OPINION: The Crown must treat energy and connectivity as national infrastructure.
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CDC's Hobsonville Campus One data centre. Photo / Chris Keall
In the second of a two-part series on New Zealand’s energy market, Rod Snodgrass looks at the opportunities data centres present – if we get the settings right.
In a previous article, I argued that adding enormous new data centre demand to New Zealand’s constrained electricity
system without changing underlying incentives risks making our energy problems worse. But what happens if we come at the problem from the other direction, starting with the New Zealand we want to be in 20 or 30 years and working backwards?
Imagine New Zealand in 2045. We have one of the world’s cleanest, most reliable, and globally competitive electricity systems.
Instead of energy prices being a constraint on economic growth, energy abundance has become a deliberately engineered national competitive advantage. Oversupply isn’t seen as market inefficiency. It’s the result of a clear strategy to produce surplus electricity for what it enables the rest of the economy to do.
Make no mistake, in the years ahead, countries that can supply abundant energy will have choices that energy-constrained economies won’t.
The global economy is becoming extraordinarily energy hungry. AI is the obvious example, but hyperscale computing, advanced manufacturing, and widespread electrification all depend on access to reliable, competitively priced electricity.
New Zealand starts with an extraordinary natural hand: hydro, geothermal, world-class wind, and growing solar potential, all serving a small population. Instead of treating that simply as enough energy to keep the wolf from the door, shouldn’t we ask whether it could become one of New Zealand’s great export advantages?
Our geography makes physically exporting electricity difficult, but we don’t need to. Put a data centre beside renewable generation and we effectively export that electricity as compute. Use it for AI and we export intelligence. Use it in advanced manufacturing and we export higher-value products. Use it to create green fuels and we export embedded renewable energy.
This changes the economics. Instead of measuring the value of another megawatt by the wholesale price it receives, we can measure it by the much greater economic activity that megawatt enables. Energy policy needs to become a national economic strategy.
Combine abundant renewable electricity with digital connectivity and our physical distance from major markets becomes less important, or even an advantage. Companies and governments are increasingly thinking about resilience and geographic concentration risk. Too much of the world’s compute currently sits in the northern hemisphere: global eggs in an increasingly fractious basket.
New Zealand offers something unusual: a stable democracy with strong institutions, rule of law, abundant renewable resources, and geographic separation from geopolitical risks. That combination could make New Zealand a compellingly safe harbour for strategically important infrastructure. A New Zealand that provides trusted, clean infrastructure becomes more economically valuable and strategically relevant.
But all this remains a daydream unless we confront an uncomfortable reality: our current electricity system rewards investment that follows demand, not infrastructure intended to create it.
If New Zealand decides energy abundance is worthy of being a national economic strategy, future energy infrastructure needs to be evaluated differently. A generation asset might generate a modest return while enabling billions of dollars of downstream economic activity for New Zealand Inc.
Which raises a legitimate question: should some of the next generation of energy infrastructure be treated as national infrastructure rather than purely commercial infrastructure?
That doesn’t mean government departments building power stations. Public-private partnerships, global infrastructure funds, NZ Super Fund, iwi investment, and institutional capital could all participate. But if the purpose is to create a national competitive advantage, the Crown needs to put its thumb on the scale.
There’s a serious conversation to be had about whether Crown stakes in Meridian, Mercury, and Genesis would generate greater national value if recycled into the next generation of energy and connectivity infrastructure. Existing gentailers would continue as commercial enterprises, but appropriate market separation would ensure nationally backed infrastructure creates new demand without unfairly competing or recreating structural problems.
First, we need to decide what we are trying to achieve. Let’s start with ambition.
We’ve become a nation of small dreams. Previous generations built hydro schemes, roads, ports, and telecommunications because they understood something important: infrastructure doesn’t simply respond to economic growth; it can create it.
We’ve got stuff the world needs: abundant renewable energy potential, digital connectivity, political stability, trusted institutions, talent, and an unusual geographic position. Put that in a blender and we’ve got the ingredients for a remarkable Kiwi century.
A century where instead of businesses leaving because electricity is too expensive, we see a manufacturing boom. Instead of debating how we ration limited electricity between households, industry, and data centres, we compete to attract the next major user. Energy becomes an engine of productivity and GDP growth.
None of this happens automatically. It requires investment, market reform, and difficult choices. But the first question is simpler: what is our ambition for New Zealand?
We can spend the next 20 years trying to ensure supply limps along with forecast demand. Or we can deliberately engineer abundance and use it to attract the investment, industries, and talent that help determine what New Zealand becomes.
Otherwise, can the last Kiwi out the door please turn off the lights.
