Originally published on Stuff
By Sam Stubbs


As the Greeks finished their failed siege of Troy, a wooden horse was offered as a parting gift and brought inside the city by the Trojans.

But it secretly had Greek warriors inside, who then opened the city gates at night, allowing their army to sack Troy. Hence the phrase “beware Greeks bearing gifts”.

I am reminded of this myth when hearing the business cases for data centres in New Zealand. It all sounds wonderful. Overseas investors will bring many millions into the country, build the highest-tech data centres, employ local builders to build them, and staff to run them.

And we have clean, green energy, which is good for the planet. And this will all make New Zealand relevant in the world of high tech and added value. We will be on the global high tech stage. And just imagine the taxes they will pay.

A high-tech Trojan horse

Personally, I’m a capitalist, and welcome investment for growth. I work for a KiwiSaver manager with significant local high-tech investments. But that doesn’t mean that all investment branded ‘high- tech’ is good, just like all drugs aren’t good. Some are positively bad.

And, as many cities and towns are discovering to their regret, data centres are anything but a gift. They are a Trojan horse.

Why? Let’s dismantle the rationale.

High tech, but few jobs

The first claim is that large data centres are high tech, and that must be good, because it creates high paying jobs but this is not the case. Because they are effectively air conditioned sheds, building them does not employ many. And operating them requires even fewer.

One hyper scale data centre in Texas has just 12 full time employees. Even the proponents of Makarewa, a proposed large scale AI data-centre outside Invercargill, admit it will generate only 50 permanent full time jobs.

Dubious economic benefits

The second claim made is that data centres increase economic growth, exports, and owners pay tax on their profits. These claims are highly dubious, and often just wrong.

For example, once the data centre building is complete, it is then stocked with expensive memory and processing chips, all of which need to be imported. This is bad for our balance of payments. And tech companies are global experts at minimising taxes, often via transfer payments to other countries.

Just look at how little tax Google and Meta pay in New Zealand, relative to their enormous revenues here. Profits from these sorts of companies, who can arbitrage tax regimes globally, do not enrich local communities nearly as much as promised.

A huge demand for power

The third reason given in support of AI data centres here is that we have renewable energy aplenty. Yes we do, but it's already all used, hence power prices being so high. So, increasing demand by energy-hungry data centres is more likely to raise power prices, not lower them.

This is a simple supply and demand issue, and we are in serious danger here of letting offshore owners make a profit high on our supply.

The planned Makarewa centre says it will be the second largest consumer of power in New Zealand, after Tiwai Point.

That is a bad thing, not a good thing. And as it needs back up power, it proposes to install 84 large diesel generators, increasing our national fossil fuel dependency and carbon footprint when in use. Bad and badder.

Our big power companies talk a good game about being able to supply the energy needs of new data centres with renewable energy. But they are hard wired to encourage more demand to keep prices, and profits, up. I would rather they built their new power plants to get existing prices down. Our biggest power companies are, after all, majority owned by the Governments we elect. Why are they encouraging new demand at a time when power prices are so high?

Invest NZ should aim higher

Perhaps the most disappointing actor in all this is Invest NZ, a taxpayer funded agency designed to encourage quality offshore investment in New Zealand.

In the past they have performed well in attracting high-tech and added-value industries - like film production - to New Zealand.

But Invest NZ stating that data centres offer international investors a ‘compelling opportunity’ and ‘safe harbour’, is effectively rolling out the red carpet for modern-day carpet baggers in my view. It encourages the purchase of huge amounts one of our most precious natural resources - renewable energy - by offshore companies who will employ very few and likely pay very little tax while increasing our carbon emissions and fossil fuel dependency.

This is low grade stuff. Invest NZ you can do much better than this.

The case for a few smaller scale data centres, that generate their own 100% renewable energy and provide data security for nationally sensitive data, is more palatable to me but this is not what I see in examples like Makarewa.

New Zealand should preserve its renewable energy, and safe harbour status, for better businesses than these. Data centres in New Zealand - with limited exceptions - are very bad. Beware these Greeks bearing gifts.

This article is editorial commentary and reflects the personal views of Sam Stubbs. It does not represent the views or policies of Simplicity NZ Limited. The content is provided for general information purposes only and does not take into account your individual financial situation or goals. It is not financial advice or a recommendation. Any external resources are provided for convenience only and are accessed at your own risk. Simplicity does not endorse or accept responsibility for any third-party content.