Data centres warn of power struggle ahead
Data centres are warning that the Australian government’s proposed AI power rules may be unworkable due to the lack of available green energy.
The Albanese government has proposed creating a dedicated agency to buy offtake agreements for up to 20 years to help meet renewable energy targets, replacing the Capacity Investment Scheme, which has struggled to drive enough bankable projects to the grid, delivering just one operational green project.
Queensland treasurer and energy minister David Janetzki has raised concerns over the mooted energy mechanism and its potential costs, stating that Queensland remains concerned about rushing toward implementing a costly underwriting scheme that impacts households and businesses.
Anthony Albanese told data centre operators to find new renewable energy supplies and pay grid expenses so the costs are not passed on to consumers or businesses.
However, this demand means dozens of gigawatts of green energy supplies must be found by operators, but Matthew Lee, JLL’s national director for data centres Australia, noted that there is a finite amount of current power infrastructure in Australia that’s available.
He also stated that the scale that developers are trying to procure power and land is a lot higher than anyone would have anticipated, which poses a challenge.
Australia’s biggest data centre operators have warned that Labor’s proposed AI power rules could prove difficult to meet because renewable energy and transmission projects cannot be delivered quickly enough, causing a growing disconnect between the pace at which data centres are expected to be built and the time it takes to develop the renewable energy to support them.
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Industry body Data Centres Australia has argued that Australia is well placed to capitalise on the AI investment boom but warned that the design of the government’s proposed legislation would determine whether it encouraged or discouraged investment, as Data Centres Australia chief executive Belinda Dennett said, Australia is an attractive market for data centre investment.
They have the opportunity to be the AI infrastructure hub for the region, and the sector is already helping finance the energy transition, with around 70% of electricity consumed by Australian data centres offset through renewable energy arrangements.
However, the industry stopped short of arguing that every new AI facility could be matched with dedicated renewable generation, as it is not feasible.
Australia is experiencing an unprecedented pipeline of proposed data centre developments as global technology companies expand artificial intelligence computing capacity, with operators pursuing major projects across Sydney, Melbourne, and other capital cities.
The government argues that requiring new AI facilities to contribute additional generation will help ensure the sector’s rapid growth does not place extra pressure on electricity prices or slow Australia’s broader energy transition, but they must balance the need for renewable energy with the practical realities of implementing these projects in a timely manner.
It is a complex issue.
