts which clearly lay out the issues….
ie when you include fuel costs over say 20 years
Actually Solar, Wind and batteries, with hydro for firming was exactly what I would suggest. However, funded by the data centre developer, not the NZ public. One misconception worth picking up on is that data centres can't/won't change demand to suit supply. They can and they do. It is a simple economic equation for them...does the revenue exceed the power cost at that point in time.
There's a fabulist been interviewed on Q&A been interviewed right now. Doesn't look like a crazy nutter to me.
Just watched that: David Keat talks a lot of sense.
SP That was David Keat. He had an informed, broadranging take on NZ Energy. Definitely worth a look by those interested in electricity supply. Main point for me was it's not USA navy stopping oil tankers passing Hormuz; it is the ship owners insurance policies
The problem is not renewables versus Lng . The problem is that the gentailers are investing behind the price curve and using precious storage in the lakes as baseload rather than for dry years . Ie dry years is a false construct based only on the presence of gas and hydro .
The whole energy market was designed before renewables were a thing .
The gentailers control all private build out of generation capacity as it is impossible to build substantial generation of new without a a power price offtake
The energy market in NZ was formed when at least 60% of our electricity was from hydro and perhaps 10% from geothermal even if there wasn't much wind and negligible solar. It is a failed system because it encourages gentailers to keep supply tight so they "have" to burn gas and coal and get those high prices for all their power.
Peter I agree our laissez-faire market will not overbuild at scale and this is at the core of NZ’s productivity problems.
Hi John, Coordination is a term that keeps coming to the fore as e consider the future of the network. It will have to be far more coordinated and will be much more distributed. The characteristics of generation will be as important as the output. I'm not sure how the current market will achieve that.
Thanks for your mahi, linking the data center and fossil fuel terminal together in this way, may explain the current governments obstinacy in moving ahead with the terminal despite offical advice to the contrary. I wonder why the data center needs to expand? How is this expansion going to impact, the local environment in terms of cooling requirements as well, not just energy usage. Who benefits from a larger data center, a fossil fuel gas terminal ? Does any monetary benefits flow to kiwis or overseas ? Does this make NZ more resilient in facing the poly crisis we are in ?
Thanks Maree, these are all valid concerns that need to be addressed.
Who benefits from a larger data center, a fossil fuel gas terminal ?
The gentailers benefit because they can sell their product 24/7.
I'm aware of a manufacturer who canned a huge new factory three weeks ago (worth circa $150m) because, in part, of the uncertainty around future security of supply of both electricity and gas. This is the story of New Zealand's industrial future - factory closures will get the headlines but cancelled capital spending will be hidden. It's not just democracy that dies in darkness.
Well said thanks Tony.
Tony - don’t let them go the way of Germany with no industrial base. The results aren’t good and the cost of electricity and full time availability aren’t good.
More fool them thinking there was any future in burning fossil gas
The fools you refer to employ 750 people and another approx. 2,000 direct downstream, all of whom are really grateful for having a job. How many do you employ?
I believe the concerns about security of supply for gas.
However you can go and buy very long dated power purchase agreements for electricity easily. Historically it has even been cheaper than taking the risk and going on spot as the market very much values stability.
Well aware of that, and the company has a 5-year power agreement at OK rates for its current operation. But there are plenty of outs in the agreement for force majeure etc.
thanks, interesting insight
Thanks Larry, any suggestions on how to have the conversation getting past the one liner opinion pieces, that are all about the neoliberal headline rather than the researched facts?
Hi David, thanks, that's what I am trying to do here to some extent. But helping the public develop a more nuanced wide boundary understanding is important to assess propositions like these.
Good point David. The Electricity Authority is calling for submissions on its latest consultations report.
< Promoting reliable electricity supply: Options to address a harmonics issue>
More then a one liner - it's 31 pages. Maybe make a submission as a consumer because all the other submissions will be made by Gentailers.
The irony of having a humongous data center consuming massive amounts of electricity in the same area as the aluminium smelting plant seems to be avoided by this government. Can the Manapouri generate enough for both?
Because this government is beholden to big business, it’s unlikely to carry out a reasonable assessment.
Hi Tony, no Manapouri is not big enough to supply both it would take significantly more generation to run both at full capacity.
Unlikely… the only place that used to generate 1GW was Huntly from its four (now three) Rankine engines…
John Dizard: Energy Shortages Loom Despite Peace Deal
https://www.theinstitutionalriskanalyst.com/post/theira856
courtesy @Sean Paul Kelley
The math that never maths is the assumption that the market will deliver. On the one hand our current govt is so enamoured by that idea that they refuse even to consider intervening in our long list of dysfunctional markets. Down to the point of not engaging in trying to define let alone untie the Gordian knot you so clearly identify. They have just reached for the solutions their funders call for; more drilling & LNG. Time to vote them out.
