Data centres are critical - but don’t have to be environmentally ruinous

By Ollie Hill, Country President, Schneider Electric New Zealand

We’ve entered the age of AI – and with it, the age of data centres. Local and global players are investing in facilities across Aotearoa to meet growing demand for digital services, especially AI. But as the conversation grows, so do concerns about energy and water use. So here’s the real question: Should New Zealand embrace this growth?

The answer is yes – for our economy, our communities, and the planet.

A recent report from Microsoft and Mandala found that AI applications and AI-enabled data centres account for more than 90% of AI’s economic potential in New Zealand, equating to $3.4 billion per year by 2035. That’s a massive opportunity we can’t afford to ignore.

The demand for AI and data centre capacity isn’t going away. The choice is whether these facilities are built here, or elsewhere. As data centres become part of our critical infrastructure, storing and managing data locally is no longer a luxury. It’s essential for national security, digital sovereignty and long-term economic resilience.

The good news is, we can build sustainably. And New Zealand is uniquely positioned to lead.

Globally, data centres are often seen as heavy users of power and water, especially in regions with scarce water and high cooling demand. That’s not the case here, and it’s not just because of our temperate climate. New Zealand generates 80-85% of its electricity from renewable sources, making us one of the best-positioned countries to host low-impact digital infrastructure.

Major players like Microsoft, AWS, CDC and Datacom have already committed to using 100% renewable energy for their operations in New Zealand. Others are actively transitioning toward this goal.

Some facilities use closed-loop liquid cooling systems that don’t draw water from public networks, such as Motivair’s, which are already being used in large-scale data centres across New Zealand. These systems offer better thermal performance and can reduce cooling energy consumption by up to 40%, compared to traditional air cooling.

And it’s not just the global giants leading the way. Spark’s upcoming data centre in Dairy Flat will be powered by a solar farm, with excess server heat used to warm a neighbouring surf lagoon – a great example of circular energy use.

Concerns about energy shortages are valid. Data centres accounted for approximately 1 to 2% of the world's total electricity consumption in 2022, a figure the International Energy Agency predicts will nearly double by 2027. But AI is part of the solution, enabling growth without adding pressure to the grid.

Schneider Electric’s research shows that data centres can reduce energy usage by an estimated 17% and water usage by 20% through AI tools and optimised infrastructure. AI can enhance grid efficiency, integrate renewable energy sources, and lower carbon emissions by analysing vast amounts of data to predict and balance electricity supply and demand. By leveraging on-site power generation, renewables power purchase agreements and bidirectional grids, data centres can secure their energy needs while also contributing capacity back to the grid.

However, the benefits extend far beyond data centres. Applied across homes, businesses, and industry, AI could reduce overall energy consumption by a third, as well as emissions. To give just one example, in Sweden, Schneider Electric’s Sustainability Research Institute found that AI-powered HVAC systems deployed across 87 educational buildings reduced emissions by 65 tonnes of CO₂ per year – or 60 times the embodied carbon footprint of the AI system itself.

New Zealand has a unique opportunity to help decarbonise the global digital ecosystem by attracting more data centre investment. And the world is watching. Speaking at the Climate Change and Business Conference in Auckland this September, EU Ambassador to New Zealand Lawrence Meredith made it clear:

“AI brings enormous potential to the economy, and what we need is a vision for how we embrace the technology while considering its climate impact. How can we ensure that, here in New Zealand, the energy fuelling AI is green? That’s perfectly possible. We in the European Union are very interested in what you’re doing in the renewable energy space – especially in geothermal, wind, solar, and your leading position in hydropower.”

Some argue our emissions are too small to make a difference. But in this case, the opposite is true. We could have an outsized global impact. Blocking growth here risks shifting infrastructure to countries with less suitable environments, weaker regulations, and higher environmental costs.

By being at the forefront of this movement, we not only gain a competitive edge in attracting global investment, we have the power to make the entire digital ecosystem more sustainable. We can have data centres, grow our economy, and still protect the natural resources we all love. And we can show the rest of the world how it’s done.