Cloudy with a bleak chance of connectivity
Friday, 18 August 2023
Makarewa, a community north of Invercargill in Southland, is like any other picturesque rural landscape. Rows of trees, large hedges, mailboxes, sheep and paddocks dot the community’s quiet existence in north Invercargill. An elongated road runs down Taylor Road and Flora Rd East, while the Waikiwi stream runs between them.
Unremarkable from its beautiful surroundings, this is the epicentre of the proposed billion dollar hyperscale data centre in Southland.
Anyone passing it could not imagine a ginormous block of concrete sitting there, housing millions of cables and servers running an unimaginable number of zeros and ones to bring us data. Data which we swear by. Data that powers the everyday supercomputers in our pockets and drives our devices, amongst other things.
This is where the magic was supposed to happen.
But before such a radical transformation can take place, it's the paddocks that catch one’s eye. The epicentre of this data centre stands still, its patches of green still awaiting further instruction.
This is business as usual.
Humble beginnings
Since being proposed in 2020, reams of text have been dedicated to the ambitious Datagrid data centre project in Southland. Touted as a billion-dollar deal, Southlanders have looked forward to having another feather in their cold caps.
The data centre would diversify the region’s business portfolio, especially outside rural, and create up to 1200 jobs for its construction.
Data centres are not new to New Zealand, and being at the end of the world has not deterred technology giants such as Microsoft, Amazon and Spark from having data centres in the country. However, a majority of them are concentrated in the North Island.
The Southland data centre would have made the paddocks of Makarewa look drastically different from its neighbouring green farms, while still carrying a “green” tag, and it would have been special for several reasons: For starters, it would have been Southland’s first data centre. Secondly, it already had a client: the University of Otago. And thirdly, while its long term job creation was debated, the mere proposition and presence of the data centre would create opportunities for locals to take up IT, cloud certifications or boost their skills.
On paper, the data centre appeared as a win-win-win, but what was it in reality?
Midjourney cloud comfort
In January 2022, Datagrid, the company that proposed the data centre, bought 43 hectares of land in north Makarewa.
The data centre would be spread over a 25,000 square metre facility which could go up to 40,000 square metres, its 60 megawatt capacity, scalable to 100 megawatts and an area that would cover five rugby fields, consuming the power that a town of 80,000 people would need.
Three months after buying the land, in March last year, Remi Galasso, the chief executive officer of Datagrid and Hawaiki Transpacific Cable and creative driver of the data centre, said that the company expected construction to begin by 2023.
This was an enterprising timeline, but it gave the company a significant leeway from what the Overseas Investment Office (OIO), which greenlit the land purchase deal, proposed.
At the time, the OIO assessment report’s key deadlines for the project looked like this:
Datagrid must lodge resource consent applications by June 30, 2023. If all relevant consents are not obtained by January 31, 2024, the OIO may require Datagrid to dispose of the land.
Construction must start by June 30, 2024 and be finished two-and-a-half years after that, being complete and operational by New Year's Day, 2027.
After getting OIO approval, Datagrid called for expressions of interest for construction.
By mid-October last year, it had filed its land resource consent with the Southland District Council.
For all practical purposes, Datagrid was ahead of its OIO timeline.
But 10 months later, today, the consent application lies in a file at the council awaiting further details.
The council has requested expert reports including landscape, noise assessment and a report on the impact of the development on productive land before its application could be evaluated. According to the council, the ball is entirely in Datagrid’s court. Without submitting the necessary information, Datagrid will not get a consent to start operations.
Sail, not drift
Technically, Datagrid already had a customer before it began operations.
In June last year, the University of Otago announced that it would become an “anchor tenant” for the data centre.
While used mostly in relation to retail shopping, this term meant that the University could get large amounts of computing power possibly for a discounted price, giving Datagrid guaranteed income and a steady cash flow as well as putting its name out there, thus attracting new businesses.
In June 2022, a press release from the University said that it “hopes to start using the hyperscale datacentre in 2024”.
Today, the University may have a different view of things.
When asked about how the Datagrid project will benefit the University, the University of Otago’s information technology services director Mike Harte said the same thing that the University had said in its press release in June 2022:
“Under the agreement, Datagrid would develop a future-proof, customised and easily scalable hosting solution, with the aim of helping to ensure the University is equipped to manage the exploding volumes of data anticipated as rising numbers of large-scale scientific projects come on stream.”
Interestingly, the University does not have a “formal agreement with Datagrid”, Harte said.
Despite this, it had significant benefits to reap from Datagrid’s offerings.
Using Datagrid’s data centre resources meant that the University would no longer need to invest in replacing its ageing data centre, “allowing it instead to scale up or down easily according to research, teaching, learning, and operational needs”. It would also help its researchers process, transfer and store digital, data-intensive files and work including MRI scans, genomics and results from sensors at field research sites.
The University had green plans of its own, and the data centre would help it achieve them.
“The data centre would be powered by 100 per cent renewable energy, which would support the University’s goal of being net-zero carbon by 2030,” Harte said.
But for the University to achieve this, the data centre has to kick-start operations first.
When asked about the challenges that the University might face with Datagrid, Harte said, “The University is not involved in the Datagrid project. We will assess our commitment once the data centre has been built and the services are available.”
Internet-ional dreams
The Datagrid data centre did not just eye local businesses for clients. The company expected that by 2025, its data centre would be connected to the United States, Australia and Asia.
