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Data centre plan to build the Iceland of the South Pacific

Peter Griffin. 15 December 2020, 9:01 am

The backers of the Hawaiki undersea data cable project are now working on a scheme to harness Southland's abundant renewable energy resources to build hyperscale data centre facilities in the region.

Stuff reports that Datagrid plans to build a large data centre in North Makarewa in Southland and connect the region to the US and Australia with two new undersea cables at a total cost of around $700 million.

The project is backed by the founders of the Hawaiki Cable, including Remi Galasso and Malcolm Dick, a New Zealand telecoms pioneer who also founded CallPlus. Datagrid has secured access to 100 megawatts of electricity capacity from Meridian Energy's Manapouri hydro scheme. That's regardless of whether the Tiwai aluminium smelter stays in business in the next few years.

A hyperscale data centre is one that can scale up quickly to offer massive capacity and is typically operated by the major data centre providers, including Google, Amazon, Microsoft and Alibaba Cloud.

Those big players would be the target customers for the facilities. Microsoft announced in May that it would spend $100 million to build its own Azure data centre region, which will see facilities based in Auckland.

But why would Microsoft or its competitors decide to base their data centres in an isolated spot well away from the bulk of their customers? It comes down to cost. The largest expense with data centres is powering the massive banks of computer processors - and keeping the equipment cool enough to function properly. The electricity cost - and carbon footprint generated if the power is coming from fossil fuel sources, is a major concern for data centre operators.

Cool and green

That's why Iceland has become a hub on the northern hemisphere for data centres. As far back as 2016, data centres accounted for around one per cent of Iceland's gross domestic product (GDP) and the industry has boomed since then on the back of the Bitcoin mining boom. A handful of local players are busy building new data centres to meet demand from a range of clients, attracted by the low cooling costs and access to hydro and geothermal energy.

The average annual temperature in Iceland's capital Reykjavík is just 5 degrees centigrade. That allows for natural cooling through ventilating the data centres, rather than requiring energy-intensive airconditioning.

Southland's annual average temperature is 9.8 degrees. According to Datagrid's founders, that would allow data centres to cut their cooling costs in half to around 15 per cent of the total cost of operating them.

With millions of customers in the Asia Pacific region, that could prove highly attractive to the big public cloud providers - as long as they can get decent connectivity to Southland data centres. That's why the plan involves replicating the Hawaiki cable links at the bottom of the country, to provide direct links to central nodes on the east coast of Australia.

Southland's future

Iceland is also building more submarine cables to improve access to its growing fleet of data centres, which accounted for the country's power consumption more than doubling in 2018.

With the local council and central Government welcoming the news, the Datagrid developments are positive for the Southland region which faces the prospect of losing thousands of jobs if Tiwai Point winds down production.

Data centres aren't massive direct providers of employment, but they have been seen as big enablers of economic development as they enable the digital economy to advance quickly. While Datagrid may not be the only answer to Southland's economic sustainability, it could well be an important part of the mix.


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