Data centre boom goes hyperscale

Multibillion-dollar industry keeps on getting bigger as new projects announced, writes Chris Keall

New Zealand is underserved for public cloud infrastructure. Malcolm Roe, DCI

Auckland’s multibilliondollar data centre boom just got bigger, with Australian contender DCI Data Centres revealing it plans to spend $600 million on two new facilities.

The pandemic has accelerated a boom in cloud computing, or using software and services over the internet — from the likes of Zoom and Slack to Netflix and multiplayer games.

While “the cloud” is often used as a metaphor, online services and online storage actually involve giant data centres or “server farms” filled with thousands or tens of thousands of computers, all of which need to be cooled.

Keeping data centres local is better for performance, and means the likes of banks and government departments don’t have to worry about the data sovereignty issues that can complicate life if files are stored in server farms overseas, where different privacy and security laws can apply.

New Zealand has no data centres in the top-tier “hyperscale” class. But, suddenly, many are on the way. In May 2020, half Infratil-owned Canberra Data Centres (CDC) announced plans for two hyperscale data centres: a 7000sq m facility in Hobsonville and an 11,000sq m server farm in Silverdale in a $300m-plus project that now has construction under way.

Microsoft soon followed, breaking ground in February 2021 on the first of three hyperscale data centres in northwest Auckland. The tech giant has not put a price tag on the project, other than to confirm that it is something more than the $100m threshold for Overseas Investment Office approval. Early customers will include Fonterra, BNZ and Spark.

In August, Spark said it would upgrade its Takanini data centre to a 10 megawatt hyperscale facility in a project that would — at least for a while — be New Zealand’s largest server farm (in the complex cloud wars, Spark cooperates with the multinationals for some services, and uses its in-house infrastructure for others).

And Amazon has said it will spend $7.5 billion building a cluster of huge data centres in Auckland, due to open in 2024 as it creates a local Amazon Web Services (AWS) region.

Tim Dacombe-Bird, the New Zealand head of AWS, said the $7.5b figure included the cost of building at least three data centres and stocking them with hardware, plus operating costs including utilities and salaries. Dacombe-Bird said Amazon’s build would create 1000 new jobs.

His company claims the build will have a $10.4b positive economic impact on this country’s economy over its first decade.

And now we have DCI’s purchase of a five-hectare (or 50,000sq m) site on the North Shore — where CEO Malcolm Roe says it will build NZ’s largest server farm, which will be known as “AKL02”.

The Australian firm already has a giant data centre under construction at Westgate, AKL01, which is due to open in 2023.

Construction on AKL02 — which the Weekend Herald understands is in the Albany/Rosedale area — will begin mid-year, with commercial operation due to begin in 2024.

It’s no coincidence the new wave of supermassive data centres will be clustered around the North Shore and the nearby northwest, given that international cables land at Takapuna and Whenuapai, while Albany houses NZ’s largest internet peering exchange — or facility to help internet traffic get to the right place, in the fastest possible time.

Roe says DCI’s combined data centre build will involve $600m in direct construction and setup costs.

“AKL01 and AKL02 will have a combined economic value exceeding $1.4b over the life of the projects. Each data centre will create more than 150 jobs during construction and approximately 250 ongoing skilled information technology and telecommunications jobs once the sites are operational,” Roe says.

Data centres are described by the amount of power they require at peak operation. Roe says AKL02 will be a 40 megawatt facility — which, as things stand, would make it NZ’s largest data centre (AKL01 will be a 10MW server farm).

DCI is in talks with Vector about the “power design” for Roe’s company’s North Shore facility.

He says that will involve a pledge to use 100 per cent renewable power — by which he means hydro and geothermally generated electricity.

Many server farms offshore feature banks of solar panels, but Roe says the technology is not practical for the Auckland builds.

“Even if we covered the whole five hectares in solar panels, that would only generate a tenth of the power required by AKL02,” he says. “Lots of the solar panels you see on data centres are just window dressing.” Roe adds that his company is working on new sustainability solutions with Naylor Love, which won the contract to build AKL01 at Westgate (AKL02 is still out to tender).

“DCI is leading the industry in delivering new cooling technologies to significantly enhance our power utilisation effectiveness and water utilisation effectiveness to minimise our impact on the environment.”

Data centre commercial politics will be another factor, once all the new facilities come online.

Microsoft partners closely with CDC across the Tasman. And while it is based in Sydney, DCI is owned by Canada’s Brookfield Asset Management, which teamed with Infratil to buy Vodafone NZ.

The intertwined field could become more crowded. Startup Datagrid — whose backers include richlister Malcolm Dick and Singapore’s BW Group — plans a $530m, 60MW hyperscale facility in Southland.

The plan, first revealed in 2020, sees Datagrid taking up some of the slack from Meridian’s 572MW Manapouri Power Station after the Tiwai smelter is taken offline. The scheme depends on funding being found for a new international fibre cable that would link Invercargill, Dunedin and Christchurch with Los Angeles, Singapore and Jakarta — to become the South Island’s first major broadband link with the outside world.

The cable would be operated by Hawaiki Cable, which was founded by Dick and others and bought by BW Group for an undisclosed sum last year. Hawaiki already operates a trans-Pacific Cable with landing points in Auckland and Northland.

While funds are still being rustled up, Datagrid said in the New Year that it bought a 43-hectare rural site in North Makarewa, about 20km north of Invercargill. Datagrid aims to open the first phase of its planned data centre in 2024 as a 60MW facility, with a plan to upgrade to 100MW.

With Auckland about to go from no hyperscale data centres to at least 10 (three built by Microsoft, at least three from Amazon, two from CDC and DCI’s twin set), is the market big enough for that many players?

“New Zealand is underserved for public cloud infrastructure,” says Roe.

All the data centres announced or under construction for Auckland (and NZ, excluding the drawing-board Datagrid) total about 80MW, by the DCI boss’ estimate — a big boost on today but still well short of the 450MW of data centres in Sydney.

“So there’s still room for massive growth,” he says.