Datagrid's new artificial intelligence factory in Southland could become the most sustainable data centre in the Asia-Pacific region, thanks to the region's cool temperatures and a commitment to using far less water and power than originally consented. The project, expected to be New Zealand's second-biggest electricity user when completed in 2028, is now at the centre of a community conversation about balancing technological ambition with environmental and social responsibility.
Why Southland's climate gives it an edge in sustainable data storage
Datagrid chief executive Remi Galasso said the region's natural advantages were undeniable. 'Any other location in Sydney, in Jakarta, in Singapore will use more water, more electricity for the cooling. We have a huge advantage here in Southland,' he told business leaders. The cool, damp climate means less energy is needed to keep servers at optimal temperatures, a factor that could make the facility a model for green digital infrastructure across the region.
Water use: a pledge to rely on rain, not groundwater
Datagrid has consent to draw up to 600,000 litres of groundwater per day, but the company has pledged to rely primarily on rainwater. Its environmental manager, Fiona Smith, said the firm was in constant contact with neighbours to dispel misinformation. 'Over the last two years I've come to know those neighbours very well. Some of them talk to me three or four times a week,' she said.
Scaling back: less water, fewer generators than first planned
The project has been significantly scaled back from its original March proposal. Head of technology Benjamin Black explained that the consenting process requires companies to assume worst-case scenarios, which led to 'some pretty terrifying numbers' in early documents. In practice, Datagrid now expects to use 70% less water than consented, under 66 million litres per year instead of 220 million. The factory will also need fewer than 34 generators, down from the 84 originally permitted.
Community concerns: transparency and the fast-track debate
Southland Business Chamber chief executive Sheree Carey said locals had mixed feelings. 'There are significant opportunities and there are also genuine concerns,' she said. 'Some of the concern in the community comes from a knowledge gap. When people see quick numbers around power, around water, generators or data infrastructure, it's completely reasonable that they want the straight answers in plain English.'
Opponents have sought a review of Datagrid's resource consents, questioning environmental monitoring conditions and potential low-frequency noise. The Southland District Council is assessing whether to launch a review, with a decision expected by September 5. Some locals have also criticised the non-notified consent process, saying it left them without a say.
Choosing community engagement over fast-track approval
Galasso said he deliberately chose to work with the community rather than use the Government's Fast-track process. 'They proposed to me the Fast-track process and said we can give you the resource consent in six months. I said, thank you, but no thank you. I will talk to the councils and we'll do the classic resource consent process. We have to do it the right way.'
From now on, Datagrid will hold monthly public meetings at the Makarewa Country Club. 'Everybody's welcome and we will have full transparency,' Galasso said.
Will the factory push up power prices?
Some locals have asked whether the factory would cause electricity price hikes. Black said a large battery storage system would help stabilise Southland's supply. 'We are going to put the battery system into what's called grid-following mode to provide voltage support. This has nothing to do with us. This is entirely around making the grid more stable,' he said.
What happens next for the Makarewa site?
Work to build a new access road and excavate topsoil began at the Makarewa site on Tuesday. Southlanders who remain uneasy about the AI factory were due to hold another meeting on Wednesday night. The project also includes new subsea cables that would give Invercargill some of the country's fastest internet, positioning it as a digital gateway for New Zealand.
Frequently asked questions about the Southland AI factory
How much water will the Datagrid factory actually use?
Datagrid expects to use less than 66 million litres per year, which is 70% less than its 220-million-litre consent limit. The company says it will rely primarily on rainwater rather than groundwater.
Will the AI factory increase electricity prices in Southland?
Datagrid says a large battery storage system in grid-following mode will provide voltage support and help stabilise the local electricity supply, rather than add strain to the network.
Why were locals not consulted through a notified consent process?
The original resource consent was non-notified, which some residents say left them without a say. Datagrid has now committed to monthly public meetings at Makarewa Country Club and says it will provide full transparency going forward.