Hi Stephen, as much as I like the idea of markets, I struggle to see how the current system we have can deliver the outcomes we need to stop the widespread de-industialisation of NZ and create the conditions where we can be more than a low value commodity export economy.
Thanks Larry. Whatever the merits of the three projects, what they clearly demonstrate is that energy system strategy can't be left to emerge from a bunch of "free" market decisions, especially in a relatively small system like ours.
Of course, with a government unable or unwilling to do any joined-up thinking the problems only compound.
FWIW, I suspect that if we were to invest heavily in solar, wind and batteries we could live with two out of the three projects, and without building a massive and expensive pumped hydro scheme. Electricity market reorganisation would also be needed. I see Consumer NZ has chipped in with some ideas... https://campaigns.consumer.org.nz/end-high-power-prices-now
Hi Gareth, I agree it will take a lot more strategic planning and overall system coordination to make things like this work, and I don't see how the market as it is currently configured can achieve that. Thanks for the links.
This perspective on investment in renewables is also relevant: https://keenlens.substack.com/p/the-nz-super-fund-is-not-new-zealands?r=1jfkew&utm_campaign=post-expanded-share&utm_medium=post%20viewer
I havent read it as Consumer seems to be captured by people that think that solar and wind will do the job along with the new batteries that will supply for the 8-18 hours a day there is no wind and solar. Apparently. They don't do any real thinking or modelling.
Perhaps you should read it. You might learn why your concerns are baseless.
I have no concerns. Other than what happened in Spain and NZ relying on unreliable as our economy falters due to lack of firm power supply....and I know the market and this area in particular very well.
If you are familiar with this area, you will know that Spain's power outage had nothing to do with renewables: https://ieefa.org/resources/excess-renewables-generation-did-not-cause-iberian-blackout
I wonder how much data storage New Zealand will require in the future?. If we don't have a data centre are we going to import this storage. In my mind, data and intelligence services will become our biggest import in the future , if we don't support local storage and services we sill be at the mercy of the likes of Google and space x.
Digital sovereignty is certainly a key issue, but this datacentre will be overseas owned and trading on a global data processing market so won't help much, if at all.
That, and as far as I can tell Datagrid is owned by Procore Technologies, headquartered in California (https://mergr.com/company/procore-technologies). Even putting the energy concerns to one side, this cannot by any stretch be considered a truly sovereign facility (thank you, US CLOUD Act; https://www.justice.gov/criminal/cloud-act-resources), and for that matter it cannot be considered a beacon of future high-tech employment (once built, apart from expansion and refurbishment, data centres required a few skilled professionals (potentially remote in some cases), and a moderately well/trained guard force).
I suspect Southland has far more important and pressing things to worry about than this data centre, particularly as [unfortunately] I fear that Fast Eddy isn’t far off the mark with regard to this possibly being moot with regard to the much bigger picture…
I suppose you’ve seen The Spinoff’s opinion piece claiming “No problem - we just keep building more dams to run AI data centres.” On whose rivers exactly?
No I haven’t seen that one but there isn’t a lot of easily available larger scale hydro, we’ve used the best stuff already. Also the last few water storage proposals on the west Coast, Nelson and Wairoa have all been fraught issues from an RMA perspective so yes I agree with you entirely on that one.
The other math that I can’t get to add up is importing LNG while Methanex uses 40% of natural gas supply to export methanol.
Thanks Dave I need to write more on this as its more nuanced. The depletion of Maui reserves is the issue here. Maui’s reserves update suggests its not economic heading into 2027. Maui’s production is only slightly less than Metanex’s demand. This means that the closure of Maui forces the closure of Methanex but add little to no additional gas to the remainder of the market.
I don't think 1GW comes at once or even at all, the penalty for getting permission from the OIO to build something bigger than you are planning is zero. Just good sense to be prepared for any possibility.
There are potential deep storage projects which are a lot cheaper and lower risk than Onslow. Raising plus allowing further drawdown of Lake Pukaki for one. Having a marginally larger stockpile at Huntly, Genesis's new gas storage project.
And we know generators are very willing to build peaking capacity with batteries.
Plus all of this only goes ahead if one or more generator enters into a voluntary agreement to sell them power on top of their existing supply obligations. Everyone's incentives are aligned, where is the failure or need for intervention?
Thanks Gibbo, Yes, it will definitely be phased and the OIO precedes further resource consenting. At this stage they have a consent for a 280MW center and have contracted 140MW of power from Mercury as far as I can establish.
I agree with you on the operating range of Pukaki as being something that offers less risk than Onslow. Tariki gas storage will also likely be necessary once Methanex ceases operations, and I agree will help with winter peaking capacity.
This piece was not so much to challenge the viability of the data center but more an observation of the disconnect nature of the various views, many of which are quite influential in shaping what we will ultimately end up with.