Prime minister Anthony Albanese says data centre developers will have a “legal obligation” to meet their own energy needs by underwriting new renewable supply, in the first clear sign that the government’s bring-your-own power concept is more than just a polite request.
In a speech to the University of Sydney on Wednesday, Albanese announced a new federal government office to set a range of standards and guardrails that the booming AI industry will have to meet in Australia, to optimise investment and avoid unwanted social and economic impacts.
“This is our time to decide what AI looks like here in Australia,” the PM said in the speech. “It is not a question of ‘if’ or ‘when’ AI will transform our economy, we are past that. The question that matters, the choice that we have – is how?
“This is about Australia shaping the future, rather than letting the future shape us.”
For Australia’s energy market, data centres represent a double-edged sword. One the one hand they offer a new source of sustained demand for the massive pipeline of renewable energy projects – namely major wind farm proposals – that are struggling to reach final investment and could use more energy-hungry buyers.
One the other hand, there is genuine concern that unchecked data centre development will put fresh strain on national networks that are already struggling to keep up with the demands of the transition to renewables – and in turn will push up power prices.
Another major concern is that developers will get around potential grid bottlenecks by building new gas and diesel plants to power their operations, driving up gas use and costs and pushing emissions in the entirely wrong direction.
Already, the federal government has proposed a set of guidelines to avoid such outcomes – now, it is seeking to make at least some of these guidelines into firm rules.
“We will create a legal obligation for the next generation of large-scale data centres to underwrite new power supply,” Albanese said on Wednesday in his address at the University of Sydney.
“To pay their full share of grid connection, so no costs are passed on to homes or businesses. And to put at least as much energy into our grid as they take out of it. To be net-generators, not net-users.
“To build new renewable generation – and firming – to strengthen our national energy resilience. And ensure data centres do not increase power prices for Australians.”
Albanese says the new plan for AI and energy in Australia will be put to premiers and chief ministers at a national cabinet meeting he is convening next month, with the aim to bring the legislation to Parliament early next year.
But whether the new rules are supported by all states and territories – and whether unanimous support is necessary to get the new rules over the line – remains to be seen.
At a meeting of state and territory energy ministers in May, Queensland withheld support for the National Data Centre Expectations set out by the federal government in March, including the push to reuire developers to offset their demand with new renewable and storage projects.
“Ministers, except Queensland, agreed that data centres in the NEM and the [Western Australia Electricity Market] should invest in additional renewable generation and firming in their state of operation to fully offset their electricity demand and provide demand flexibility services to avoid additional costs being borne by other energy users,” a communique from the May meeting says.
“Further, that data centres should provide transparent reporting on their energy use and emissions production.”
As Renew Economy reported at the time, it is understood that Queensland has raised questions around the levelised cost of energy at which data centres are considered viable in Australia – and professes concern that strict rules around BYO renewables will stifle investment.
Failing to win the support of Queensland could be a deal breaker, according to the Climate Council, which says “changes to coordinated regulation of (and any policy changes affecting) the electricity market depends on cooperation between federal and state governments.”
The Climate Council is hoping that Albanese’s new Office of AI will provide a work-around if unanimous support cannot be achieved.
“With the Queensland government threatening to allow data centres to expand without any renewable energy requirements, posing significant risks to power bills and our climate, the new Office of Artificial Intelligence must ensure Australians do not pay the price for a state-by-state race to the bottom for data centre expansion,” the Council said in a statement on Wednesday.
“Australia is a very attractive location for data centre proponents, but it means that we need strong guardrails to protect our standard of living; we need these things to work for us.,” said Climate Council CEO Amanda McKenzie.
“With power prices and climate pollution set to surge in the next decade without intervention, this must occur from the get-go.
“Accelerating the roll-out of proven renewable energy is the only way to keep prices as low as possible, ensure grid stability, and slash climate pollution to better protect our communities, economy and environment from worsening climate disasters.”
The Australian Greens, too, have come out in support of strong federal guardrails – and want a ban on any new data centre development until they are in place.
“AI is the new extractive industry, if we don’t have the right rules in place big tech companies will take our resources and leave Australians with little to show for it,” said Senator Sarah Hanson-Young, Greens spokesperson for communications, arts and environment and chair of the inquiry into AI data centres.
“We need a moratorium on the building of data centres until there are laws in place to properly regulate their impact in Australia including energy, water use, environment and communities.
“Just because big tech companies want to move at hyperspeed, doesn’t mean that we need to fast track and roll out the red carpet for them. We need to take the time to get this right, if we don’t there will be serious consequences for our energy grid, water, environment and climate.
“The Albanese Government needs to show the Australian people that they are more than just talk when it comes to putting the interests of Australians ahead of the interests of big AI companies.”
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Sophie Vorrath
Sophie is editor of Renew Economy and editor of its sister site, One Step Off The Grid . She is the co-host of the Solar Insiders Podcast. Sophie has been writing about clean energy for more than a decade.
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