CANBERRA: Prime Minister Anthony Albanese’s proposed “world-first” environmental and energy controls for Australia’s A$150bil (US$105bil) data centre (DC) pipeline will face their first test when federal, state and territory energy ministers meet to discuss guardrails for the sector.
Ministers will meet virtually to discuss the proposed curbs as Australia’s rapidly expanding DC industry – fuelled by demand for artificial intelligence (AI) and hyperscalers including Microsoft Corp and Meta Platforms Inc – attracts opposition from community and environmental groups.
New DCs would need to add at least as much electricity generation to the grid as they consume, Albanese said in July.
He laid out plans to embrace the sector while shaping how it develops. “Bringing these issues into a single national framework would be a global first,” he added.
He said operators would be expected to build renewable generation, minimise water use, maximise energy efficiency and fund any additional water infrastructure required, though he provided few details on how the policy would work.
Australia is among a growing number of countries trying to regulate AI without stifling innovation while ensuring adequate power supplies for the energy-hungry DCs that underpin the technology.
A surge in DC investment is also helping support the country’s slowing economy.
Australia is emerging as one of Asia’s top locations for DC construction due to its high potential for renewable energy (RE), stable political environment and strong connectivity with Asia via low-latency submarine cables, Bloomberg Intelligence analysts led by Matt Ingram said.
DC investment could hit A$150bil by 2030, Commonwealth Bank of Australia associate economist Lucinda Jerogin said.
About 6GW of capacity are planned, with demand driven by appetite for hyperscale cloud and AI infrastructure, she said.
The country was second only to the United States in terms of dollars invested in the sector in 2024, according to a report from real estate group Knight Frank.
Most Australian state and territory governments have expressed support for controls like those outlined by Albanese, though Queensland could be a holdout.
The state doesn’t support the imposition of renewable power requirements in order to remain an attractive market for investors, Premier David Crisafulli said.
All states and territories must support the federal policy for it to proceed.
A YouGov survey found that 82% of respondents agreed that new DCs should be made to pay for extra RE and storage infrastructure that meets their power needs.
National rules on DCs would stop states and territories from competing with each other, according to Rob Nicholls, a senior researcher at the University of Sydney’s Centre for AI, Trust and Governance.
“The policy the prime minister has announced doesn’t work unless there’s buy-in from all the states and territories,” Nicholls said. “Part of the reason you have a policy is to avoid a race to the bottom from the states.”
Chief executive officer Belinda Dennett of industry group Data Centres Australia – whose members include Google, AirTrunk and Microsoft Corp – said the group is supportive of the principle that new electricity demand should be backed by new supply, with many operators and customers already underwriting RE.
Still, the industry wants clarity on three key issues, Dennett said, including if the compliance obligation falls on the DC operator or the tenant, when that obligation takes effect, and what energy usage is being offset – the electricity consumption or its nameplate capacity. — Bloomberg
