AI’s rise in Auckland is creating uncertainty in electricity demand, with data centers forecasting a 60% increase. This challenges energy priorities, infrastructure spending, and how to balance needs of critical services with regular consumers. There’s a clear call for industry leaders to strategize around this energy dilemma.
Artificial intelligence is fast becoming a major player in how much electricity Auckland needs. As the demand for tech rises, who gets priority access to power is becoming a critical issue without clear answers. Simon Mackenzie, the outgoing CEO of Vector, the country’s biggest electricity lines firm, noted that the global landscape, particularly with the rise of data centers, adds to the uncertainty around electricity demand.
In a recent asset management plan, it was stated that AI operations are particularly power-hungry, consuming significantly more electricity than traditional digital services. If businesses do embrace these AI technologies, the forecast for growth is stark – a whopping 60 percent increase in demand from data centers expected over the next ten years, adding another 700 megawatts to Auckland’s already heavy daily usage of around 1800 megawatts. However, every prior estimate has turned out to be overly optimistic, leaving experts a bit wary.
Recent power outages in Spain and Portugal only underline the global conversation about energy security and prioritization when power’s in short supply. Mackenzie has pointed out that in times of low lake levels, the real question becomes how much energy reduction data centers can realistically manage. Usually, their backup systems aren’t robust enough to cover full operational demands.
While data centers don’t enjoy any special transmission deals, they can purchase additional pathways for greater supply reliability. Mackenzie asked a salient question, highlighting the need for a more balanced treatment between critical users, like those using AI for hospitals or transportation, and everyday consumers. A single data center can demand enough electricity to power around 8500 homes, but with AI hype, that figure could skyrocket.
An enlightening moment happened at a recent Waikato symposium when an AI expert likened using generative AI to fill a page with answers to simply pouring a carafe of water. Vector recently began supplying power to two major data centers in Westgate and Albany, marking the growing conundrum in Auckland’s energy landscape. Mackenzie believes this issue hasn’t been addressed at a significant enough level within the industry, adding nuance to what’s at stake.
The Electricity Authority is expected to lead this important dialogue, but Mackenzie recognizes it has a full plate with many ongoing challenges. At the same time, households and businesses have just started seeing an increase of $10 to $25 in charges from nearly 30 lines companies. This bump in costs is meant to fund infrastructure upgrades totaling close to $6 billion over the next five years, but it raises the critical question: What should this money be spent on?
Both Vector and Wellington Electricity’s recent asset summaries reflect a lot of uncertainty about future investments. They highlighted the unpredictability surrounding electrification, emerging technology, and whether major client projects will actually happen. Unlike others, Vector uniquely grapples with the AI and data center wildcard primarily due to the surge in hyperscale center construction centered on Auckland.
Tech giants like Microsoft and Amazon are heavy hitters in this investment landscape. Closer to home, Infratil is actively growing its reach through a substantial $500 million data center fund alongside CDC, a Canberra-based company. Vector’s report speaks to burgeoning uncertainties in customer behavior, the evolving technological environment, and the impact of these massive data centers on the electricity system.
Though the top-tier data centers pay extra for direct supply connections, demand for such energy lines has significantly risen. Vector is receiving far more connection requests for hyperscale data centers than in previous years. This increase presents complex challenges that will significantly shape future network planning. In response to the rising demand, a planned $40 million investment over the next decade is on the table to enhance CBD substation and cabling infrastructure.
Mackenzie mentions that Vector relies on data center operators for forecasting demand, describing them as professional and reliable. Nonetheless, the bigger picture regarding how New Zealand adapts to servicing these data centers is crucial. Other parts of the world, including countries within Europe and parts of the U.S., have certain restrictions to manage data center demands. Also noteworthy is the government’s recent decision to facilitate easier removal of risky trees for resilience—something Mackenzie supports.
On the topic of electric vehicles, the situation is murkier. Despite Mackenzie having sought government action last year to promote smart-charging at homes, the requested interventions haven’t materialized. With subsidies for EVs dropping last year, the immediate urgency has lessened, but the potential for demand growth remains tangible. The government is now looking to transition from grants to low-interest loans to accelerate charging station development.
From Mackenzie’s perspective, visibility and management of electrical loads are key. “We still believe that’s an absolute requirement to be able to build smarter,” he emphasized, indicating a pressing need for innovative solutions as future electricity demands loom large on the horizon.
In summary, artificial intelligence is fast emerging as a wildcard in the electricity demand landscape—especially in Auckland. With an expected 60 percent surge in demand from data centers driven by AI growth, the industry faces tough questions about energy priority, system capacity, and investment strategies. As challenges arise, particularly around power supply and the balance between essential services and consumer needs, the call for a more structured approach to managing these demands becomes increasingly critical.
Original Source: www.rnz.co.nz
