Singapore-based Datagrid is building a NZ$3.5bn (US$2bn) AI datacentre in Makarewa, New Zealand, which will become the country’s second-largest electricity user at 280MW. According to company plans, the facility will support global AI and cloud providers with training and data storage, while a new high-speed internet cable will connect Invercargill to Australia.
The Environmental Cost of New Zealand’s AI Ambitions
The Makarewa project highlights a growing tension between national economic goals and local environmental stability. Datagrid has secured approval to draw up to 604,800 litres of groundwater daily and discharge 5,000 litres of treated wastewater per day, according to Environment Southland regional council reports.
Local residents, including Makarewa resident Amanda, have expressed alarm over the potential use of 84 diesel backup generators during power shortages. These generators are approved to discharge air contaminants, raising concerns about round-the-clock noise and light pollution affecting both the community and local farm animals.
Economic Gains vs. Long-Term Job Creation
Local authorities view the NZ$3.5bn investment as a regional win. Datagrid claims the project will generate 1,200 jobs during construction and approximately 50 permanent positions once operational by 2028.
However, Angus Dowell, an economic geographer, argues these figures are misleading. Dowell states that while construction provides short-term gains, datacentres are “very, very low employers long term,” suggesting the long-term economic development benefits do not “stack up.”
Comparing Projected Benefits
| Metric | Projected Impact |
|---|---|
| Construction Jobs | ~1,200 (Temporary) |
| Permanent Staff | ~50 (Long-term) |
| National Goal | NZ$25-30bn in total foreign investment (Invest NZ) |
Government Strategy and the ‘Safe Harbour’ Appeal
The project aligns with a broader strategy by Invest New Zealand to attract foreign capital for AI infrastructure. According to the agency’s website, New Zealand is a “safe harbour” for investment due to its cool climate, available land, and access to renewable energy.
A report from Boston Consulting Group, commissioned for the agency, claims the AI industry could unlock up to $70bn of economic activity over the next decade. This high-level ambition contrasts with the experience of locals like Kelly Blomfield, chair of the Southland Sustainable Resource coalition, who says residents feel the region was “sold out from underneath us.”
Blomfield notes that attempts to gather more information from Datagrid have been unsuccessful, leading to a feeling that the community won’t find out the full impact “until its done.”
Industry Response to Resource Concerns
Datagrid CEO Rémi Galasso has previously dismissed concerns regarding water and power usage as unfounded. Galasso argues that Southland’s cool climate reduces the need for water cooling and that the company will use long-term renewable energy arrangements, meaning it will not compete with households for electricity.
Despite these assurances, Dowell points to “a lot of opacity” surrounding the project. He suggests that New Zealand should look at the environmental impacts of datacentres globally and the “asymmetrical distribution of value” in the big tech AI economy before committing further.
Frequently Asked Questions
When will the Makarewa datacentre be operational?
Construction is scheduled to begin this year, with the facility expected to be operational by 2028.
How much electricity will the facility use?
The centre will use 280MW of electricity, making it the second-largest user in New Zealand.
What are the main environmental concerns?
Community concerns focus on the use of 84 diesel generators, the extraction of 604,800 litres of groundwater daily, and the removal of a nearby wetland.
What do you think about the trade-off between high-tech investment and local environmental preservation? Share your thoughts in the comments below or subscribe to our newsletter for more deep dives into AI infrastructure.