However, for this to happen, it needed the 15,000km long Hawaiki Cable which was acquired by the BW Digital Group in May 2022 for $500 million.
BW Digital Group, a Singaporean shipping, infrastructure and oil and gas company, also held a 37% ownership in Datagrid as of 2021.
The Hawaiki Cable, which was completed in 2018, would bring Datagrid connectivity that would link Australia, New Zealand, American Samoa, Hawaii and the west coast of the US.
In 2020, Galasso had said in a press release that “the only hyperscale data centre currently servicing New Zealand is based in Australia, but Southland’s climate makes it 15% cheaper to power a data centre of this size compared with Australia”.
“These savings, along with New Zealand’s well-educated workforce and long term political stability make Southland highly attractive as a location for global companies to safely store their data.”
That’s right. Southland’s bone-chilling cold could help Datagrid save cooling costs in a business that almost entirely banks on keeping its servers at a certain low temperature.
The press release added that the lack of the submarine cable infrastructure prevented New Zealand from having the kind of connectivity that would support hyperscale data centres, the kind proposed at Makarewa. However, the Hawaiki cable could change that.
Hyperscale data centres differ from regular data centres by means of custom engineering, allowing economies of scale. A hyperscale data centre will outperform a regular data centre significantly.
Galasso also said that the Hawaiki cable would give the data centre “access to a serviceable market of around 20 million people across New Zealand, Victoria, New South Wales and parts of Queensland”.
An attempt to contact Intelia, the Noumea-based company, of which Galasso is the founder and chairman of, was unsuccessful.
Powering down
In 2020, Meridian Energy had agreed to supply Datagrid with 100 megawatts of power from the Manapouri hydro scheme.
The company, along with Datagrid, hoped that the data centre’s use of renewable power generation and connectivity would “be enough to attract hyperscale cloud partners like Google, Facebook and Microsoft”.
Meridian Energy’s general manager of generation and natural resources Guy Waipara had said then, “A low-emissions data centre is a huge opportunity for Southland and all of New Zealand to leverage our abundant clean energy to create high-value jobs and diversify our economy even more into the digital space.”
However, earlier this year, the electricity supplier voiced concerns stating that its “confidence in that project is diminished” following Remi Galasso’s exit from BW Digital.
Meridian’s diminished confidence reflected on its website.
A press release page on its website, from 2020, was removed at the time of access on 17 August 2023.
However, the formerly live page could be seen on the web archive:
Following Meridian’s diminished confidence, Ludovic Hutier, Galasso’s replacement at BW Digital, said that the “data centre and the associated Hawaiki submarine internet cable remained its primary focus and were on track”.
However, Galasso’s plan had envisioned a local ecosystem.
Last year, he said that the company hoped to receive expressions of interest from Southland and New Zealand companies, “with which we look forward to forging valuable partnerships to create a local ecosystem of workers that will join us on our journey over the next 5-10 years”.
The paddocks at Makarewa would not look the same again, and neither would Southland. If the data centre was established in the area, the possibility of a digital cloud ecosystem was there to be had. The data centre could attract businesses and government customers, and possibly aid in disaster management of data, backups and more for its clients.
Was it just another dream in the Land of the Long White Cloud? What would it take to achieve this dream? Or would the project remain just a pipe dream?
Meridian Energy declined to comment on this story.
BW Digital did not respond to a detailed questionnaire sent to the company about the Datagrid project, but instead provided this statement by BW Digital’s chief executive officer Ludovic Hutier:
“We continue to progress the Datagrid datacentre project in Invercargill. However, it is a multifaceted, complex and unique project encompassing a myriad of legal, financial, commercial and technical parameters that will take time to be perfectly aligned. Unfortunately, due to our obligations of confidentiality with multiple stakeholders, we are unable to share any detailed information regarding the status of the project at this time that might be considered commercially-sensitive. We expect to provide an update on Datagrid later in the year.”
Southland’s sounds of silence
In light of New Zealand Functional Foods pulling its factory out of Southland to relocate to Canterbury, the Datagrid data centre would have been a big win for Southland.
Instead, the region has had nearly no updates on the project.
Nearly six months ago, Invercargill MP Penny Simmonds said that she thought Meridian’s concerns about the data centre were premature, particularly in light of the assurances from Datagrid and BW Digital.
But as of August, Simmonds hadn’t received any updates on the project. “I haven’t had any update at all since then, so I’m hoping that things are still going fine,” she said.
At the same time, Great South’s strategic projects manager Steve Canny had said that it had been involved in the early stages, involving the selection of a suitable site in the Makarewa environment, but while Datagrid was pressing on with the consent process, there hadn’t been any week-to-week or month-to-month involvement.
“But our understanding was that … when the project got to the next phase of activity, there would be greater engagement across the board,’’ he said.
A request for comment from Canny on the project has remained unanswered.
Whether the green pastures of Makarewa will ever turn into gold for Datagrid is unknown. However, from a long term point of view, the Datagrid data centre had the ability to make New Zealand look good to the world. There was a well of opportunity there waiting to be taken by whoever would take it.
But, all that remains of Galasso’s ideas today, is the silage that was already there.
Datagrid is not the only data centre planned in Southland. New Zealand owned T4 Group also announced plans for a Tier T4 data centre in the region and was negotiating a land purchase deal in March this year.
At the time, T4 Group chief operating officer David Simpson said that stage one of the project was expected to commence between May and June. The location of T4 Group’s data centre is not known, but the company was considering a section near the Ascot Park Hotel as of June 2022.