By Perry Williams and Colin Packham
Queensland’s opposition to a federal Labor scheme underwriting renewables leaves data centres in a uniquely problematic position if they can’t meet their clean power obligations under the Prime Minister’s artificial-intelligence vision.
The Albanese government has proposed creating a dedicated agency to buy offtake agreements for up to 20 years to help meet renewable energy targets. The Electricity Services Entry Mechanism is intended to replace the Capacity Investment Scheme which has struggled to
, delivering just one operational green project.
drive enough bankable projects to the gridHowever, Queensland treasurer and energy minister David Janetzki has raised concern over the mooted energy mechanism and its potential costs, adding to its standoff over renewable energy demands for data centre developments.
“Queensland’s continued commitment is to affordability and reliability as the foundation of our energy system and Queensland remains concerned about rushing toward implementing a costly underwriting scheme that impacts households and businesses,” said Janetzki.
Anthony Albanese told data centre operators ** last week to find new renewable energy supplies** and pay grid expenses so the costs are not passed on to consumers or businesses.
However, that demand means dozens of gigawatts of green energy supplies must be found by operators. And any delay over implementing new policy to spur green energy projects forward would pile further pressure on data centre developers already scrambling to secure supply.
“There is a finite amount of current power infrastructure in Australia that’s available,” said Matthew Lee, JLL’s national director for data centres Australia. “The scale that developers are trying to procure power and land is a lot higher than anyone would have anticipated.”
Australia’s biggest data centre operators have warned Labor’s proposed AI power rules could prove difficult to meet because renewable energy and transmission projects cannot be delivered quickly enough.
Growing disconnect
Operators say there is 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.
Industry body Data Centres Australia has argued Australia is well placed to capitalise on the AI investment boom but warned the design of the government’s proposed legislation would determine whether it encouraged or discouraged investment.
“Australia is an attractive market for data centre investment and we have the opportunity to be the AI infrastructure hub for the region,” Data Centres Australia chief executive Belinda Dennett said. “The detail of the proposed approach will determine whether the new laws attract investment or create new deterrents.”
Data Centres Australia said the sector was already helping finance the energy transition, with around 70% of electricity consumed by Australian data centres offset through renewable energy arrangements, including power purchase agreements, renewable energy certificates and on-site solar.
However, the industry stopped short of arguing every new AI facility could be matched with dedicated renewable generation.
Instead, operators typically rely on electricity supplied through the National Electricity Market while using long-term power purchase agreements to finance new wind, solar and battery projects, rather than owning generation assets themselves.
The distinction is expected to become central as the government develops legislation requiring new AI infrastructure to support additional electricity supply.
Executives say the challenge is not a lack of willingness to invest in renewable energy but whether enough projects can secure planning approvals, transmission access and grid connections quickly enough to keep pace.
Pipeline of developments
Australia is experiencing an unprecedented pipeline of proposed data centre developments as global technology companies expand artificial intelligence computing capacity, with operators including AirTrunk, NextDC, CDC Data Centres and Stack Infrastructure pursuing major projects across Sydney, Melbourne and other capital cities.
The industry has also cautioned against applying uniform rules across all facilities, arguing different classes of data centres have different operational requirements and varying ability to locate near renewable generation or temporarily curtail workloads during periods of network stress.
The debate comes as the Australian Energy Market Operator forecasts electricity demand from data centres will increase sharply over coming decades, driven largely by AI, cloud computing and digital services.
The government argues 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.
This article first appeared in The Australian as Data centres warn AI power rules are unworkable as green energy lags.
Related Topics #
UNLOCK INSIGHTS
Discover the untold stories of emerging ASX stocks.
Daily news and expert analysis, it's free to subscribe.
By proceeding, you confirm you understand that we handle personal information in accordance with our Privacy Policy.