Exclusive: Sustainability expert warns NZ must reassess data centre water use

New Zealand risks locking in long-term water and power constraints if it fails to properly assess the environmental footprint of proposed data centres, a sustainability expert has warned.

James Raea, Chief Executive Officer at Effective Climate Solutions is urging the New Zealand Government to reassess how it approves and regulates data centres before further large-scale developments proceed.

In a recent interview with TechDay, Raea stressed that the country "isn't recognising the extent of the problem."

His comments come as global energy consumption by data centres reached an estimated 240 to 340 terawatt-hours (TWh) in 2022 - about 1–1.3% of worldwide electricity demand - with further growth expected as artificial intelligence systems expand.

Water scrutiny

Cooling systems remain one of the most resource-intensive elements of data centre operations.

Traditional cooling towers circulate warm water and rely on evaporation to dissipate heat, leading to significant water loss. Chilled water systems and adiabatic cooling reduce some losses but still require continuous supply. Direct liquid cooling and advanced air-cooled systems can lower overall water consumption, particularly in cooler climates.

Raea said the issue is not whether data centres should exist, but whether their cumulative impact on surrounding communities has been fully examined.

"We've got to look at the resources, because right now it's like, 'We'll put in a data centre', but no one's looking at all the effects on everything else," said Raea.

"If you have a data centre and the rest of the population don't have enough water, obviously that's a fundamental issue that you've got to think of before you put it in."

Cooling towers can use up to 1.8 litres of water per kilowatt-hour (kWh) of electricity in poorly optimised systems. In drought-prone regions, that demand can compete directly with agricultural and residential needs.

Raea said carrying capacity - the balance between people, infrastructure and natural resources - must be central to any approval process.

"Each piece of land has a carrying value of people and processes," he said. "We need to understand these limitations in developing businesses like data centres so needs are balanced for long-term outcomes."

Grid constraints

Energy supply presents a parallel challenge. New Zealand's electricity grid was built around consistent hydro, coal and gas generation. As wind and solar capacity expands, managing intermittent supply alongside constant, high-load users such as data centres requires upgraded transmission infrastructure.

"We will need substantial electricity infrastructure upgrades," said Raea.

He warned against assuming existing networks can absorb new demand without knock-on effects, particularly if hydro lake levels fluctuate or wholesale prices rise sharply.

"We don't want to build these centres and then have them shut down because of power price spikes or other resource factors like water," he said.

Raea said developers' commercial incentives may not align with long-term system resilience, placing greater responsibility on regulators.

"If you've got a developer's position, they're always going to be saying everything's super positive," he said. "You need an environmental protection lens looking at what effects we're going to have in water and resources and everything else."

Downstream impacts

Beyond immediate water and electricity use, Raea said infrastructure decisions often fail to consider secondary effects.

"We don't think about the effects of the decisions we make," said Raea. "Every time you change something, it affects everything else."

He argued that without comprehensive modelling, councils risk approving facilities that intensify pressure during droughts or extreme weather events, particularly as climate volatility increases.

"These massive storms are happening," said Raea. "We've just got to say, well, this is what's happening, and we've got to adapt to what's happening."

Regulatory rethink

Raea called for clearer regulatory frameworks to ensure efficient deployment of sustainable cooling technologies, renewable integration and water reuse strategies before additional data centres are approved.

"The question is, how much is too much, and how much can we sustain?" he said.

"It's about how you use it, how you power what you do, and cooling and all this stuff. It's about understanding the whole ecosystem around that."