Published on the 08/07/2026 | Written by Heather Wright

Is expensive hydro enough for AI investors?…

Invest NZ is making an ambitious pitch to global AI investors: Build here.

The government-backed investment agency is promoting New Zealand as a destination for large-scale data centres and AI infrastructure, arguing the country offers a rare combination of renewable electricity, available land, grid capacity and political stability at a time when global demand for computing power is surging.

“The question is whether global investors will be persuaded that renewable power outweighs and room to expand outweigh the advantages traditionally offered by larger markets.”

The strategy is built around a simple proposition. As AI drives unprecedented demand for data centres, access to power is becoming a critical constraint. And if electricity is becoming the scarce resource, New Zealand believes it has an advantage. Earlier this year Boston Consulting Group flagged data centres as a key growth opportunity for New Zealand, proviing a $70 billion opportunity for the country.

Invest NZ describes New Zealand as ‘the secure, green solution’, highlighting that more than 88 percent of the country’s electricity generation comes from renewable sources. It says established data centre hubs are increasingly facing limits around power, land and environmental capacity, while New Zealand still has room to grow.

The pitch, launched last week, comes as global spending on Ai infrastructure reaches unprecedented levels. Microsoft, Amazon, Alphabet, Meta and Oracle collectively spent US$437 billion on capital expenditure in 2025, up 68 percent year-on-year, with spending forecast to continue rising as hyperscalers build out AI capacity.

Boston Consulting Group, which has been advising on New Zealand’s data centre opportunity, says global computing capacity is expected to more than double by 2030, with demand continuing to outstrip supply. Its research argues New Zealand has a ‘right to win’ a larger share of international investment because of its renewable energy resources, fibre connectivity and stable operating environment.

But New Zealand is entering a competitive market.

Australia has been attracting large-scale investments from AWS, Microsoft and Google for years, supported by a significantly larger domestic market and a more established cloud footprint. Those investments have largely been concentrated around Sydney and Melbourne, where providers can serve large enterprise and government customer bases.

Invest NZ is effectively arguing that, in the AI era, the equation is changing. Rather than being built solely where customers are located, some future AI infrastructure may be built where long-term electricity supply is available and affordable. It’s an argument BCG also supports. It says a growing share of workloads, particularly AI model training, are not latency-sensitive, so distance is no longer a constraint and computing capacity can increasingly be located where power and infrastructure are most competitive.

56 and counting

The country isn’t starting from scratch.

Last year a Tech New Zealand report into data centres noted there were already 56 operational data centres in the country, with another 20 planned or under construction, claiming the sector ‘directly employs over 1,000 people’. That report also painted a glowing picture of data centres in New Zealand, saying the sector underpins $93b in economic activity, with $16.5b in ICT GDP and $76.5 billion in knowledge-intensive services. And, like BCG and Invest NZ, it also pushed the sustainable power card, noting local data centres achieve on average power usage effectiveness. (PUE) of 1.3 – ‘significantly’ outperforming the global average of 1.54, and are rapidly transitioning to 100 percent renewable energy sources.

Recent years have also seen major investments from local operators including Spark, Datacom and CDC, alongside expansion by international cloud providers. Amazon Web Services has previously announced plans to invest NZ$7.5 billion in its Auckland cloud region over 15 years.

But the clearest example of the proposition Invest NZ is now selling offshore may be Datagrid’s Southland project. A subsidiary of Singapore’s BW Digital, and headed up by founder and CEO Rémi Galasso who was also the founder of the Hawaiki Cable (Callplus founder Malcolm Dick is Datagrid’s other co-founder), the company has secured approvals for a $5 billion ‘AI factory’ at Makarewa, north of Invercargill. The 78,000m² 

development will comprise six large data halls and is designed to support hyperscale AI and cloud workloads.

Galasso has described the development as having the potential to transform Invercargill into a digital destination, while the company has consistently promoted Southland’s renewable energy resources, cool climate and international connectivity as key advantages.

But the project also highlights the scale of infrastructure required to support AI ambitions. When fully operational, the facility is expected to draw up to 280MW. It’s been granted approval however, to scale up to an eye-watering 1GW capacity – twice the power consumption of the Tiwai aluminium smelter, whose future has been a key factor in New Zealand’s energy planning. Even at 280MW, the facility will be the second-largest electricity user after Tiwai and accounting for six percent of national electricity consumption. (Globally, a UN University report – which notably doesn’t include New Zealand suggesting the country’s current limited visibility in global AI infrastructure development – says by 2030, AI could be consuming three percent of the world’s electricity.

Earlier this year Datagrid secured a 15-year 140MW/year power purchase agreement with Mercury to help underpin future supply requirements.

The infrastructure challenge extends beyond electricity. Hyperscale AI facilities require extensive cooling systems, and Datagrid plans to use groundwater and on-site stormwater for thermal management at its Southland facility. As New Zealand pursues large-scale AI investment, energy, water and connectivity are all becoming part of the equation.

The company is also expected to benefit from the Tasman Ring Network, a 6,000km trans-Tasman subsea cable linking Invercargill with Sydney and Melbourne that has received approval and is intended to improve international connectivity for cloud and AI workloads.

Supporters see such projects as evidence New Zealand can compete internationally.

University of Waikato AI Institute director Albert Bifet has previously said facilities such as Datagrid provide the computing power and connectivity needed to train and run modern AI systems, noting that other regions are investing heavily in comparable infrastructure to support innovation and economic growth.

Others point to broader economic questions around who ultimately benefits from such investments.

University of Auckland researcher Angus Dowell has noted that major data centres can be physically located in one region while remaining economically integrated into global cloud and AI networks, where customers, decision-making and commercial returns are often concentrated elsewhere. “The key issue is therefore not just whether the project brings investment, but how the benefits of that investment are structured and distributed,” he said earlier this year.

For now, Invest NZ is focused on making the investment case.

At an Auckland event last week, business and energy leaders were presented with a vision for turning New Zealand into a significant destination for AI infrastructure investment. Contact Energy chief executive Mike Fuge described the opportunity as a ‘once-in-three-generations opportunity’.

The question is whether global investors will be persuaded that renewable power, available capacity and room to expand outweigh the advantages traditionally offered by larger markets.

With hundreds of billions of dollars continuing to flow into AI infrastructure globally, that is the bet New Zealand is now taking to market.